Mexico seeks to ban bulk exports of Tequila...

[boone]

This info was gathered from Alcoholic Beverage Executive Newsletter and Kane's Beverage Week

Mexico Seeks to Ban Bulk Exports of Tequila...,force Bottling in Mexico; DISCUSS says Rule is illegal.

A proposed Mexican regulation banning bulk exports of tequila and requiring all bottling to occur in Mexico "will have a devastating effect on both U.S. and Mexican spirits industries," said Peter J. Cressy, president, Ditilled Spirits Council of the U.S. "It will damage existing brands, drive companies out of business and cost jobs on both sides of the border," he added.

It could have a grave effect on consumers worlwide through higher prices, fewer choices and the significant potential for serious product shortages, he added.

The rule could force U.S. suppliers to assign their trademark rights to a Mexican company to have a brand bottled in Mexico. One supplier---Michael Griesser, vice chairman, McCormick Disilling Co.---told us he would never agree to assigning the trademark for Tequila Rose and Tarantula tequilas. McCormick is in the midst of a $2.5 million 60,000 square foot plant expansion and has hired four additional supervisors and 20 second shift workers to accomodate a booming tequila business that includes a ready to drink version of Tarantula that is already exceeding production capability.

There's no reason for us to call tequila a unique product of Mexico when blue agave grows around the world, Geisser said. What's wrong with the framers in Arizona getting rich by supplying agave to the U.S. producer, he mused.

The Mexican Bureau of Standards rule, scheduled to go inot effect Jan. 1 2004, would prohibit the sale of Tequila not bottled in one of five Mexican states comprising the Tequila region. More thatn 50% of Mexico's tequila production is exproted to the U.S. In 2002, 83% of Tequila imported into the U.S. was shipped in bulk form and bottled here.

Other companies with U.S. operations that would be affected by ther rule include Allied-Domecq Spirits, which bottles 1 million cases a year of Sauza Tequila at its Fort Smith, Ark. plant. Diago, which bottles Jose Cuervo, Heaven Hill Distilleries, David Sherman Corp and Barton Brands. McCormick, Heaven Hill, David Sherman and Barton Brands have formed a Bulk Tequila Importers Alliance.

This ill-conceived action is a violation of Mexico's obligations under the North American Free Trade Agreement (NAFTA) and World Trade Organizatin (WTO) rules Cressy said.

And it violates a written pledge by the Mexican ambassador in 1991 that Mexico would never disturb the bulk export business.

The propsed ban on bulk shipments would not take effect until January 2005 and Mike Griesser, vice chairman of McCormick Distilling, said the year's delay was to provide Mexican companies time to expand their bottling plants. There's not enough capacity there currently to handle all of this tequila, he said.

DISCUSS warns that if the proposed rule goes into effect it would raise cost for consumers and threaten jobs in the U.S. bottling plants. This proposal could have a grave effect on consumers worldwide through higher prices, fewer choices and the significant potential for serious product shortages.

The industry hopes the Bush admistration will fromally object to the rule changes when trade ministers from the three countries hold their next regularly scheduled meeting Oct. 7 in Canada. Frank Coleman, DISCUSS spokesman, said that protecting the quality of tequila shipped in bulk has not been a problem. He said the existing standards are stictly monitored by Mexica's Tequila Regulatory Council.

Sales of tequila, propelled by the popularity of margaritas and tequila shots have almost doubled over the past decade, making tequila the fastest growing liquor in the country. According to industry figures, tequila sales rose to 7.2 million 12 bottle cases last year and represented 4.7% of all U.S. liquor sales in 2002. The U.S. is Mexico's biggest market for tequila, consuming more that 50% of the country's foreign shipments last year.

Bettye Jo

(Greg--ya better start stockin' up )