The Beer, Wine and Spirits Industry

Rebeca Duran

Staff Writer
The Brazil Business

Updated

13 September 2013

The Brazilian beverage industry has a considerable importance for the national economy, not only for its production value, but also due to the rejuvenation that the sector has recently experienced.

There has been a notable growth in certain Brazilian producers which currently occupy prime positions in the country and abroad. Caipirinha, made of cachaçais, is considered a typical Brazilian drink, but when considering the spending ratio of the national population, fermented beverages such as beer and wine are revealed to be the true preference of Brazilians. In 2012, the consumption of spirits (whiskey, rum, brandy, vodka) brought in 677.38 million BRL, while beer, wine, and champagne consumption were worth a staggering 5.57 billion BRL to the economy.

Competitiveness in the Sector

The production process of this industry involves the production of the commodity, bottling, and distribution, the supply of raw materials and packaging. In a country of continental dimensions like Brazil, the spatial location of industrial plants to the consumer market and the creation of distribution networks (which have the capacity to reach the most remote locations) are important and crucial variables to the market strategy of large companies.

These two factors act as barriers to the entry of new competitors nationwide, leading companies to a process of merger and/or acquisition when they need to expand their activities and increase their market participation.

Nevertheless, due to the low complexity of the manufacturing process and the possibility of marketing in small networks, it is possible for small businesses to act regionally, conquering market shares close to their location, especially in peripheral areas.

Consumption of Beverages Per Regions

The consumption of alcoholic beverages in Brazil varies across all the regions of the country. In the Northeast, North and Midwest, for example, the consumption of spirits is higher than in the South and Southeast. Wine is consumed more in the South compared to the Northeast and beer is steadily consumed all over the country.

Brazilians Love Beer

Brazil is the third largest beer market in the world, but still defective in the premium sector. It's no wonder that business people are already projecting a growth of 13% in this niche for the next decade. Currently, the special beers are equivalent to only 7% of beverage consumption in Brazil.The problem is that, this percentage includes brands that cannot be regulated at the level of super premium beer. Of this 7%, only 2% is actually targeted as special types of beer.

On average, Brazilians consume 140 million hectoliters of beer per year. Brazilians lose to Germany in variety of beers, but not in consumption. China and the United States lead the ranking, respectively.With so much potential, special beers' market has attracted the attention of business people. Since 2010, the sector has doubled its growth. In such an environment, both the domestic and the imported brands are benefited. In 2011, only the labels from outside the country grew 101% over the previous year, according to the data from the Ministry of Development.

Largest Brazilian Brands

AmBev is the biggest producer of beer in Brazil, but others companies are also important producers in the country and worldwide.The Brazilian beer companies were responsible for a billing of 63 billion USD in 2012. The major breweries in Brazil and its brands are:

• Ambev: Skol, Brahma, Antarctica, Stella Artois, Bohemia, Original, Serra Malte, Polar and others.
• Femsa: Kaiser, Sol, Bavária and Heineken.
• Primo Schincariol: Nova Schin, Primus and Glacial.
• Cervejarias Cintra: Cintra.
• Itaipava: Itaipava, Cristal and Petra.

Low-Cost as a Rule in the Wine Market

The wine market is characterized by a high complexity because of, among other reasons, the great diversity in types of wines and the multiplicity of national laws regarding this product. However, this market can be divided into two main segments: the common wine and the quality wine. In Brazil, the common wines are the most consumed, basically because of the price.

According to researches, 115 millions of bottles of wine are consumed per year in Brazil and among this quantity, 80% of the wine consumed have a price of up to 18 BRL.

The statistics in the country point out another curiosity of the Brazilian consumer, 85% of bottles consumed are from red wines, while only 15% refers to white wines. Besides the preferences of the wine type, people in Brazil seem to purchase more of the imported wines (73%) than of the national ones (27%).

Imported Wines X National Production

Argentina and Chile, together, account for 63.29% of the volume of wine imported to Brazil. Chile contributed 43.08% in this account, leaving 20.21% of the volume for Argentina. Four countries called old world - Portugal, Italy, France and Spain - complete the list of the largest importers of this product to Brazil.

Of course, there is a whole context around these numbers, but the biggest one is the most obvious: price. Tax exemptions of Mercosur, the high value of the dollar and the euro (leaving the old world wine even more expensive), and the proximity of these two South American countries to Brazil make the value of their bottles more palatable.

The imported wines are much more consumed by Brazilians than national wines, because:

• Taxation Matters: In Brazil, when a bottle of wine gets out of the winery, it has already paid more than 50% in taxes, while in Argentina, Chile, or Uruguay this cost is just at 20%.

• Costs in the Packaging: A bottle in Brazil costs the producer 30% more compared to a similar bottle in Argentina, Chile, or Uruguay. The same applies to tanks, hoses, boxes, corks, labels, capsules and others.

Hot Beverages Spread in Brazil

In Brazil, beer is the alcoholic beverage with the highest market share with 88.9% out of the total. Next are the distillates with 7.5%. The other drinks occupy the rest of the market (3.6%) - according to the data from Euromonitor, 2012.

Despite the dominance of beer, spirits market reached more than 25.5 billion BRL in 2011, an increase of 23.6% between 2006 and 2011. Brazil is already the fourth largest spirits market in the world, after Scotland, Sweden and Greece.

An increase in the consumption of hot beverages such as vodka, cachaça, whiskeys, rum, liqueur, and tequila has been noticed in the country. The Brazilian city Recife was pointed out as the city with the highest per capita consumption of whiskey in the world.

With the arrival of the days with lower temperatures, there is an expected increase in the consumption of rum and other spirits. Industry executives argue that a general average, that is, 60% of sales in this market is concentrated in the winter and the remainder is divided randomly in other periods of the year.