Exporting Mezcal from Oaxaca Mexico: Starting Out

Alvin Starkman, M.A., J.D.

So you want to import mezcal from Oaxaca to the US, Canada, the UK, Europe, and/or elsewhere in the world, by starting your own brand. Regardless of the country into which you plan to import the iconic agave based Mexican spirit, it is important to understand that the rules and regulations for importing alcohol are typically complex and onerous.  They are much simpler for blouses, blenders, jewelry and most other marketable items.  Learn at least a bit about the steps which must be taken and the effort and cost involved, before making a definitive decision and visiting Oaxaca with your mezcal export/import project in mind. 

Some jurisdictions have a three tier system, wherein an importer is not permitted to distribute, and a distributor is not permitted to retail. There are permutations of this, depending on the country.  Just as importantly there are states and provinces which control virtually all aspects of import and distribution; but presumably you are aware of at least the broad regulatory framework for your own jurisdiction.

Remember that the name you select for your mezcal must be registered not only in the country into which you want to import the spirit, but also in Mexico. This is regardless of whether or not you are interested in the Mexican domestic market for sales. By all means register your name, but prior to spending much effort or resources in brand development, ensure that your name is available in Mexico.  You or your lawyer can do a simple search. However, a Mexican lawyer, and better yet a Oaxacan attorney with expertise not only in intellectual property but also in spirits, is best consulted.  Such a lawyer can also explain the likelihood of a dispute arising if your preferred name is close to another already registered and the likely outcome, whether or not it is worth fighting for depending on the financial resources of the individual or company which has registered ahead of you, etc. Over a decade ago many entrepreneurs, both Mexicans and foreigners, began registering names for agave spirits; even tequila brand owners with concerns about losing their market share if they did not jump on the mezcal bandwagon. 

Have contingency plans in place for your preferred name and marketing plan.  Many who visit Oaxaca for the first time with an export project in mind wait until they have a particular palenquero in mind with an artisanal mezcal factory in a specific region of the state.  They do this with the hope of gaining some inspiration as to naming their brand from what they learn while here in Oaxaca, or even from taking a history of the family. Sometimes those visiting with only a rough business plan in mind find that an effective name for a brand, or a marketing “hook” as I call it, jumps out at them almost immediately upon getting into a mezcal producing region of the state. 

Prospective brand owners come in all shapes and sizes, but I envisage three broad categories along a continuum: 

• The pure entrepreneur who is in it just for the money and thinks he knows how to maximize profit, caring little or nothing for the palenquero and his family, and trying to obtain the best possible price for his agave, bottle, and all the rest.  He’s not even that interested in learning about the culture of mezcal and agave growers, processes, etc.  He thinks that money can buy whatever he wants, but will only part with it to the extent absolutely necessary.  Believe it or not, there are those in this category who only reluctantly visit Oaxaca.
• At the other end of the continuum is the altruist, the ardent mezcal aficionado who absolutely loves the spirit, the multiplicity of cultures in the state of Oaxaca, and wants to expose the globe to the fascinating world of artisanal mezcal.  This individual also wants to help improve the economic lot of the distiller and his family.  If he makes money that’s fine, and if not, well, he’s having a lot of fun, it’s his love and his passion, and he’s being a good-deed-doer to and for the palenquero and segments of the broader community.
• Somewhere in the middle is the impresario, or employee with decent business sense, perhaps with some connection to the alcohol industry, who likes mezcal, sees an opportunity in a growing market because of the mezcal boom, and thinks he can make some money at it.  He thinks, rightly or wrongly, that his home state, province or country is just beginning to catch on.  He can’t afford to quit his day job, although he might, but only if he can get back into his vocation if the project falters. He conceivably lacks the knowledge he should have about mezcal and the industry, but is prepared to study to bring his level of knowledge up to speed. 

If you’re considering a mezcal export/import project you’re probably somewhere in the middle of two of the categories along the continuum, but not necessarily so. There are indeed those at either end.  In both cases they might as well just “go for it.” The altruist will thoroughly enjoy the experience and reap positive benefits, whether the business takes off or fizzles. The no-holds-barred capitalist can’t lose because of his unlimited capital and/or ability to drum up investors.  He knows how to pull a rabbit out of the hat.  But if that doesn’t work and the rabbit fails to appear, in any event he’ll l write off all losses.  That’s what he’s been doing from the outset. It’s the person somewhere in the middle who must be cautious.  He cannot afford too much of a financial setback.  The only way to realistically rationalize the venture is to figure that worst case scenario he’ll be stuck with inventory he can give away at Christmas, and drink for the rest of his life.  After all, he loves the particular mezcal he’s been trying to market, and he knows it won’t go bad over the ensuring years. 

Where do you want to position your agave spirit in the marketplace: high end, middle of the road, or inexpensive; sipping, mixing for cocktails, or both; an ABV of 37%, 44%, or 54% (remember that this impacts the price paid for the mezcal, both by you and the end consumer); blanco, and/or añejo; more obscure species of agave, or espadín, madrecuixe and the like; initially entering the market with a single specie, or a more comprehensive line of products; marketing the mezcal of only one palequero or multiple producers, and; artisanal (and/or ancestral) as opposed to more mainstream.

You might discern dichotomies between the tree-huggers (organic/100% natural Birkenstock crowd), the true spirits aficionados, and those always looking for the latest fad. There’s nothing wrong with seeking to attract one camp versus the other.  Del Maguey’s Ron Cooper and Scorpion Mezcal’s Douglas French both began their businesses in the mid-90s, the former with “single village mezcal” and the latter with “worms are for wimps.” Both were motivated by, at least to my knowledge, a love of the spirit, wanting to earn from its marketing, and helping Oaxacans through promoting quality mezcal outside Mexico. 

Exclusivity over the palenquero’s production is a consideration which virtually always arises for those wanting to get into the industry. If you intend to build or dramatically expand the palenque for your distiller and/or pay all costs for certification and obtaining the permit and equipment for bottling, you will be in a better position to request exclusivity.  What kind of arrangement do you envision given that you will in theory be helping out your palenquero business associate for the long haul whether your project succeeds or not? Is it reasonable to expect him to agree to exclusivity if in your first year of production you are buying only 3,000 bottles at 750 ml? Perhaps consider exclusivity over a particular recipe, for importing into a particular country or state, over only the certified spirit, or after your reach certain production and export goals. Think about what’s fair to both sides. 

And what about capitalization?  During the latter part of the first decade of this century, one now popular (at least in the US) semi-industrialized brand began with a $150,000 loan. On the other hand, what is today considered a superior, quality artisanal mezcal brand began with less than $20,000.  Its owners started out relatively recently, during or about the latter part of 2012, doing virtually all of the legwork on their own. This harkens back to where you are along the continuum noted earlier. The brand with the more significant capitalization is owned by people with profit motive and little more in mind, while the owners of the better brand, not surprisingly I suppose, were driven by passion; and yes of course wanting to earn a modest if not decent living. Does reputation within the community of agave spirit commentators matter to you?

The foregoing are but a few of the considerations for thought, best pondered early on in your voyage into the world of the business of mezcal. The enumeration is certainly far from exhaustive, and is meant to be a starting point and no more. And remember, at least into the third decade of this century the price of agave will likely continue to rise exponentially.

Alvin Starkman operates Mezcal Educational Excursions of Oaxaca (www.mezcaleducationaltours.com).  He has assisted brand owners on four continents.