Liquor's name sets off a fight

By Andrew Wang
Los Angeles Times

As trade squabbles go, it's a tempest in a margarita glass.

Despite legal challenges, John Wagoner of Temecula, Calif., plans to launch his 100-proof agave spirit called Temequila. He has replaced his 25-gallon still with a 300-gallon version he designed himself. Glenn Koenig • Los Angeles Times

In October, when he finally perfected his recipe for an alcoholic beverage distilled from the pi–a, or core, of blue agave plants, he knew he faced a potential legal problem. Just as the French own the name champagne, the Mexican government holds — and vigorously protects — the rights to the name tequila.

So Wagoner, 44, came up with Temequila, a play on the name of his adopted hometown that he hoped would forestall a legal challenge.

The name "kind of flowed nicely," said Wagoner, who plans to start selling his 100-proof concoction next month for $58 per 750-milliliter bottle.

But in Mexico, Wagoner's wordplay is seen as a distinction without a difference.

A Guadalajara-based group that represents agave growers, tequila producers and distributors sent a letter last month that warned him to stop using the name or face legal action.

Making a spirit called tequila is "impossible to do in any other part of the world than Mexico — not in South Africa, not in Europe, not in the United States," said Ramon Gonzalez, director of the Tequila Regulatory Council.

Temequila, he said, is "phonetically similar" enough to fool tequila buyers into thinking it's the genuine, Mexican-made article.

The Mexican government, which contends that the name tequila is specifically protected by the North American Free Trade Agreement, also is weighing in.

"We don't see it as a minor problem," said Salvador Behar, general counsel for trade at the Mexican Embassy in Washington. "Whoever is trying to mislead the consumer is a threat and we take it seriously."

The small scale of Wagoner's operation is not an issue, he added. "If it's one bottle or 10,000 bottles, the problem is the same."

More than 8.5 million cases of tequila were sold in the United States, last year, according to the Distilled Spirits Council of the United States. That was up 5.8 percent over 2003 — the fastest growth of any major category of distilled spirit. And nearly 78 percent of the 109 million liters of tequila that Mexico exported last year went to the United States, the tequila council reported.

"This is a very important matter for (Wagoner)," said Tom Pirko, president of Santa Barbara-based consulting company Bevmark. "But it's much more important for Mexico."

Wagoner, a Compton, Calif., native who owns a staffing agency in Long Beach that finds jobs for developmentally disabled people, was an unlikely candidate to start an international trademark dispute when he bought land in the rugged hills near Temecula in 1996. The divorced father of two was in search of fresh air and open spaces, which he found in southern Riverside County, about 50 miles north of San Diego. He also was looking for something to grow on his five-acre parcel, his motivation more aesthetic than agricultural.

Wagoner's neighbors were partial to avocado or citrus groves, but he settled on the low-growing blue agave, a cousin of the wild variety that dotted the hills near his land.

"I didn't want something that would block my view," Wagoner said.

The prickly plant would thrive, he surmised, because the local climate, elevation and soil — a reddish-brown volcanic variety — were similar to conditions in the Mexican state of Jalisco, the center of the country's tequila industry.

Wagoner bought about 100 2-year-old agave plants from a plantation near Guadalajara, the capital of Jalisco. At around the same time, Wagoner said, he learned there was a shortage of blue agave on the market, caused by the plant's long growth cycle — eight to 12 years — and the spread of a pesticide-resistant weevil. The expanding U.S. taste for tequila, the main ingredient in margaritas, added to the demand.

Tossing his landscaping plans aside, Wagoner at first considered selling his agave plants to Mexican tequila producers. Then he decided it would be more lucrative to make his own product.

After a few years of studying distilling texts, numerous visits to distilleries in the United States and Mexico, lots of Googling and dozens of test runs, Wagoner had his agave spirit. With money from his savings — he won't say how much — Wagoner established Skyrocket Distillers.

Only the problem of the product's name remained.

In 1974, "tequila" was the first trademark granted protection by the Mexican government as an appellation of origin, which said only agave spirits made in the city of Tequila in Jalisco state could bear the name. The designated area has since been widened to include the entire state, as well as 56 towns and villages in four other states.

Mexico's protection is similar to the European Union's Protected Designation of Origin, which defends the names of products that are geographically distinct such as wines, cheeses, hams, sausages and oils.

The French version of the legislation, the Appellation d'Origine Controlee, covers several dozen regional products, including champagne, which can only be produced in the Champagne region.

Trading partners stipulate in international trade pacts that geographic appellations must be respected. Just as clauses in NAFTA protect tequila, Gonzalez of the producers' council said, other parts of the agreement bar Mexican manufacturers from using American trademarks such as bourbon and Tennessee whiskey.

Despite the tequila council's threats, Wagoner said he was sticking to his mid-April launch date. To that end, he has just replaced his old 25-gallon still with a new 300-gallon version he designed himself, financed with money from outside investors. Last month, 20,000 bottles arrived from a factory in China, squat, bell-shaped and painted red, white and blue with "Made in the United States" emblazoned on the front.

In total Wagoner has about 3,000 plants on his land and his parents' 20-acre plot nearby. One plant, he said, is enough to make about 50 bottles of liquor, and he's reached agreements with two other landowners in Temecula to help him grow more. His goal for the first year is to produce 120,000 bottles, or 90,000 liters. (Jose Cuervo, Mexico's oldest tequila maker, sold nearly 30 million liters in the United States in 2003.)