This week I attended an online forum for the cachaça industry, the first of its kind. The forum focused primarily on the technical aspects of cachaça production. However, there were other elements I found intriguing related to environmental responsibility and marketing.
But two topics were left unaddressed, or should I say, were not well addressed. The first issue relates to the domestic cachaça market and the byzantine taxation system, making it difficult for producers and even retailers to sell products across state lines. As I’ve mentioned previously, there is the possibility of an increase in a federal tax, sending the price of cachaça through the roof.
Only one speaker discussed this significant topic. However, there does not appear to be a plan to deal with these taxation issues. Remember, in Brazil, depending on the bottle, almost 40% of the cost of cachaça can go towards taxes. That’s before the imposition of a new federal tax. How are producers and other interested parties going to organize themselves to combat this? Well, this forum would have been an excellent opportunity for such a discussion. Unfortunately, only the last presentation was conducted live. The others, including the one that discussed the taxation issue, were recorded.
The second issue relates to the exportation of cachaça. Exports dropped almost forty percent last year, mostly to the US. This, of course, is related to the pandemic and closure of many restaurants. But let’s look at the numbers: Global exports, which in 2019 were $14 million, dropped to $9 million. Either way you look at it, the situation isn’t good.
I was pleased to hear that one of the national producer representatives from IBRAC mentioned an interest in pushing cachaça internationally. I was not very impressed with the analysis of which countries they will target and why they are targeting them.
Of course, the US as the largest importer of cachaça, is on the list and several European countries. But the presentation did two things poorly. One, it presented the opportunity to export as some universal right of any cachaça producer. This is a mistake. Mediocrity should not be accepted. Second, there appeared to be a lack of understanding about how sugarcane spirits are fairing in the US. They are in decline. All of the sales data shows this. And a few brands DOMINATE the market. If they’d only discussed the positioning of cachaça brands with those operating in the market, maybe they would have made a better presentation.
But clearly, that didn’t happen. And so, cachaça limps along. Yes, the quality of products will continue to improve. But the lack of market analysis both domestically and internationally is abysmal.