“We bought a jewel in Ypióca because we thought this can be big, this can be transformational,” Álvaro Garcia, marketing director of Brazil, Paraguay and Uruguay at Diageo, told the Financial Times. “From the beginning, we knew it would take time,” he added.
It is, however, taking longer than anticipated, partly because of economic recession, partly because of 2015 changes to Brazil’s alcohol taxation regime that pushed spirits prices up sharply, a combination that has driven many lower income drinkers to the bootleg market.
Brands need to work together to shift its image from the bottom end of the market into something more premium and trendy, according to Angélica Salado, an analyst at Euromonitor in Brazil.
“Cachaça today competes against all the other alcoholic drinks that have a strong position in the market,” she said. “The competition is cachaça versus the other drinks, not cachaça Ypióca against cachaça 51 [a rival brand].”
In the absence of a cachaça marketing board, however, individual brands are pursuing their own strategies. Alberto Gavazzi, Diageo president for Latin America and the Caribbean, remains confident that Diageo can “continue to ‘premiumise’ the consumer and grow the category just like tequila has done”.
The company is evidently having a fair degree of success on that score. Ypióca’s net sales only grew 5% in the year to June, but those of luxury “gold” darker blends grew significantly faster: sales of Ypióca Ouro, its main “gold” cachaça, were up 34% in the same period.
Interest in cachaça is growing internationally as bartenders acclaim its versatility. It can be used in more than caipirinhas, Brazil’s national cocktail: a three-time International Bartender of the Year award winner points out it makes a good martini, for example. As well as supporting calls for more countries to recognise cachaça in their registries of geographical indications as a product of Brazilian origin, recruiting bartenders as advocates could be a useful strategy for Diageo to adopt.
Sourced from Financial Times, Star2; additional content by WARC staff