US market targeted as Latino spirit establishes world presence

By Jamie Sundquist | 17 November 2000

As cachaça producers make a concerted effort to establish a world-recognised spirit through traditional and innovative means, Jamie Sundquist reviews the progress and pitfalls facing Brazil's Samba spirit.

Think of Brazil and images of a fly-footed Pele might spring to mind or perhaps if you're a dance fan the thought of a hot latino couple dancing the Samba. Or maybe you're the party type and the Rio Carnival is your ideal of the South American country. The likelihood is though that despite its image as a place to party its national drink cachaça will not be high on the list of defining exports. This might all be about to change though.

Finally, the white spirit of Brazil, cachaça, is on its way to worldwide recognition as it increasingly finds its way into the traditional on-trade locations around the globe. In the last year, cachaça producers kept up with a national consumption in Brazil of over one billion litres, netting over R$1 billion ($555m) in sales. However, with the increasing popularity abroad questions have been raised as to whether producers can keep up with the increase in consumption outside of the country.

The quality and price of cachaças vary from producer to producer depending on the materials and methods used. Artesian distilleries, such as Nega Fulô, offer consumers a richer and aged beverage. These small-scale producers target the upper income consumer willing to pay $5 to $25 per litre for a wooden-barrelled distilled spirit unique to artesian cachaça producers.

By comparison, companies producing such brands as Muller (brand "51"), Tatuzinho, Pitu and Ypioca, yield a higher volume using various flavours and aromas during the manufacturing process. At approximately $2 per litre, higher-volume producers focus on a broader scope of consumers in Brazil and abroad with less expensive, stainless steel production methods.

Not surprisingly, export favourites continue to be those brands that are manufactured in facilities that can support mass production and large distribution networks. Rafael Ribeiro Alves, the administration and financial director of Ampaq, the Minas Gerais state organisation of producers, predicts that the recent sales in Germany are just the beginning of export success.

Consistent with each year in the past decade, the levels of production of between one billion and almost 1.5 billion litres will remain the same throughout Brazil next year, according to The International Wine and Spirit Record.

But, reports from the export sector of Secex/Decex reveal total sales reached $4m at $0.86 per litre during the first semester of 2000, which includes a recent 20% increase in sales due in part to international exposure in the first half of this year. The increase raises the question of whether producers are capable of sustaining international growth in the second half of 2000 which is estimated to match first half results.

Increasingly popular in Europe, Brazilian cachaça is finding its way into liquor stores, bars and restaurants throughout the continent. Producers and exporters are hopeful that this trend will continue as they plan for the future. And while the European market grows, affiliate organizations both at the state and federal level are preparing for US expansion in 2001. Alves confirmed that once distributors are established in Brazilian-populated areas such as San Francisco, Miami, and New York a grouping of 10 national brands will be available for mass distribution.

Lending support to this push for international growth are the smaller
producers who are discovering alternative means of promotion and distribution. Since traditional distributions channels are far too expensive for the local distilleries, many have turned to the internet to advertise and sell their products around the world.

According to Ricardo Assis, of Riacho Doce, a distillery in the state of Minas Gerais, incorporating web-based selling techniques is cheaper than establishing distributors overseas. In addition, international consumers have more confidence in purchasing via the net (unlike their Brazilian counterparts).

However, regardless of distribution method used, cachaça producers are encountering hurdles in the form of individual country regulations on labelling, bottling and content. Indeed various federal and state organisations are still considering their quality control regulatory measures.

Producers anxious to sell their product abroad are increasing the pressure on government and local organisations to step up efforts to establish quality controls. For example, according to Joao F. Silva of the American Embassy in Brasilia, "the Brazilian government is trying to resolve the problem regarding the name "cachaça" with the US Bureau of Alcohol, Tobacco and Firearms, Department of Treasury." Establishing the name "cachaça" with the US government is an essential step in safeguarding the product and its production methods as it enters the US market.

(Contributing statistics and industry insight provided by John Laurino,
Director of Unit Brazil, an export consulting company in Brazil)

Jamie Sundquist

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