Agave Prices Collapsed, Tequila Prices Collapsed Faster: Cuervo's Sober Quarter Is a Category-Wide Warning Shot

Becle's third quarter of 2026 was bad on every reported line, and the market treated it as a demand verdict. The arithmetic says the headline is misleading. Last year's comparison quarter contained a 753 million peso gain in other income, and stripping that out still leaves EBITDA margin 760 basis points lower at 17.2% versus 24.8% in constant currency. The damage is real; 85% is simply the wrong measure of it.

Strip out the peso and the quarter still breaks down badly, but not mostly on volume. Constant-currency net sales fell 10.3% against a 5.6% volume decline, which puts roughly 4.7 points of the loss on price and mix, and the company itself attributes the 330 basis point gross margin decline to net sales per case pressure. This is a business defending volume by cutting the value of a case.

The regional split makes the United States the centre of the problem, and the problem is value rather than litres. US and Canada net sales fell 14.5% in pesos while volumes slipped only 3%, with management citing an unfavourable regional price and mix and noting that US shipments are improving as the distributor transition progresses.

Inside the portfolio the damage is concentrated, and not where investors assumed. The flagship Jose Cuervo brand lost 11.0% of volume while the smaller tequila lines fell only 0.6% and ready-to-drink grew 4.0%. Becle's portfolio also spans 1800, Gran Centenario, Reserva de la Familia and Maestro Dobel, so brand lines are not perfectly comparable year on year, but the direction is clear: the mass brand carrying the volume is the one losing it.

One part of the US gap is self-inflicted and will not repeat. Cuervo took over US distribution of the Jose Cuervo brand from Proximo on January 1, 2026, so early-2026 shipments had to be rebuilt from scratch, and the company says US shipments are improving sequentially as that transition completes. The hard question is what is left once the transition anniversary passes.

The cost side of tequila has inverted. Agave traded as high as 30 pesos a kilogram before the boom unwound; 2025 and 2026 transactions have cleared between 0.8 and 8 pesos, and Mexican production has fallen to 495.8 million litres from a 601.5 million litre peak in 2022. That is a cost collapse of three quarters or more, and essentially none of it reached gross margin.

There is a second-order reason the cushion is late rather than absent. Becle carried average inventory of 14.4 billion pesos across the trailing four quarters, roughly 282 days of cost of goods sold, so high-cost agave from the 2021 and 2022 planting cycle clears through production slowly. The price cut is immediate; the cost relief arrives over several quarters, by which time the shelf price has already been reset.

The same deflation is running through the wider spirits supply chain, and it is starting to look like a balance-sheet event rather than a margin event. MGP Ingredients reported third-quarter sales down 10% to $117.9 million with adjusted EBITDA down a third to $21.5 million. Net debt leverage rose to 3.6 times from 1.8 times a year earlier, even as capital spending was cut to $11 million from $25.4 million year to date.

Where the shopper went is measurable. Constellation Brands grew wine and spirits net sales 17% to $159.4 million in its June quarter with depletions up 10.2%, and beer net sales rose 5%, while Brown-Forman's ready-to-drink portfolio grew 20% with New Mix up 48%. US spirits supplier revenue fell 2.2% to $36.4 billion in 2025 while tequila and mezcal fell 4.1% to $6.4 billion, so the category is not shrinking evenly: agave spirits are shrinking faster than the shelf around them.

Two things would break this thesis, and both are plausible. Management has called the spirits slowdown mostly cyclical, and if US volumes stabilise while price and mix normalise, the margin damage proves a transition cost rather than a reset. A weaker peso would flatter reported results with no operational change, and Diageo's tequila figures are annual and reported rather than organic, so they mix category weakness with portfolio disposals.