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South Africa Seeking To Steal Slice Of Global Tequila Trade From Mexico
Impact / Sept. 1, 2003

By Larry Luxner

The continuing shortage of blue agave and rising demand for tequila has boosted prospects for South Africa's Agave Distillers the world's first non-Mexican agave spirits producer.

The company's executive chairman, Keith McLachlan, says he's "preparing to take on the international market, where interest has been phenomenal."

Agave Distillers is already exporting limited quantities in bulk to the United States, Great Britain, Australia, France and Angola, but the real prize lies in the world's biggest tequila-consuming nation the United States.

"We plan to take a share of market in the U.S.," said McLachlan, recently quoted in Juluka, a Washington-based newsletter aimed at South Africans living abroad. But a dramatic boost in production, along with a substantial marketing campaign, will require a big cash injection if it is to be successful.

"We are waiting for an evaluation from our auditors, but initially we'll probably raise about R5 million (just under $700,000)," he said, adding that at this stage, about 30% of the company will end up in the hands of new investors.

Agave's distillery is located just off the Cape Town-Johannesburg highway, near the town of Graaff-Reinet in South Africa's dry, windswept Karoo region. The company owns a 480-hectare field of agave plants, some of them 100 years old. The distillery itself can produce 1,200 liters of agave spirit a day, and with the money McLachlan is raising will be able to expand to 4,000 liters a day by the end of 2003, with plans ultimately to boost production up to 10,000 liters daily.

South Africa's fortunes are helped by a disease that recently wiped out many Mexican tequila producers, and by excessive Mexican government regulations that some experts think has resulted in poor farming of the product.

Yet legally, tequila can only be called tequila if it has been produced in the Mexican state of Jalisco, home of all of Mexico's major tequila exporters. Although McLachlan recently met with officials of Mexico's Tequila Regulatory Council, he says the two parties are unlikely to find a solution that'll see them working together in the future.

"As a result," he told Juluka, "although it is virtually identical to tequila from Mexico, South Africa's blue agave product cannot be marketed as such." It is therefore branded "agava."

On the other hand, regulations stipulate that tequila must contain at least 51% of the agave spirit, and Mexican products containing less than 100% of the spirit retail for between $18.99 and $21.99 on U.S. liquor-store shelves. This compares to the $15.99 to $16.99 which McLachlan hopes to sell his 100% pure agave product for in the United States.

The product currently on the market is called Agava Silver. A second product, called Agava Gold, is being aged in oak barrels in neighboring Namibia, though the barrels will eventually be brought to the Graaff-Reinet factory to house the whole operation under one roof. The final product is diluted to a strength of 45% alcohol and is available for locals in bottled form; at present, Agave Distillers is selling 12,000 to 15,000 cases of the spirit a month.

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