Spirits in Brazil

PRE-COVID-19 PERFORMANCE

Competition within dominant cachaça encourages switch amongst small to medium producers towards other types of spirits in 2019

Cachaça remained the dominant type of spirit in Brazil in 2019 due to its local production. However, with a much lower average unit price compared to overall spirits, this alcoholic drink is often perceived as an economy option, affordable to most income groups; therefore, it is a mature area of spirits which has not experienced a great deal of innovation for many years resulting in stable but undynamic volume growth through both channels.

Increasing popularity of cocktails boosts demand for spirits, particularly gin in 2019

With on-trade dominating demand for spirits in Brazil, the preparation of cocktails in front of the consumer in bars continued to increase in popularity as Brazilians regained their purchasing confidence in 2019. Gin continued to benefit from this trend, with increasing interest in prestige, ultra premium and super premium English gin driving higher current value growth.

Diageo continues to gain ground on leader Cia Muller de Bebidas in 2019 with wide product portfolio

Spirits in Brazil is a fairly concentrated competitive landscape, with a handful of major players accounting for a large share of total volume sales, led by Cia Muller de Bebidas Ltda, which also leads the largest total volume category of cachaça. However, this has not proven a significant barrier to new entrants towards the end of the review period with the share held by “others” gaining further growth in 2019, as a number of smaller companies continued to find success in niche areas not yet covered by leading manufacturers.

2020 AND BEYOND

COVID-19 impact

On-trade volume sales of spirits are expected to fall by 27% in 2020 in light of the impact of COVID-19. This compares to an expected 1% rise forecast for 2020 during research conducted in May 2019 (before the spread of COVID-19).

Affected products within spirits

Spirits was strongly negatively impacted by lockdown measures in Q2 2020 due to lockdown measures with the closure of horeca establishments resulting in significant declines for the category through the dominant on-trade channel. This trend was particularly notable for the largest volume category of cachaça which has a significant presence through on-trade.

Recovery and opportunities

The impact of the lockdown in Brazil and the expected economic instability is expected to pose a significant challenge to producers of spirits in the early part of the forecast period. Since experimentation and innovation for the category tends to be driven by on-trade establishments, demand through the latter is likely to be strongly felt for the remainder of 2020 and into 2021 as consumers are set to remain wary of spending longer periods of time in public spaces, including horeca, as lockdown measures are eased, while financial instability due to reduced disposable incomes or even unemployment will strengthen consumers’ focus on prioritising their spending, certainly in the short term.

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