What’s In Your Tequila? California Lawsuit Claims Some Labels Misled Consumers

Tequila has become the darling of California’s cocktail culture.

According to industry data, more than 50 million cases of tequila were sold in the United States in 2023, a 7.6% increase from the previous year. And California is the biggest market for the spirit produced from the blue Weber agave plant grown exclusively in a handful of states in Mexico — a demand boosted by the state’s sizable Latino population.

A handle of tequila can range up to $100 and beyond, depending on the brand, with many premium labels promoting that their liquor is made up of “100% agave.” This kind of tequila usually costs more because it “takes more agave to make,” said Mike Morales, Los Angeles-based executive editor and tasting director of the industry magazine Tequila Aficionado.

“It’s a big status symbol.”

But a series of legal battles has begun this summer that could shake up the entire industry — one of them in the very state that has embraced tequila the most.

A San Francisco resident has filed a class action suit in federal court against spirits giant Diageo — parent company of well-known tequila brands Don Julio and Casamigos — alleging the company intentionally misled consumers about the agave content in its tequila products labeled “100% agave” in order to profit from this deception.

‘An earthquake in the industry’

The class action — filed in the U.S. District Court for the Northern District of California — claims to represent anyone “who purchased Diageo Premium Tequila Products” with the goal of recovering “financial losses sustained by consumers who were misled by [Diageo’s] false and misleading advertising.”

This is actually the third lawsuit that Diageo faces from consumers regarding the agave content in their Don Julio and Casamigos brands, with one class action filed by consumers in New York in May and another in Florida shortly after.

Out of all three states where Diageo is being sued, California has some of the strongest consumer protection laws — and the beverage company has recently requested that this particular lawsuit be moved to the same New York court overseeing the first case.

The plaintiffs joining the San Francisco resident in the lawsuit are represented by Baron & Budd and Hagens Berman, two consumer rights firms with extensive records of wrestling with major corporations in court. Neither firm returned KQED’s requests for an interview.

A spokesperson for Diageo told KQED that “claims of adulteration are outrageous and categorically false,” and that the company will defend the quality and integrity of its tequilas in court “and against anyone who is spreading misinformation and lies about our products.”

Lawyers for both Diageo and the California plaintiffs will meet in San Francisco’s courthouse on Oct. 3. Regardless of what the courts decide, said David Suro Piñera, a Philadelphia-based tequila entrepreneur and historian, the lawsuits “are an earthquake in the industry.”

So why is the agave content inside a tequila bottle so crucial when it comes to selling this liquor that’s only becoming more popular? And what does this lawsuit say about how U.S. consumers shape an industry that started thousands of miles away in Mexico?

Evolution in the public eye

Covered floor to ceiling with colorful and intricately decorated bottles, the San Francisco Tequila Shop on the steep streets of Bernal Heights is an oasis for lovers of spirits derived from the agave plant. It was here in the backroom one August afternoon that owner Moose Malhi hosted Suro Piñera for a tasting event featuring some blanco, some reposado and plenty of conversation.

Suro Piñera told the assembled tequila enthusiasts about how, back in 1986, he opened a restaurant called Tequilas in downtown Philadelphia with the goal of bringing high-end Mexican cuisine to that city. But other local restaurateurs were confused about the name, he said.

“They would hear ‘tequila’ and imagine something else — not high quality.”

But in the following decades, the way American consumers think about this liquor has changed significantly, Suro Piñera said. “To see right now the passion, the commitment, the interest in tequila, is a dream come true,” he said.

Families have been producing tequila primarily in the Mexican state of Jalisco for centuries, blending European distillation techniques with Indigenous agricultural knowledge. The Tequila Regulatory Council is the independent body that establishes the rules for the industry, which includes where tequila can be produced, who can sell it and defining what goes into it.

Anything marked as “tequila” must include at least 51% alcohol derived from blue agave. The other 49% can come from other sources, like caña (sugar cane) or grain alcohol, which are typically cheaper. This type of tequila, that’s a mixture of alcohols from different sources, is called “mixto.”

The Diageo lawsuit said that 100% agave “is a powerful marketing tool that shapes consumer expectations” and then accuses the company of tricking consumers into buying tequila that actually has “cheaper, non-agave alcohol.”

Mislabeling their tequila products is a violation of consumer protection law, the lawsuit claims. “For dominant players like Diageo, this is not just deceptive — it is a calculated, strategic misuse of market power.”

‘A pleasant burn’

Regulatory details aside, how does being 100% agave affect the way your tequila actually tastes? If you rarely drink tequila because of its strong flavor, don’t expect 100% agave tequila to be any easier on you, the San Francisco Tequila Shop’s Malhi said.

“People drink tequila that’s been sweetened by additives, and they think it’s smooth,” he said. “If all you drink is tequila that’s been sweetened, and then you try something with no additives, that’s such a big jump.”

“A good tequila is going to give you a pleasant burn,” said Marcos Higareda, a tequila entrepreneur based out of Riverside County. “This comes from the ground. The soil nurtured that agave for the last seven, eight years. Then it went through a process to convert it into tequila.”

There’s also a lot of variation between the distilleries that provide tequila labels with their product. Some are run by the same families that first opened them decades ago, with long-held distillation traditions becoming industry secrets. And while some of these factors are dependent on humans, others — like rain and drought — are ultimately out of our control, Higareda said.

And with 100% agave tequila, it’s normal for there to be slight variations in color, taste or aroma in the same batch. “Not all tequilas are going to be the same,” he said.

Agave under strain

But as the world’s thirst for tequila grows, Higareda said that big brands are responding with a product that seeks to smell, taste and look the same regardless of where you go. One way to do that: adding sweeteners and colorants to achieve this uniformity, as permitted by the Tequila Regulatory Council’s rulebook for tequila production, also known as the “Normas.”

“You want to go to the shelf and you want to see that your product has the same consistent color every single time and the same flavor every single time,” a Jose Cuervo executive recently told Forbes Magazine.

And globalization is being felt all the way through the supply chain.

The first time that Morales of Tequila Aficionado visited Jalisco, almost two decades ago, he remembers how bright the fields of agave were in the sunlight: “I had to look at them with my sunglasses on because they were so blue and bright against the red soil,” he said.

On recent trips, however, he’s seen: “it’s not like that anymore,” he said. “The plants aren’t big enough. They don’t let them grow long enough.”

For decades, the tequila industry has followed a cycle of boom and bust. When the price of tequila goes up, growers rush to grow and harvest agave as fast as possible, and when the price goes down, “everybody leaves their plants to rot,” Morales said.

Industry data shows that U.S. tequila sales are growing faster than vodka, whisky and all other spirits combined — and the giants of the beverage industry have noticed this surge. In the past decade, multinational corporations have snatched up some of the most famous tequila brands: London-based Diageo bought Don Julio in 2015 and then Casamigos in 2017; Sauza was taken over by Suntory, a Japanese company, in 2014; and rum giant Bacardi purchased Patrón in 2018.

“These brands are well-funded and want a return on their investment,” Morales said. That could mean depending more on non-agave sources for alcohol content, he said.

“Any tequila that’s being mass-marketed and charging a lot of money is probably lawyering up,” Morales said.

What now for the industry — and in court?

Back at the San Francisco Tequila Shop, after Suro Piñera’s tasting event, Malhi rang up his customers — and pointed to a photo behind the register of his grandfather, Nirmal Singh Malhi, standing next to family friend Ernie Sánchez.

In 1993, Malhi’s family opened a liquor store in Modesto, next to the Sánchez family. Over the years, they all developed a strong bond and learned about each other’s culture: the Sánchezes hailing from Jalisco, Mexico and the Malhi from Punjab, India.

The Sánchez family would frequently travel to Jalisco and bring back tequila brands that weren’t available in the U.S. yet. It was the Sánchez family that taught him, Malhi said, “that in each bottle, there’s a lot of tears, sweat and hard work.”

“When you really understand all the work and tradition that goes into making a quality spirit … that’s when you will appreciate more of what you taste when you drink tequila,” Malhi said. And he — like so many who’ve made tequila their lives — will be paying close attention to the case against Diageo as it unfolds at San Francisco’s federal courthouse, he said.

What most likely will decide the outcome of this legal battle is the evidence that each camp presents, said Deborah Hensler, professor of dispute resolution at Stanford Law School.

The verdict could also hinge on emerging technology. The defendants include data from two types of chemical tests — nuclear magnetic resonance and isotope testing — designed to measure the composition of alcohol derived from tequila. According to several industry experts that KQED spoke to for this story, these tests are fairly new in the world of tequila and have not yet been universally adopted by tequila producers.

“The defendant would have to bring in their own experts that counter [this data],” Hensler said — so that the judge can adequately consider whether the plaintiff’s evidence is credible and scientifically valid.

If the case stays in California — and is not transferred to New York as Diageo has requested — the Golden State’s robust consumer protection laws could also come into play. The lawsuit claims the beverage company is in violation of the state’s Consumer Legal Remedies Act, which prohibits companies from misrepresenting the source of the goods they are selling, said Ted Mermin, consumer law professor at UC Berkeley.

“You can’t advertise something if you know — or should know — that what you are saying isn’t true,” he said. “You do not need a law that’s called ‘the tequila purity law.’”

And say the court finds that Diageo did mislead consumers about the agave content in its products? It would be the smaller players in the supply chain that pay the consequences, Suro Piñera said.

For years, farmworkers and environmental activists have warned that greater demand for agave could have serious long-term consequences on the drinking water and agricultural land used by the very families that make this liquor possible.

“If this [spirits] category collapses and the external corporate interests just go to the next country — the next trending liquor — they’ll be leaving us with a damaged ecosystem and greater inequality,” he said. “It’s a cultural and ecological expropriation.”

And with that, Suro Piñera added, wiping away “the reputation and recognition that we have worked so hard to build.”