Mexican entrepreneurs Fabiola Rodriguez and Lizeth Quiñones hope to capitalize on China’s growing appetite for tequila.
In the U.S., tequila has become ubiquitous as the liquor that gives a margarita its kick. But in China, which only recently opened its doors to top-shelf varieties of Mexico’s signature spirit, selling the drink requires a slightly different approach.
Fabiola Rodriguez and Lizeth Quiñones are two young Mexican entrepreneurs who have their sights set on opening the first store focused on selling Mexico’s firewater in the world’s most populous country. The women wear traditional Mexican clothing and serve the potent drink over mint and mineral water.
About two-and-a-half years ago Rodriguez and Quiñones formed a Guadalajara-based company, Conexión Asia, to help Mexican companies distribute products like clothing, coffee and electronics to China. When Mexican President Enrique Peña Nieto struck a deal with Chinese President Xi Jinping allowing the import of tequilas made with 100 percent blue agave—as the best varieties of tequila are—Rodriguez and Quiñones decided to seize upon that opportunity.
During a trip to China they contacted a Chinese alcohol distributor who suggested they open a store at a luxury mall that focuses on the sale of alcoholic beverages in the Chinese port city of Xiamen. The business partners now have plans to open a 200-square-meter store (slightly larger than 2,000 square feet) called “Viva Mexico” in the mall in September.
The store will feature tequila and agave products in a setting that will share a bit of Mexican culture with the Chinese. They plan to decorate the store with a timeline of Mexico’s history, from the Mayan civilization to the Spanish conquest and on to the present day.
Making a Cultural Connection
Part of what the women work toward is to bridge the culture gap between Mexicans and the Chinese. For many businessmen in Mexico, that can be a difficult chasm to cross.
“They think selling tequila in China will be the same as in the U.S.,” Rodriguez said. That’s not the case, as Chinese people aren’t as familiar with the drink. Rodriguez said they also work with bartenders, teaching them about cocktails that work with tequila and what kind of food can be paired with it.
Rodriquez and Quiñones recognize China’s growing power in the world economy. While China has found homes for many of its products in Mexico, the opposite isn’t the case. Mexico runs about an annual $50 billion trade deficit with the Asian country.
With the arrival of 100-percent agave tequila to China, producers of the spirit are hoping it will become a major market for the drink. While the country had tequila before, it was only in the form of lower quality mixtos, where other sugars are mixed with agave during fermentation.
Last year, China hadn’t even cracked the top 10 destinations for tequila exports. In 2013, Mexico exported 525,000 liters of tequila to China. Of that, 90,000 liters were made from 100 percent agave, according to numbers from Mexico’s Tequila Regulatory Council, which oversees the production of the spirit.
Big Challenges for Small Startups
While the Chinese market opening presents a significant break for tequila manufacturers, there are some challenges for smaller operations. The largest companies, like Jose Cuervo and Sauza, have hefty advertising budgets to blitz new markets with media campaigns and establish brand identity, said David Ruiz, a consultant who’s been helping tequila distillers distribute their product internationally for 35 years.
Shipping costs, in proportion to potential profit, are higher for smaller companies because they don’t distribute such large quantities. Also, once the tequila market becomes profitable, there’s a good chance Chinese companies will come to Mexico and start buying distillers so they control production and distribution themselves.
It’s already happened with U.S. companies, Ruiz said, pointing out Smithfield Ham, which was approved for sale to a Chinese company last fall. Ruiz predicted a similar situation with tequila once the drink becomes popular. At that point Chinese business representatives will likely start touring Mexican distilleries with wallets at the ready.
“They have the money to do that and they have the power to do that,” Ruiz said.
Dale Quinn is a freelance journalist based in Guadalajara, Mexico. He’s most recently written about technology, real estate and security issues faced by international companies. His work has appeared in The Financialist, an online magazine published by Credit Suisse, and in the Institutional Real Estate Inc.’s Americas letter. Before moving to Mexico, he worked as a business reporter for the Arizona Daily Star, where he covered the housing crisis in the wake of the financial meltdown.