Chinese liquor lovers are not taking to tequila

Baijiu is still the preferred spirit in China

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Tequila has a problem in China: consumers think it is cheap and nasty. Despite a vast Chinese market of liquor lovers, including affluent connoisseurs keen on luxury brands, hopes that the country would become the world’s largest tequila market by 2020 have been thoroughly dashed.

Mexico currently exports less than half a million litres of tequila to China, compared with nearly 151m to the US last year, according to data from the Tequila Regulatory Council. Last year, China did not make the top 10 export destinations for Mexico’s national drink. According to the IWSR, the London-based authority on the drinks trade, in 2015 there were 61,500 9-litre cases of tequila sold in China, compared with 2.3m of brandy/cognac and 1.2m of whisky.

“One of the major reasons that tequila is not popular among the Chinese is that Mexico is not an aspirational place for them,” says Shaun Rein, managing director of China Market Research, a consultancy in Shanghai. “Chinese consumers are shifting away from beer, aiming for symbols of luxury like cognac, which reminds them of that French lifestyle, or Australian wines [that are] catching on as a symbol for the new world.

“On the other hand, Mexico has created . . . a negative image in the past years . . . Mexico has always left an impression of being cheap and bad-tasting in the [public] eyes of Chinese.”

Mexico’s President Enrique Peña Nieto has made boosting diplomatic and trade ties with China a goal, but relations were strained in 2014 when Mexico abruptly cancelled a $3.6bn high-speed rail contract awarded to a Chinese-led consortium. It emerged that a Mexican company linked to one of the members of the bid group had paid for the president’s wife’s luxury mansion, sparking a major scandal.

Luis Velasco, president of the National Tequila Industry Chamber, admits that it will be difficult to make inroads. The Chinese “culturally just don’t get tequila”, he says. “They don’t know how to drink it.” Rather than a sophisticated drink like the cognacs and whiskies that Chinese consumers have come to love, “they think it’s a bit weird . . . like a firewater from the third world”. Educating consumers “is a task that’s going to take years”, he says.

In any case, China already has a firewater of its own — baijiu — which is distilled from grains and is very potent. The IWSR says 1.2bn 9-litre cases were sold in 2015 in China. Ironically, producers are looking to the success of tequila to try to expand baijiu’s appeal abroad by, for example, devising cocktails.

But resistance to tequila is more than a cultural preference. The industry has also run into regulatory hurdles that have blocked exports of many aged tequilas because of rules on additives.

Even though China permits imports of whisky and cognac containing caramel colouring, tequila with the additive has not been allowed, Mr Velasco says. Caramel colouring is commonly added to even out the colour of a tequila batch after ageing. “Provided rested, aged or extra-aged tequilas do not contain caramel colouring, they have no problem entering China,” he says. Progress has been made, but “it’s taken years”.

The Chinese government’s crackdown on ostentatious gift-giving and the country’s economic slowdown have also hurt sales of imported spirits. Casa Dragones, one of Mexico’s most exclusive tequilas, had been set to start exports to China back in 2013, in bottles with special calligraphy, but had to put its plans on ice.

“I’m not discarding the possibility in the near future,” says Bertha González, the group’s chief executive. But for now, she is focusing on growth markets, chiefly the US and Mexico.

Hans Qu, a sommelier and lecturer on wine in China, urges Mexico’s tequila industry to find “more patience”, noting that whisky is now ubiquitous but “took 300 years to get to where it is today”.

His advice? Put on your sombreros. “The key is to combine the liquor with Mexican culture, giving young Chinese exposure to the traditional Mexican hats.” More than one Mexican product might benefit from such an export push.

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