June 26, 2011 Toasting Success

Volume 7 | Issue 1

With over 80 years of history, Cereser is one of the most traditional alcoholic beverage companies in Brazil, not to mention one of the larg

Cereser has innovation in its DNA, and its DNA can be traced back quite a ways; specifically to the year 1886, when an Italian farmer by the name of Santo Cereser emigrated to Brazil. Armed with his knowledge of viticulture, Santo settled in Jundiaí, in the interior of São Paulo state and, with his family, began growing grapes and selling the harvest to local winemakers, while making his own wine, artisanally, on the side.

All was well until a day in 1926, when Santo’s grandson, João, delivered a harvest to a major client and was refused payment. Due to harsh economic times, the client was unable to purchase the grapes. Instead of accepting loss, João came up with the idea of Cereser creating its own winery. And thus, Indústria Vinhos de Santa Isabel – which later grew into Viti-Vinícola Cereser – was born.

ABSOLUTE LEADERS

Although Cereser was now supplying grapes for its own needs, beginning in the 1940s, these needs began to expand as the company started to branch out into new categories of grape-based beverages. In 1941, the company launched its own brand of vermouth and, in 1947, it rolled out Dom Bosco, an inexpensive table wine that brought wine to the masses. However, it was in the ‘60s and ‘70s that the company really struck gold with the introduction of Cereser Sidra (sparkling apple cider) and Chuva de Prata (a champagne-like mixture of sparkling wine and cider). Both products really took off, especially the Sidra, which quickly became Cereser’s best-selling and most profitable product by far.

“Today, we’re absolute leaders in Brazil’s sparkling cider market,” declares José Fontelles, Cereser’s commercial director. “Between Cereser Sidra and Chuva de Prata, we have a 75 percent market share. In fact, the Cereser brand is synonymous with cider; when Brazilians go to buy cider, they say they’re ‘going to buy Cereser.’”

Unlike too much sparkling wine, success hasn’t gone to the company’s head. As a category leader, Cereser is always looking for ways to consolidate its market position by constantly developing its mix. In recent years, it has added both flavored and non-alcoholic ciders to its product line. Although the demand for non-alcoholic cider is a global trend, it’s especially big in Brazil where it’s one of the beverage industry’s fastest growing categories, a phenomenon that Fontelles partially attributes to stricter anti-drinking legislation as well as the rising number of Brazilians joining evangelical churches. “Although sparkling cider is still growing in Brazil – by around 7-8 percent annually,” says Fontelles. “non-alcoholic cider is growing by around 20 percent. Since we’re practically the only manufacturer in Brazil, all of this growth is ours.”

NEW MARKETS, NEW PRODUCTS

Non-alcoholic cider is only one new category in which Cereser is investing, and it’s not its first foray into non-alcoholic beverages. In 1997, the group entered the fruit juice category upon purchasing a manufacturing plant in São Paulo state. And this year, in a partnership with the Walt Disney Company, it’s launching Spunch, a sparkling, fruit juice-based drink for children, which is being marketed as a special commemorative beverage that can be consumed by children at birthdays and other special events. Aside from giving Cereser access to the untapped children’s food and drink market, the launch is part of an ambitious plan to expand into the food service segment.

“This is our big goal for 2011,” confesses Fontelles. “Right now we’re working with distributors who can help us penetrate this channel, which includes hotels, airports, restaurants, caterers, etc.” To meet the demands of the food service segment, Cereser has created new formats for pre-existing products such as small, individual-sized 220mL bottles of Chuva de Prata, reflecting a general trend towards smaller formats as more consumers choose to celebrate without having to down the contents of an entire bottle of bubbly.

The company has also created entirely new products such as a vodka-lemon “ice” drink (modeled after Smirnoff Ice). Containing a low alcohol content, “ice” drinks – also sold in individual-sized bottles – are increasingly popular in Brazil. While the individual sales value is low, high volume makes these drinks profitable.

Cereser is no stranger to vodka. The company first entered the distilled liquor market in the 1980s, when it added vodka along with malt whisky, brandy, and cachaça to its mix. Over the years, it has broadened this portfolio substantially, most recently by adding a line of rum in 2009. Declares Fontelles: “Our mission is to be present in all categories of alcoholic beverages in Brazil – and to be one of the leading players.”

PHYSICAL AND GEOGRAHIC EXPANSION

Currently sparkling ciders and wines account for 44 percent of Cereser’s business, followed by distilled liquors (29 percent), wine (18 percent), vermouth (5 percent), and non-alcoholic beverages (4 percent). In order to keep up with its expanding portfolio, the company has expanded physically and geographically as well.

Late last year, at its main 452,000-square-foot Jundiaí facility, Cereser installed the largest assembly-line of ciders and spumantes in the world. Made in Italy, the state-of-the-art equipment is capable of processing 26,000 (660mL) bottles an hour; 25 percent more than leading European manufacturers. And, in 2006, the company opened a second 130,000-square-foot in Suape, an industrial zone near Recife, capital of the Northeastern state of Pernambuco. As a result of these investments, Cereser has experienced average annual growth rates of 7 to 8 percent over the last three years and has achieved a current total production capacity of 66 million bottles (28 million of which are 660mL bottles of cider and sparkling wine).

The opening of the Pernambuco plant was key to providing Cereser with strategic access to the fast-growing markets of the Brazilian North and Northeast. When Cereser began producing rum last year, the decision to make it in Recife made perfect sense when viewed with the strong predilection for the cane-based beverage in the Northeast. “Brazil is a continent and whenever we add new products to our portfolio, we try to take advantage of regional opportunities,” confesses Fontelles. He admits that the company always takes consumer and cultural habits into consideration. As such, the company knows, for example, that traditional cider is more popular in the North and Northeast while sparkling wines are preferred in the South and Southeast where European (especially Italian) immigration is strong. It also knows that demand for its “yellow” cachaça isstronger in the Central-West states of Brazil than in coastal regions where “white” cachaça is de rigueur.

This catering to niche markets extends to Cereser’s international business as well. Currently, Cereser beverages are exported to 43 countries around the world, with international sales accounting for 15 percent of the company’s total revenues. Over time, Cereser has become savvy at matching certain products with specific markets. For example, sparkling wines, flavored ciders and brandies do very well in Latin American countries while sales of vermouth are very strong in Africa (where major clients include Angola and Nigeria). Meanwhile, nonalcoholic ciders have been a big hit in Middle Eastern countries such as Qatar and Dubai as well as in Spain.

STAYING TRUE TO CONSUMERS

Whether overseas or at home, what really distinguishes Cereser from its competitors is the public it targets. “Unlike other manufacturers, our products aren’t geared to the A and B Classes,” says Fontelles, referring to the wealthiest (and smallest) socioeconomic groups in Brazil. “Our consumers have always belonged to the more populous C Class, and our decision to cater to this market really sets us apart in Brazil. Although the vermouth we make isn’t Martini and Cinzano, we still make a quality product, whose cost is much more accessible.”

This winning combination of high quality and competitive costs applies to all categories in Cereser’s portfolio. While quality is achieved via traditional know-how and investment in state-of-the-art equipment, savings are ensured by via large scale production combined with operating costs that are lower and brands that are less expensive than those of major multinationals.

Traditionally, Cereser’s trump card has been the size of Brazil’s C Class (which today numbers roughly 90 million people – close to half the Brazilian population). As the country’s recent and ongoing economic boom has led to historic and substantial income increases for poorer Brazilians, this increase in prosperity has leveraged Cereser’s growth. “It’s interesting,” comments Fontelles. “As many Class C Brazilians have moved into the B Class, they’re starting to buy more sparkling wines. At the same time, people in D and E classes who never had any disposable income are now able to buy cider.”

Although consumers may be changing, the company’s philosophy is the same as it was in 1926. Says Fontelles: “After all these years, we’re still a family enterprise and we still care about our customers.” Pointing out that the Cereser brand is very dear to the Brazilian consumer, Fontelles admits that today there “exists a real emotional bond” between the company and its customers; an accomplishment that is definitely worth drinking to.

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