Ypiocam Brazil's second largest drinks manufacturer was snapped up for a healthy £300m yesterday by UK-based Diageo. The deal has doubled Diageo's size in the country's market.
Diageo, which produces brands such as Bushmills whiskies, Smirnoff, Ciroc and Ketel One vodkas, Baileys and Captain Morgan’s rum, has slowly but surely been building its business in developing economies, with sales in countries such as Brazil and India already contributing around 40% to revenues. Ypioca produces a key ingredient in Caipirinha cocktails – a staple cocktail in Brazil and a big money-maker.
Even though Diageo already has a large presence in Brazil, the acquisition gives it extra capacity in terms of productive capacity of warehouse space – it now owns a bottling plant in Fortaleza, a distillery in Paraipaba, and a warehouse in Guarulhos, Sao Paulo.
Another factor that pushed forward the deal is Ypioca’s developed supply chain network, which Diageo says it plans to utilise to market some of its existing products.
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.”
Randy Millian, Diageo’s president for Latin America said: ““This is about the emerging middle class which is driving growth in Brazil,” he said. “We think it’s opportune because it’s before the [2014] World Cup and the [2016 Rio] Olympics.”
Look out for TM’s Export Focus on Latin America this month (June).
