June 26, 2010 The Brazilian Spirit

Volume 6 | Issue 2

Still in the hands of the founding family, Ypióca is one of brzazil’s leading producers of cachaça – the alcoholic spirit made from sugar ca

Internationally recognized for its successful football, carnival, beaches and bikinis, Brazil is home to some of the world’s growing passions and fashions. These were the focus of a recent advertising campaign by Ypióca, the country’s top producer of aguardente (otherwise known as cachaça) the liquor used in the famous Brazilian caipirinha cocktail. Associating the drink with the national identity gave yet another kick to the spirit of celebration that has become synonymous with Brazil.

With industry booming and the majority of companies walking out of the economic brawl on firm feet, Brazil’s success stories have even more reason to clink glasses, and Ypióca is no exception. Entering its 164th year of trading, the market leader is also the nation’s most traditional, 100 percent Brazilian, family-run company.

GENERATIONS OF SUCCESS

Founded by a Portuguese immigrant in 1846, Ypióca began by producing just 30 liters of aguardente per day. The small company based in Maranguape in the northern state of Ceará, used techniques brought over from Europe to make 5-liter-barrels of cachaça to local customers. Four generations later Ypióca has a production capacity of 126 million liters per year from five facilities throughout Brazil.

Each generation brought developments to the business. “Important changes include the introduction of the measuring lid (conta gotas), the liter-bottle and the straw packaging, which are used still used today,” says current President Everardo Telles. Manufacture of the straw bottle covering, which is a distinguishing mark of the Ypióca brand, originally employed 7,000 craft workers. In 1968, shortly before Everardo Telles assumed the presidency of the company, the first bottles of cachaça were exported to Germany. Today, the success of the cachaça has taken it to every continent in the world. Ypióca was the first to be exported from Brazil and can be now be found on supermarket shelves in 40 different countries.

Telles’ entrepreneurial spirit has also extended the industrial scope of Ypióca. The company is now a group that encompasses eight markets and generates around 20,000 jobs. Aside from its five distilleries, located in the states of Ceará and Rio Grande do Norte, the group is also active in the mineral water, paper and cellulose, agricultural and packaging industries. The company has its own tourist attraction too – Ypark. Located just 18 miles from Fortaleza in Ceará, the park offers not only a cachaça museum, which explains the history of the company, but an adventure playground, radical sports, nature trails, animals and boat rides. “The park is informative and fun, as well as representative of our social awareness,” Telles comments. The intention is to provide complete coverage of all the areas of the business for clients. “Today, we are vertically integrated and diversified,” he says.

NOT WASTING A DROP

Two of the most important ingredients of Ypióca cachaça are tradition and quality. All of the sugar cane used to manufacture its products is subject to rigorous tests from seed to harvest. The once manual agricultural systems are now computer operated. A subterranean irrigation and fertilization system that runs 20cm below the surface of the soil is fully automated, restarting itself every 20 minutes. The technology used by Ypióca at harvest is also state-of-the-art. The ecologically correct procedures, without burning crops, allow 100 percent use of all the products and byproducts. Part of the waste is used to generate power, making the facilities self-sufficient. Other parts are hydrated and used in animal feed and fertilizers or used in paper and cellulose manufacture.

In total, 50 percent of the sugar cane used comes from Ypióca’s own plantations. The rest is supplied by between 300 and 400 partners. The balance means that the company is instrumental in the agricultural development of many rural areas of the country. It also enables the high levels of production, which would otherwise require the cultivation of enormous expanses of land.

The harvest, which takes place from August to December, produces around 450,000 tons accumulated in the five facilities of the company. Animal feed from the waste is used by the group’s agricultural division, which produces cattle and pigs for meat, milk, corn and beans that are sold and also used to provide food for employees at the factories. Ypióca’s several farms in the north east of Brazil are integrated to exchange goods and services.

In 1992, Ypióca launched its paper and cellulose division, Pecém Agroindustrial Ltda, that produces 70 tons of paper in rolls every day, manufactured using recycled paper and sugar cane waste. The paper and cardboard used is sold to third parties and also used in the delivery cartons and packaging of Ypióca’s cachaça and water.

Since 1996, Ypióca Emballagens based in Fortaleza, Ceará has been manufacturing PET and PVC bottles for the group. With the latest technology, it is the only factory in this region of Brazil to produce bottles in five and 20 liter sizes. The group produces all of its own packaging which totals around 1,400 tons per year. This still only constitutes 50 percent of production and the remainder is sold to third parties such as the cosmetics, pharmaceutical and food industries.

Ypióca Águas Minerais Indústria e Comércio Ltda produces and bottles Brazilian mineral water. The water originates from a 10-hectare-area near Fortaleza and is extracted using industry approved, and fully automatic machinery. The company is also a specialist in filling domestic and commercial drinking water supplies. The filling system guarantees clean, free flowing drinking water available chilled, hot and at room temperature.

The diversification has been important to Ypióca’s continued success. “We are always looking to complement existing business and increase opportunities,” explains Telles. The businesses are not only integrated but linked by sales teams, logistics and distribution operations. Ypióca has its own fleet of 100 delivery vehicles in Ceará and outsources logistics in other states. The company has a distribution center in São Paulo and uses the ports in the north east of Brazil for exportation. “Cachaça is an easy product to transport, as it is not affected by heat or time restrictions,” Telles continues.

The age of Ypióca cachaça is one of the important differentials of the brand. The aging process was implanted under the third generation of management of the company and involves storing the spirit in balsam barrels for up to six years. The cachaça is kept for this period to allow a chemical reaction between the component substances that creates the taste and smell characteristic of Ypióca.

PRODUCT MIX

Best known for its traditional, typically 39 percent alcohol cachaça, Ypióca has not only developed a diverse product mix, but also an extensive range of drinks based on cachaça. Versions of the original product include gold, silver and organic lines as well as different ages, subtle tastes and packaging. The company also produces flavored aguardente available in lemon and red fruits. According to Marketing Director Aline Telles, the flavors are a response to the market’s reduction in alcohol consumption. “We have the knowledge and the professional know-how to offer a broad spectrum of products to our clients. We have products aimed at young people and women, for example, which keep us continually ahead of the competition,” she says.

The recipe is a proven success, with annual growth averaging 10 percent and projected growth for 2010, 12 percent. The new products and growing markets are the reasons for expansion. “A new cachaça flavored with the national guaraná berry is proving successful all over Brazil and we are constantly thinking of new products,” she continues.

The strategy for success is strangely no secret at Ypióca. Quality and know-how as well as forward thinking and modern technology make it a top-selling brand with one of the highest turnovers in the industry. “We have strong family values, balanced with outside expertise,” adds Everardo Telles. Of the six directors, three are from the Telles family and three are hired professionals.

Investment in diversification, organization and infrastructure help to maintain Ypióca’s market position. The company has production facilities all over the north and northeast region, with an administrative center in Ceará. One of the factories opened in 2003, also in Ceará, currently covers 3,000 hectares and is the largest in the industry. However, Ypióca is in the process of beating its own record with a $35 million plant for the production of cachaça and ethanol. As well as the largest and most modern in the industry, the factory which opened in October 2009 in Jaguaruana, Ceará, is the first to produce all the liquid derivatives of sugar cane. With a 100,000-square-meter factory in 6,000 hectares, the plant will have a total production capacity of 50 million liters of ethanol or 90 million liters of cachaça. “This versatility will allow us to define the patterns of each harvest, adapting them to the needs of the company and the market,” confirms Telles.

The new plant will increase annual revenue by 20 percent and generate 360 more jobs in the region. Due to lack of relevant expertise locally, Ypióca is operating an internal selection process, further integrating the companies of the group.

The impressive developments in the company provide a positive outlook that others only dream about. Ypióca’s new facility will add a new range of clients to the existing network of distributors, wholesalers and supermarket chains. Believing in its products, accepting challenge, creating opportunity and innovating in the industry have become second nature to Ypióca. The reality is continued stable success and market leadership and as Aline Telles concludes, “it is a reality created through dreaming with our feet firmly on the ground.”

Subscribe to Industry Today