Tequila is made in the town of... Tequila.
Easy enough.
Not just anyone can make tequila. It's only tequila if it's produced in the state of Jalisco and limited regions in the states of Guanajuato, Michoacán, Nayarit, and Tamaulipas.
The city lies next to a dormant volcano. The blue agave plant grows in the volcanic soil of this region. So essentially, Agave + Volcanoes = Tequila.