Could the World Cup boost international cachaça sales?

Popular at home, cachaça has never won over international drinkers, but with the Brazilian Olympics and World Cup coming up, that could well change.

Cachaça has failed to reach its international potential, but with the Olympics and World Cup set to soon take place in its motherland, could this soon change?

If a waiting room for the “next big things” of the spirits industry exists, cachaça might just as well make itself comfortable and start reading those well-thumbed copies of GQ littering the coffee table. Ahead of it in the pecking order, rum has moved significantly towards fulfilling its potential in recent years, while Tequila still flatters to deceive, hugely over-reliant on the US and Mexican markets.

And cachaça? Some 99% of the category’s volumes are still knocked back in its home market of Brazil, but even there, it’s in long-term decline. For an 80m case industry, it all sounds rather depressing.

But wait: in August 2011, Italy’s Gruppo Campari paid US$26m for Sagatiba, a premium- and export-focused cachaça brand; even more significantly, less than a year later, Diageo splashed BRL900m (then about US$450m) on Ypióca, Brazil’s leading premium cachaça brand with 6.6m case sales and an 8% share of the total market at the time of acquisition.

2014 World Cup in Brazil

In the next three years – just in case you’ve been away and haven’t heard – Brazil will host both the football World Cup and the Olympic Games. Spirits multi-nationals getting involved in the industry? Huge global events on the doorstep? If this moment isn’t cachaça’s chance to grab the limelight, it’s never going to arrive.

“The World Cup and Olympics are fantastic opportunities to showcase and grow the Ypióca brand on a global scale, as cachaça is the largest spirits category in Brazil and the national drink,” says Eduardo Bendzius, Ypióca’s marketing and sales director.

“The drink is embedded into Brazilian culture and is consumed across all demographic segments, age groups and regions.”

Few would disagree. Darleize Barbosa of Cachaça 51 brand owner Companhia Müller de Bebidas describes it as a “great opportunity for cachaça’s visibility”, while Julka Villa, marketing director of Campari do Brasil, plans to use the twin sporting extravaganzas to push Sagatiba in the on-trade, “the place where all the consumption habits start”.

For now, cachaça exports remain reasonably modest

Rum from Brazil

For the moment, however, most of the buzz surrounding the Olympics and the World Cup centres on the home market. Sure, there’s a hope that the many thousands of visitors from all around the world will discover and learn to love cachaça, but export ambitions remain relatively modest for the time being.

That might seem surprising, given that the world’s largest spirits market by value, the US, has in recent months granted cachaça official status (it was previously known simply as rum from Brazil).

While the cachaça producers are happy about the change – after all, they lobbied for it long enough – they’re not exactly leaping around. “It was a victory to have cachaça recognised by the TTB (the Alcohol and Tobacco Tax and Trade Bureau) in the US, but it is just the beginning in my opinion,” says Barbosa. “If you isolate this action, the effect will not be significant. You do not catch the attention of consumers just because of that.”

Building a national brand

The context for cachaça’s recognition might help explain why. This was emphatically not prompted by any recognition on the part of the US authorities that cachaça has any significant standing or weight in the market – it barely sells 100,000 cases a year there. Instead, the move was a quid pro quo in return for Bourbon and Tennessee whiskey (ie Jack Daniel’s) gaining similar recognition in Brazil, one of the world’s key emerging spirits markets.

For the moment, the main priorities of the cachaça brands remain closer to home, as Bendzius makes clear. “Our current focus is on improving our route to consumers in Brazil and building up a national brand.” He continued: “That means improving our distribution outside of the north-east of the country, which we are already doing, and increasing our marketing spend to continue building Ypióca’s credentials as a premium cachaça brand.”

To this end, since Diageo bought Ypióca, the brand has launched the Let’s Brasilizar campaign, starring John Travolta, and is aiming to leverage its status as the official cachaça of the famous beaches of Rio.

As volumes of cachaça decline in its home market, international premium spirits have flooded in

Social media

Meanwhile, Campari’s domestic strategy for Sagatiba is aimed squarely at pushing the brand’s mixability, over and above the ubiquitous Caipirinha. One of the central weapons, says Villa, has been a multi-media campaign against what we might call mixology-phobia in English. Using the hashtag #contramisturofobia, the target is to promote Sagatiba’s versatility in a range of different drinks, with the payoff: Sagatiba Pura. A cachaça que se mistura.

In Brazil, cachaça stands at a crossroads in 2013. Its long-term volume decline is all but inevitable, given the huge quantities of cheap spirit consumed historically throughout Brazil. The world’s sixth largest economy has opened its doors to the products and the brands beloved of the West, and Scotch whisky and vodka have happily flooded in. The future for cachaça, as disposable incomes rise, lies in the premium market. Quality, not quantity.

“Cachaça 51 has taken the decision to be an important player in the segments of premium cachaça,” reports Barbosa. “For this reason it has developed and launched the Terra Brazilis and the Reserva 51.”

Premiumisation plans

One thing is clear: Campari’s and Diageo’s acquisitions in the sector have far more to do with premiumisation opportunities in the Brazilian market than any grand plan to turn cachaça into a spirits category of global standing. Sagatiba was created for precisely this purpose, while Ypióca claims to have 62% market share of premium cachaça.

Not to say that they have no export ambitions at all. Bendzius points out that Ypióca is already present in more than 40 markets and says Diageo’s distribution muscle provides a “major opportunity” for the brand, while Villa scents “a good potential for growth” beyond Brazil, “especially in the countries which already have a developed cocktail culture”.

But Barbosa brings us back to sober reality. Will cachaça’s almost total reliance on the Brazilian market end any time soon? “Not in the near future,” she says. “All markets are promising, considering that cachaça’s international presence is still small. It will be a long journey.”