Diageo gets the taste for a cocktail with Brazilian spirit

Laura Chesters
Tuesday 29 May 2012 09:00

Diageo has taken a further gulp of the growing cocktail sector by buying the spirit used to make the Brazilian drink caipirinha.

With the cocktail scene growing globally, the drinks group is making a £300m bet on the growing thirst for caipirinhas.

It is buying Ypioca, Brazil's leading brand of premium cachaca. Cachaca, a spirit made from sugar cane and also referred to as Brazilian rum, makes up 80 per cent of the spirits market in the South American country. It is what vodka is to Russia or what wine is to France.

Diageo, which is making a play for the Americas in terms of emerging market growth, wants access to the growing middle classes of Brazil who drink Ypioca.

Ypioca is strongest in northern Brazil allowing Diageo, which is more dominant in the south, to take the brand national. Diageo will also use the brand's strength in the north to sell its other spirits and grow market share.

UBS analyst Melissa Earlam said: "We view this style of bolt-on emerging market deal positively, offering local premium brand leadership as well as distribution synergies over the mid-term for Diageo's international spirits. It follows on from Diageo's acquisition of Mey Icki in Turkey and ShuiJingFang in China."

Caipirinha is the national cocktail of Brazil – the country drinks 86 million, nine-litre cases of cachaça each year.

Ypioca has a 62 per cent share of the premium market and an 8 per cent share of the cachaça market with sales of £60m.

Paul Walsh, Diageo's chief executive, said: "Brazil is an attractive, fast-growing market for Diageo with favourable demographics and increasing disposable incomes."

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