Cachaça Industry In Brazil
Cachaça is one of the most famous products made in Brazil, being renowned worldwide. In this article, we will take a deeper look at the Cachaça industry in Brazil.
Cachaça consumption
Cachaça is not just a common alcoholic beverage in Brazil. Being the main ingredient of the most famous Brazilian drink, caipirinha, cachaça has already been established as a National Beverage by Federal Decree. According to this decree, cachaça is the exclusive denomination of cane liquor produced in Brazil. Also, there is a Cachaça Day in Brazil, which is the 13th of September. In 2013, the annual average consumption of cachaça by the Brazilian population was 11,5 litres per person.
Cachaça is the second most consumed alcoholic beveragein Brazil, trailing only to beer. In the category of spirits, cachaça is by far the most consumed, accounting for more than 80% of this niche’s market share.
Cachaça production in Brazil
The Brazilian cachaça industry has shown impressive performance. According to estimates by Ibrac, Instituto Brasileiro de Cachaça, which is Portuguese for Brazilian Institute of Cachaça, more than 1,2 billion litres of cachaça were produced in 2013. But the most interesting feature of this industry is the nature of its producers. In 2013, there were only 5.000 legally registered producers of cachaça in Brazil producing 4.000 brands, but the latest Brazilian census shows that the number of producers could actually be higher than 40.000.
This is due to the fact that 98% of all cachaça producers in Brazil are small or micro artisanal producers spread throughout the country. Despite this, industrial cachaça accounts for 70% of the Brazilian production of cachaça. Over 600.000 indirect and direct jobs are generated in Brazil thanks to the cachaça industry. Also, according to data from Euromonitor, cachaça sales generated over USD 7,5 billion in 2013.
Technical requirements for cachaça
Cachaça is a specific name given to the sugarcane liquor produced in Brazil with the following characteristics:
- Sugarcane as main ingredient
- Alcoholic strength between 38% and 54% at 20°C
- Maximum of 6g of sugar per litre
Spirits with more than 6g of sugar per litre get the denomination cachaça adoçada, which is Portuguese for sweetened cachaça.
Main producing states
Cachaça producers are spread throughout Brazil, mainly small or micro producers contributing to the artisanal cachaça production. According to Abrabe, Associação Brasileira de Bebidas, which is Portuguese for Brazilian Association of Beverages, São Paulo is the state which produces the most cachaça in Brazil, accounting for 46% of the total national production. Pernambuco and Ceará are tied in second, each being responsible for around 12% of the national production. The other states, which are Paraná, Minas Gerais and Rio de Janeiro, are each responsible for 8% of the national production.
It is important to mention that São Paulo’s leadership comes from the high production of industrial cachaça. Opposite to São Paulo is Minas Gerais which ranks first when it comes to artisanal cachaça production. Along with the state of Rio de Janeiro, these two states are responsible for over 50% of the national production of artisanal cachaça in Brazil.
The top five states in terms of the number of cachaça brands in Brazil are:
- Minas Gerais - 1.587 brands
- São Paulo - 676 brands
- Rio Grande do Sul - 343 brands
- Rio de Janeiro - 244 brands
- Santa Catarina - 238 brands
Top producers of cachaça
In 2013, the companies that produced the most cachaça in Brazil were:
- Companhia Müller de Bebidas, which owns Pirassununga 51 and has 18% of the market share
- Pitú has 15% of the market share, with 6% of it coming from the Caninha da Roça brand
- Indústrias Reunidas Tatuzinho Três Fazendas, which owns Velho Barreiro has 8% of the market share
- Ypióca has 2% of the market share
It is interesting to analyse here how the production of cachaça in Brazil is spread. These four companies are responsible for 43% of the national production.
Foreign investment
The cachaça industry started attracting attention due to its potential for growth, especially outside of Brazil. Major foreign investment in this sector began in 2011, when the Italian liqueur brand Campari bought Brazilian cachaça brand Sagatiba. The British brand Diageo, which owns the Johnny Walker whisky brand, bought Ypióca in 2012 and the American brand Brown-Forman, which owns the Jack Daniel’s whisky brand bought Santa Dose. The French Pernod Ricard and Spanish Osborne are among other foreign companies interested in acquiring cachaça brands in Brazil.
Export of cachaça
Around 99% of all cachaça produced in the world is consumed in Brazil. This leaves only 1% to be exported to the rest of the world. In 2013, only 9,21 million litres of cachaça were exported from Brazil, accounting for USD 16,59 million. Despite the increase of 10% in revenue generated by export from 2012 to 2013, cachaça exports are decreasing.
As of 2013, cachaça is exported to 59 countries, with more than 90 companies working in this market. The top three countries that import the most cachaça are:
- Germany - 17,69% in volume
- United States of America - 11,43% in volume
- Portugal - 9,18% in volume
Brazilian exports of cachaça to the United States are expected to grow, since in 2013 the spirit started being regarded as cachaça, and not just “Brazilian rum”. The same process of recognizing the origin of a certain alcoholic beverage is what keeps the sales of Tequila - originally from Mexico - and Champagne - originally from France - high. The expectation is that the volume of cachaça exported to the United States will multiply by 10 between 2013 to 2018.
A partnership between IBRAC, Apex, the Brazilian Trade and Investment Promotion Agency, and Abedesign, the Brazilian Association of Design Companies was created in 2013 in order to boost Brazilian exports of cachaça.