Diageo buys Brazilian cachaça maker

Financial Times of London

With the World Cup and Olympics heading for Brazil in the next four years, it looks an opportune time to buy into Brazil’s national spirit.

Diageo, the globe’s biggest spirits company, has bought Ypióca and some production sites from Ypióca Agroindustrial Limitada for US$453 million, giving it a foothold into the world of the caipirinha.

Ypióca is a premium version of cachaça, which is distilled from fermented sugar cane juice and forms the base of Brazil’s national cocktail.

Ypióca has around 8% market share of the total cachaça market, ranking second by value and third by volume in the category. So is it a good deal? At around five times pro-forma net sales, it’s at a similar multiple to the company’s dramatic purchase of Turkish spirit Mey Içki in February 2011. And although the sales of Ypióca have declined slightly recently, the brand fits with Diageo’s general “premiumisation” strategy.

Ypióca leads the premium cachaça segment with a 62% share, and sells at 1½ times the usual cachaça price.

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