Now would seem an opportune time to assess the current fortunes and potential for Brazil's national spirit, cachaça, and a new joint-report from The IWSR and just-drinks has done just that.

It has often been suggested that cachaça, Brazil's national spirit, has the potential to establish a strong presence in export markets, not least because of the success of products such as Tequila and white rum. And yet, it has never really happened for Brazil's national drink. 

As cachaça continues to face declining sales in its domestic market, which accounts for 99% of total volumes, the onus on developing export markets is increasing.

Indeed, a new report from The IWSR and just-drinks, published this week, suggests the "twin, long-term challenges" facing the cachaça category are to "drive premiumisation and overhaul the category’s image in its home market", while at the same time building exports "slowly and steadily" in a "targeted selection" of markets.

With regard to the premiumisation trend, the cachaça market is at least moving in the right direction. The report points out that, while total volumes declined by 3.2% in 2013 to a record low of 79.4m cases, sales in value terms are increasing, recording a compound annual growth rate (CAGR) of 4.26% between 2009 and 2013 to reach just over US$2.3bn last year.

Premiumisation is something that has been "neglected for years" by the major producers. The prevailing trends in the domestic market will make catching up ground on imported spirits brands, which are in part responsible for cachaça's decline, no easy task.

As the report points out, "the dominant themes in the core Brazilian cachaça market remain unchanged in 2013, including a mass migration towards beer and more aspirational categories such as vodka and whisky, which continue to steal volume from the value and standard end of the market".

Nevertheless, the report adds that the input of international brand-owners is having a positive impact. "Innovation and premiumisation have come to cachaça," the report states, "and the presence of multinationals Diageo, Campari and Bacardi in the sector can only add more momentum to this trend."

Diageo’s acquisition of the Ypióca brand in 2012 has been particularly significant. "The healthy growth at the premium end of the market has been largely down to Ypióca, with Diageo’s acquisition of the brand altering the landscape of the market," the report suggests. Another factor fostering premiumisation is the growing interest in artisanal, pot still cachaças, mainly centred on the state of Minas Gerais.

With regard to developing export markets, the report points out that, for a spirits category of its size, cachaça has "historically underperformed in export markets", which is hardly surprising as producers have had "little incentive to look beyond their own borders with such a vast domestic market to service". However, brand-owners are increasingly looking to overseas markets to offset the domestic decline, and "are aware that exports offer the potential for higher pricing and bigger profits".

On paper at least, cachaça has always been thought of as a product with export potential. Images of nubile young Brazilians, sipping caipirinhas on Copacabana beach while they rest between sambas and games of beach volleyball are a marketer's dream, one would have thought, and every bit as compelling as any imagery that Tequila has to offer.

Moreover, there are now some other notable headwinds that could bear positively on cachaça's export potential.

As the report points out, the growing prominence internationally of "Brand Brasil" is without doubt a positive factor. It states: "After years of under-achievement, foreign trade is becoming increasingly important for Brazil", citing its cuisine, music and fashion as important features.

Of particular interest to spirits marketers will be the growing popularity of Brazilian churrascaria steakhouses in the US, the UK and other markets, given how the growth in Tex Mex cuisine assisted the export growth of Tequila.

Tourism is also a factor, not least with the many thousands of visitors Brazil have hosted during the FIFA World Cup, and will host at the Rio 2016 Olympic Games.

The awareness of all things Brazilian fostered by the World Cup can only help to raise the profile of cachaça in export markets The primary target markets would appear partly to select themselves. There is only one export market with sales over 100,000 cases, and that is Germany, which achieved sales of 285,000 cases in 2013, up from 277,000 in 2012. The other markets in cachaça's top five are Portugal, the US, France and Chile.

The US may well be marked out for more attention. It has recorded the strongest compound annual growth (CAGR) of any cachaça market during the past five years, with a CAGR of 5%.The UK would undoubtedly be another market worth developing. Currently, it is the eighth largest export market with sales of only 20,750 cases, but it has recorded a CAGR of 1.6% between 2008 and 2013 and, of course, has been a highly successful market for Tequila.

Only time will tell if the current confluence of positive factors provides cachaça finally with a tellingly favourable environment to expand in export markets. However, export marketers might bear in mind that it is extremely rare for the same country to be hosting both the World Cup and the Olympic Games within two years.

It is surely too rare and attractive an opportunity to squander.

Expert analysis

Global cachaca insights - market data, product innovation and consumer trends research

Global cachaca insights - market data, product innovation and consumer trends research

The "twin, long-term challenges" facing the cachaça category are: to drive premiumisation and overhaul the category’s image in its home market, while at the same time building exports "slowly and more