Margarita madness

Lime costs soaring

Impact on Cinco de Mayo margarita bashes hard to swallow

Bloomberg NewsMay 2, 2014 

LIMES21

Lime prices are surging as some growers in Mexico, source of nearly all the U.S. supply, band together to set prices after a crop disease ravaged trees, squeezing profits before the biggest margarita bash of the year, Cinco de Mayo. Shown, limes at the Michoacan market in Mexico City last month. Illustrates LIMES (category f) by Debarati Roy and Megan Durisin © 2014, Bloomberg News. Moved Friday, May 2, 2014. (MUST CREDIT: Bloomberg News photo by Susana Gonzalez).

SUSANA GONZALEZ — Bloomberg

— The most expensive ingredient in the margaritas here at Adobo Grill isn’t the tequila. It’s the lime.

Costs for the fruit more than tripled in the past two months, squeezing profit margins before the biggest U.S. margarita bash of the year, Cinco de Mayo, according to George Ortiz, who helped start Abodo 14 years ago in the historic Old Town neighborhood.

“We fresh-squeeze lime juice every day,” said Ortiz, 50. “We use it for table-side guacamole, fresh squeezed limes right there. We use it for ceviches. It’s a huge expense.”

Lime prices are surging as some growers in Mexico, which supplies about 97 percent of the fruit in the U.S., banded together to set prices after a crop disease ravaged trees. Americans spend about $2.9 billion annually on margaritas, which account for about 14 percent of the country’s cocktail sales, according to Technomic, a Chicago-based research firm tracking the food industry.

“Cinco De Mayo is by far considered the biggest day for margarita sales in the U.S.,” said David Henkes, a vice president at Technomic. “It will disproportionately impact higher-end restaurants and those that tend to make from-scratch margaritas. You may also see restaurants and bars promote other more profitable cocktails if lime prices stay high.”

Retail-lime prices climbed to 56 cents per fruit as of April 4, according to the latest data from the U.S. Department of Agriculture’s Market News unit. One lime yields about 1 ounce of juice. By comparison, a 750-milliliter bottle of Zapopan Reposado Tequila is listed at a regular cost of $12.99 at online beverage-retailer BevMo. That’s about 51 cents an ounce. Ortiz said he spends about $23 on a bottle, while the equivalent amount of lime juice costs him $40.

Prices for limes are up 81 percent from a year earlier and more than double the cost in mid-January, the USDA data show. The Standard & Poor’s GSCI gauge of 24 commodities gained 4.6 percent in the past 12 months while the MSCI All-Country World Index of equities rose 13 percent.

Members of Mexico’s Citrus Growers Association of Apatzingan Valley limited supply to guarantee a minimum price for producers, Leonardo Santibanez, an association member and coordinator of its trade events, said in March.

The group has been able to push up prices after crop disease in the neighboring state of Colima crimped production, making Apatzingan the main grower. Excess rainfall also hampered output.

The Cinco de Mayo holiday commemorates the Mexican victory over the French in the 1862 Battle of Puebla and has become a celebration in the U.S. of Mexican food, culture and, of course, drinks.

Dos Caminos, which operates six restaurants, including four in New York, one in Fort Lauderdale, Florida, and one in Atlantic City, New Jersey, uses as many as 40 cases of limes per week. After prices climbed to about $100 a case from about $35 at the beginning of the year, costs jumped by $10,000 a month, Jaclyn Schwartz, a New York-based marketing specialist at the chain which is owned by BR Guest Hospitality Group, said in an e-mail.

“We are hoping that enough people walk in through the door to help us make up for the squeeze in margins,” Elias Mandilaras, a 32-year-old manager at the Dos Caminos midtown Manhattan location, said.

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