Cachaça: In Full Flow

Brazil’s cachaça is carving out an identity for itself ahead of the 2016 Olympics, as Richard Woodard reports

Cachaça, like Brazil, is changing. In the longer term, the much-trumpeted hosting of the football World Cup and Olympic Games in the space of two years may end up as a footnote in the history of a spirits category which is at the same time both huge and ripe with unfulfilled potential. As I say, like Brazil.

For those who have only a passing acquaintance with cachaça, it can be hard to get a fix on the category’s true identity. International audiences are realistically only interested in the tiny fraction of cachaça production that has any pretensions to branded and therefore exportable status.

This is a category that, for all its recent domestic declines, still sells nearly 80 million cases of product a year. But roughly 99% of those volumes are sold in Brazil and, of that figure, almost the same proportion is low-priced generic spirit. Strip out the domestic filler and cachaça as a branded and international spirits category remains tiny.

Tiny, but still a lure both to individual entrepreneurs and global spirits powerhouses. True, the likes of Diageo (Ypióca) and Gruppo Campari (Sagatiba) were more interested in the distribution clout and domestic presence of their acquisitions, but Diageo at least has signalled its longer-term intent to build export volumes.

Trends in Brazil may give a boost to this strategy. Broadly speaking – and Brazil’s current economic travails may interrupt this trajectory – commodity cachaças are on the wane and premium brands, Ypióca included, are on the upswing. As this forces major players to refine both liquid and packaging, they may also end up with products that are more palatable, in every sense, to an international audience.

“Premium segments are a growing trend in Brazil,” says Marina Santos, marketing director for Campari do Brasil, owner of Sagatiba. 

To chase this trend, Sagatiba has supplemented its core Pura unaged cachaça with Velha – an alambique or pot still product with at least two years in oak. And, at the top of the range, it has Sagatiba Preciosa, a limited edition of 3,000 bottles taken from a batch distilled in 1982 and aged for 23 years in European oak. Its three-figure price tag may be ambitious, but it’s also a clear vote of confidence in the future of the higher end of the category.

“With decades of increased disposable income, Brazilian consumers are definitely enjoying ‘better’, whether it’s better coffee, better beer, better wine or even better water,” says Steve Luttmann, founder and chief executive of Leblon. 

“With the cost of imported products being so high, and a greater emphasis on environmental costs, there has been a groundswell of interest in higher-quality Brazilian products. This is happening in many categories, and it is happening clearly in cachaça.”

Leblon – in which Bacardi has had a stake since 2007 – is based in the cachaça hotbed of Minas Gerais, where countless small distillers ply their trade – a potential treasure trove of quality spirit, but with a highly fragmented production base. Luttmann notes that, while overall cachaça volumes have continued to decline in Brazil, the premium segment has been consistently growing at double digits, thanks in part to increased interest in “artisanal alambique” cachaças.

“Resembling the craft beer movement, the artisanal cachaça movement is now catching on with the local bartenders, and there are some important new protagonists of the movement, such as the Mapa da Cachaça website, created by Felipe Jannuzzi,” he says. “Every bar now has an ‘artisanal cachaça’ list
that it presents to consumers on their menu, and stores now have an artisanal cachaça section.”

Opinions differ on the true potential of this part of the sector. Andrea Baumgartner, international marketing director of Underberg, which distributes Pitú in Europe, says: “We don’t think that they are going to be big players, of course, but they are building the quality perspective.”

But Luttmann is utterly convinced that artisanal cachaça is “integral” to the future of the category. “With the continued growth of the craft spirits movement worldwide, this is really becoming the reality, certainly in Brazil, but it is definitely becoming the focus point for the category internationally,” he argues.

“The taste-quality differential between artisanal alambique cachaças and industrial cachaças is just too great, and while many industrial cachaças’ cruder aspects may disappear in the overly sweetened masked cocktail, consumer tastes are just becoming more sophisticated, and their expectations of their base spirits are getting higher.”

As evidence, he cites a “ton” of interest in Leblon’s new aged expression, Reserva Especial, which aims to capitalise on the renewed interest in brown spirits in the US in particular.

Sporting chance

This is the perfect moment for cachaça to show the world exactly what it’s all about. First the football World Cup last summer; next the Olympics in Rio in 2016. As good a time as any to look back to one event, forward to the other – and consider what cachaça can gain from them both.

To make the most of the World Cup, Pitú sold a limited Brazil edition around Europe, earning excellent visibility at a retail level, says Baumgartner, as well as a Brazilian Party Set including a bottle of Pitú, two glasses, 14 straws and a pestle for those half-time Caipirinhas.

“We don’t think that the Olympic Games will have the same impact as the football World Cup, as football is much more popular than the summer games,” he says. “Anyway, we hope the talk about Brazil will keep cachaça top of mind for buyers and consumers.”

For Sagatiba, the World Cup coincided with the brand’s 10th birthday, prompting a special edition bottle sporting the colours of the Brazilian flag and available in Brazil, France, Spain, Greece, Uruguay, Chile and Angola, plus other markets.

“Big events such as the World Cup are a seeding opportunity for us,” according to Sagatiba. “During the events, both cachaça and the Caipirinha were in the spotlight and, at the same time, we had our limited edition that was being exported to countries where soccer is a hit.

“The focus on the Olympics will be Rio de Janeiro, and we’re planning activations and some innovations that will be announced at the appropriate time.”

Leblon’s activities, meanwhile, spanned the domestic and international spheres (see boxout), with promotions at home focused mainly on the Rio and São Paulo areas, plus key airports, and also including the presence in Rio of the “Leblonette” girls handing out muddlers and the brand’s How to be Brazilian book.

“We do expect the Olympics to be significantly bigger than the World Cup, especially in the US, where ‘consumption’ of the Olympics is extremely high,” says Luttmann.

Building a presence

Question marks, however, remain when it comes to just what – if anything – the two events will do for cachaça in its home market. Baumgartner reckons it’s “too soon” to say if the World Cup has helped slow the migration of younger, upwardly mobile consumers from cachaça to Western categories such as vodka and whisky.

Luttmann, meanwhile, doubts it has had any significant impact on local consumption habits. “It definitely helped us build local distribution throughout the country, but the World Cup impact really came from the foreign visitors,” he says.

In a microcosm, that’s the challenge currently facing the cachaça category: how to manage the delicate process of transitioning gradually into a more value than volume-focused category, simultaneously building a greater international presence while not missing the chance to attract a more premium-focused domestic consumer.

In the end, both strands of this strategy are linked, in that they require a greater number of professionally branded products whose liquid, packaging and marketing can meet the needs of the demanding modern consumer.

Up against marquee global brands both at home and abroad, it’s at once a tough task and a steep learning curve for cachaça producers. The Caipirinha has long been their chief marketing weapon of choice, but now the artisanal cachaças of Minas Gerais could be set to add a new level of sophistication to the mix.