Diageo acquiere cachaca Ypioca: A new step in a consolidated market

Diageo announced in late May, It has reached an agreement to acquire Ypioca Agroindustrial Limitada , the producer of cachaça Ypioca, for a total amount of 460 million dollars in cash.

"It allows Diageo to expand its presence in Brazil and have access to a growing number of consumers from the middle class, causing the growth of premium brands", says Diageo.

In volume terms, Ypioca is the third global brand of cachaça its annual sales totaled nearly 100 million dollars last year, behind Cachaca 51 which has 30% market share and Pitu Cachaca.

We can notice a consolidation of Cachaca brands in those recent months, Leblon cachaca recognized as the best because of the multiple medals acquired in different contest (Gold Medal Award Winner at the 2006, 2007, 2008, 2009, 2010, 2011, and 2012 at San Francisco World Spirits Competition)  , have sign a deal with Bacardi Martini who take a majority part of the company, and Pernod Ricard is looking for a major acquisition.

This type of acquisition allows major groups of wine and spirits to penetrate an emerging and festive market like Brazil, but also to be part of the significant growth of cachaca through one of the most popular cocktails The caïpirinha.

source: bloomberg.com

Who owns Cîroc Vodka? Surprise it's not Diddy

In 2002 Sean "Diddy" Combs asked Busta Rhymes to "pass the Courvoisier" But nowadays be advised that he might say that if you’re not drinking Cîroc vodka while you’re reading this article, you’re not reading it the right way.

Indeed when you heard or read about Cîroc Vodka, Diddy is related to this brand. Numbers of you may think the rapper from the Queens own this vodka, or at least a part of this; but this vodka is the total propriety of the world's largest producer of spirits, Diageo.

Diageo decided to launch its ultra-premium vodka in 2003 in order to compete with the new emerging vodka in this sector such as Belvedere or Grey Goose. In order to acquire credibility in this specific market and secure the quality of its new product; Diageo decides to produces  Cîroc Vodka in France.

The name is derived from the combination of two French words, “Cime” meaning peak or summit-top and "roche" meaning rock.

The Process

The grapes used for Cîroc vodka are "snap frost" grapes; Mauzac Blanc from the Gaillac region of France, and Ugni Blanc from the Cognac region. The juice extracted from these grapes is cold fermented.

In order to be pure this juice extracted has been distilled five times, to obtain 96% purification. The final distillation is performed in a traditional Armagnac style copper pot still.

Diddy’s role

In 2007, Diageo announced that Diddy would be taking on all brand management decisions for the company’s  Cîroc vodka. In exchange Diddy receive 50% of the profits from  Cîroc. Profits means after the production/marketing and any other cost associated with producing Cîroc.  

Combs said he wanted to work with Diageo because the company understood that "I'm not just a celebrity endorser, I'm a brand builder. I'm a luxury brand builder."

This is actually seen as an excellent decision, the sales increase by 500% in only five years, and the notoriety of  Cîroc is now International, even in place where it is not marketed.

Thanks to this success, the brand introduced three other flavored varieties Red Berry and Coconut in 2010 and Peach in 2011.

Source: Billboard, Cîroc and Diageo