Demand rises for premium spirits in Latin America

16th January, 2015 by Tom Bruce-Gardyne

Young, vibrant and volatile – Latin America is a land of opportunity for premium spirits, be they international or home-grown, discovers Tom Bruce-Gardyne.

Latin-America

The future looks bright for premium international spirits in Latin America

Many a Caipirinha was mixed in bars around the world as people gathered infront of TVs to watch Brazil vs Germany in the World Cup semi-final on 8 July last year. Perhaps the less said about the match the better given what happened to the host nation, but the World Cup certainly gave a boost in exports for Brazil’s beloved national spirit.

“In Brazil cachaça completely dominates consumption,” says Dan Mettyear, who monitors the country as market analyst for IWSR. He has tracked the cane-based spirit’s decline as it lost 12.5 million cases in the five years to 2012. Last year it slipped another 2% to 78.5m cases. Meanwhile, vodka has been growing steadily to 8.5m cases in 2013, partly because Brazilian barmen have been shifting from the Caipirinha to the vodka-based Caiprioska.

“Cachaça has quite a negative, low-life image in Brazil,” says Mettyear, who points out: “the term ‘cachaçaceiro’, or cachaça-lover, basically means drunkard. As the middle classes expanded they were desperate to try something new and vodka was an easy switch for consumers.” You can buy a bottle of the top-selling Cachaça 51 for under R$7 (US$3) in a Sao Paolo supermarket. Locally-distilled Smirnoff Red might be three times as much, but it’s infinitely more accessible than Johnnie Walker Red which, according to Mettyear, costs around R$70 (US$30).

Economic squeeze

The Brazilian economy officially entered recession in late August, and disposable income is being squeezed hard. However Diageo, the lead player within international spirits, hasn’t seen much of a slowdown yet. Tania Cesar, the firm’s marketing director for Brazil, Uruguay and Paraguay, says: “The most premium part of each spirits category is what’s growing fastest, and of all categories, Scotch whisky is doing best.” Quoting Nielsen, she puts Diageo’s growth in Scotch at 28% for the year to July.

Despite its price, Brazil is a huge market for Johnnie Walker, and consumers who have scaled the heights to get there are reluctant to retreat. It seems they would rather max-out their credit lines than risk being caught ordering a less prestigious brand in a bar. “It is quite an image-conscious country and people don’t want to lose face,” says Mettyear.

Whisky is traditionally stronger in the northeast of the country where locally-bottled Teachers and Passport are big players in standard Scotch. Both these Pernod Ricard brands face growing competition from White Horse which jumped 55% in the year to July, according to Cesar. For her, the biggest challenge is to increase the market penetration of international spirits, which was one reason Diageo spent US$450m buying Ypióca, Brazil’s best-selling premium cachaça.

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