Scotch and vodka show Latin America promise13th February, 2013 by Chris Mercer
Global distillers are using whisky and vodka brands to beat a path for premium international spirits through Latin America’s jungle of local favourites, discovers Chris Mercer.
Headline spirits sales for Latin America are underwhelming. Consumption is smaller today than in 2006 and will only expand by 6% on 2011 levels up to 2016, to 2.24bn litres, says Euromonitor International, whose regional figures include Mexico.
However, falling consumption of native spirits, such as cachaça in Brazil and Tequila in Mexico, conceals premium opportunities. “Scotch and vodka are showing a lot of promise,” says Diageo’s president for Latin America and the Caribbean, Randy Millian.
Diageo saw net sales rise by 16% in Latin America & Caribbean in the first quarter of its new fiscal year, and that’s no fluke. The drinks giant has posted double-digit growth in the region for five of the last six quarters, according to Sanford Bernstein analysts.
Millian says Latin America was the largest regional contributor to Diageo’s global sales growth on Scotch whisky in its last fiscal year. “In Paraguay, Uruguay and Brazil, over 60% of [our] net sales growth was driven by Scotch, primarily Johnnie Walker and Old Parr,” says Millian. He names Venezuela, Colombia and Mexico as other strong-performing countries in this increasingly dynamic region.
In calendar 2011, Scotch exports to Central and South America increased by 38% in value to £489m, according to the Scotch Whisky Association (SWA). Brazil was the ninth largest single export market for Scotch globally, worth £99m.
“The most exciting market at present is Brazil,” explains Mark Thorne, regional director for Pernod Ricard-owned Chivas Brothers. “Brazilian consumers are increasingly looking to trade up with an interest for international brands.”
Expect to see more marketing around Chivas 18 and 25 Year Old blends in Brazil, and across a Latin America region that is traditionally known for 12-year-old whiskies.
However, premium international brands must still mix with Scotch blends that have “gone native” to the extent that many outsiders either don’t know them or have forgotten they existed. Names like Passport, Old Parr and Haig are not just gathering dust on bar shelves, while Pernod’s Something Special has enjoyed a decade of success via its collaborative ‘Enbotellarte’ competition with regional artists.
To emphasise the point, Diageo reported Buchanan’s net sales up 25% in its last full year, with Johnnie Walker up 12%. In Brazil, Pernod reported Chivas sales up 10% and Passport up at more than double this rate.