Cachaça is in a class by itself, USTR says (and, please, don’t call it rum) UK distiller Diageo is set to pay $450 million to Ypióca Agroindustrial Limitada to acquire the leading premium cachaça brand, Ypióca, the Financial Times reports. The acquisition, Diageo says, gives the world’s leading premium drinks business entrée to Brazil’s largest local spirits category: Ypióca is number 2 by value and 3 by volume in Brazilian cachaça sales. But the acquisition is also a bet that the appeal of Brazil’s national tipple (accounting for fully 80% of the nation’s spirits industry) will transcend borders, especially as brand Brazil gets global exposure as the country hosts the FIFA World Cup in 2014 and the Olympics in 2016. In August of last year, Italy’s Gruppo Campari placed a similar bet in acquiring Sagatiba, the “leading super premium” cachaça brand in Brazil. The main ingredient in caipirinha cocktails, cachaça is a distilled spirit made from fresh-pressed sugarcane juice – making it distinctly different from rum, its partisans point out, which is derived from molasses. This is a distinction not officially recognized in the US, where the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) has since 2000 required that cachaça be labeled as “Brazilian rum.” As a salve to national pride and in the hopes of boosting sales, Brazilian exporters and US purveyors (notably, fifth ranked importer Leblon, which mounted a “Legalize Cachaça” campaign), have sought to drop the rum label, and win US recognition of Cachaça as a distinct product of Brazil, as Cognac and Champagne are of France, and Tequila is of Mexico. That’s about to happen. Last month, the United States Trade Representative Ron Kirk and Brazilian Minister of Development, Industry and Foreign Trade Fernando Pimentel exchanged letters of intent committing the US to start the process of changing its regulations to designate Cachaça as a distinctive product of Brazil – whereupon Brazil will recognize Bourbon Whiskey and Tennessee Whiskey as distinctive products of the US. Will increased trade result? Our import data indicates sales of the exotic (to US imbibers) spirit suffered in the recession. Much will depend on the marketing cachet of the Cachaça appellation.
Date posted: May 30, 2012