Oaxaca, Mexico's Mezcalerias Reaching Spirit's Saturation Point?

The state of Oaxaca in south central Mexico is home to most of the country's mezcal, the high alcohol content agave based spirit. And over the past two years its capital, Oaxaca de Juárez, has been leading the charge in opening a plethora of cantinas and restaurants specializing in a broad range of artisanal mezcals to its growing number of enthusiasts. These mezcalerías cater to locals, Mexicans from the furthest reaches of the country, and international tourists. While "mezcal tourism" has been and will likely continue to be a significant boon to Oaxaca's economy, a frequently asked question is if the number of mezcalerías in the city has reached the saturation point despite the recent dramatic rise in the spirit's reputation on the world stage.

Tourism in Oaxaca, in general, has had its peaks and valleys since 2006, especially in terms of visitors from the US. That year witnessed significant civil unrest, and despite the fact that it was not dangerous for travelers to visit Oaxaca, the US state department warned against stepping foot in the state. Media also played a significant role in deterring tourism.

Thankfully people's memories are short, so tourism returned. That is until the "Mexican" Swine Flu scare. But tourism rebounded. Then there was the combination of the "Mexican drug wars" and the US economic crisis. But since the resurgence of the US economy, and President Peña Neto apparently taking a different approach to dealing with drug cartels from that of his predecessor, Oaxaca is back in business.

But will the current surge in tourism continue, and be enough to enable the city's drinking holes to turn a reasonable profit (let's forget about the well-known downtown Oaxaca supposed "not-for-profit" mezcal bar), and warrant the opening of more mezcalerías? On all counts, I would suggest so.

Mezcal will continue to positively impact the level of tourism in the state capital. There are several reasons to opine that more mezcalerías than the current (early 2016) 15 or so will open, and that the existing ones will not only survive, but continue to thrive. A saturation point is not in sight. There are numerous reasons for this perspective.

It is trite that the profit margin for retail spirit sales is significant; more so in Oaxaca than for example in the US or Canada, since tourists are accustomed to hometown elevated prices (which of course take into consideration cost of export, import tax, warehousing, agency fees, etc.) and are more than willing to pay what amounts to half the cost of a shot as compared to in their home watering holes. Bars can sell a 1.5 ounce serving of mezcal tobalá for 120 pesos ($7 USD) or more, without patrons batting an eyelash. Average cost to the retailer for this type of mezcal is in the neighborhood of 250 pesos per liter, perhaps a bit more. This is not to suggest that tourists are easy marks, but rather simply that profit margins for mezcal here in Oaxaca are as healthy, if not healthier than in the US, Canada, the UK, and elsewhere. On the contrary; Oaxacan mezcal prices remain a bargain.

In theory, only mezcal which has been certified by a regulatory board, Consejo Regulador del Mezcal, can be sold in Oaxaca. There are costs associated with certification, and tax on a bottle of this kind of mezcal is extremely high. However, many mezcalerías in Oaxaca sell quality "mezcal" which is called destilado de agave, or is known by a similar name. Sale of this alternate agave based spirit (yes, still a mezcal) nets a significantly higher gross profit. Sometimes but not always, the lesser cost to the retailer is passed on to the customer. Another way that some mezcal cantinas have kept the cost down to consumers is by offering servings at both one and two ounce drinks (i.e. La Mezcalerita).

Some Oaxaca mezcalerías serve food (i.e. el Destilado), which broadens the pool of prospective patrons to include spouses and others in a party who are not all that enamored with the spirit. While the profit is of course less with food as compared to with spirit, offering a quality comida or cena certainly helps to pay the bills.

Other mezcal bars serve cocktails (i.e. El Espino Gastro Cantina), having a similar effect as those which go the cuisine route to keep their establishments filled. While some in the industry decry the bastardization of mezcal by using it to make cocktails, even such "purists" have begun to come around and have used a "cocktail night" as a way to attract customers.

You don't need much space for a mezcalería (i.e. Los Amantes). It appears legal to sit, stand, and drink outside the bar on the street. Of course the closer the locale to the heart of Oaxaca's downtown historic core, the higher the rent and the more modest the square footage, and thus the necessity of lax, if any, imbibing laws. On the other hand, with a bit of good publicity, a welcoming vibe and quality hooch, one can have all the space needed and a presumably affordable rent if at the fringes of downtown (i.e. Cuish).

Oaxaca is one of the poorest states in the country. Concomitant is the fact that wages are low, though retailers would be hard-pressed to encounter reliable staff at anywhere close to minimum wage, unless healthy gratuities are the norm. Thus, wages can be the most modest expense in a mezcalería's cost equation. But it cuts both ways; low wages can mean staff of questionable quality, so it becomes incumbent upon mezcal bars to keep a close watch, with owners close at hand. However, quality personnel can be affordable in this industry, since many bars do not open until the afternoon. Thus, a single shift can keep wages in check.

Often family members and partners maintain hours of operation (i.e. respectively Mis Mezcales and In Situ). In such cases reputations are built upon friendliness, helpfulness and knowledge of those staffing the mezcalería (i.e. Mis Mezcales) often combined with quantity and diversity of product (i.e. In Situ boasts 180 different mezcals). With the cost of mezcal purchased wholesale in quantity still extremely modest (i.e. as low as 60 pesos per liter for espadín), establishments can afford to be well-stocked.

No doubt tourism in Oaxaca will continue to have its ups and downs. But mezcal enthusiasts seem immune to the fear-mongering, and the urging by their friends and family against traveling to Mexico, and more specifically Oaxaca. The number of aficionados continues to grow, as does the diversity in their objectives: restaurant / bar owners visiting with their staff for training purposes; entrepreneurs with export aspirations; scotch, brandy and tequila drinkers anxious for something new; and of course novices wanting to sample and learn. Market saturation of mezcalerías in Oaxaca appears to be a long way off.

Alvin Starkman (M.A., J.D.) residents in Oaxaca. He owns and operates Mezcal Educational Excursions of Oaxaca (http://www.mezcaleducationaltours.com). Alvin teaches novices and industry professionals alike about mezcal and pulque, taking them into the state's central valleys and further beyond, to visit quaint, untouristy, artisanal distilleries, or palenques as they're locally known, as well as into the fields to harvest aguamiel with his Zapotec friends..

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