Risks Specific to Avuá Cachaça
1. The premium spirits market, despite being an active and stable market, is exposed to macroeconomic risk, as consumers may choose to trade down to less premium cachaças if their is a macroeconomic downturn.
2. The growth of Avuá Cachaça has, in large part, been linked to the growth of the “craft cocktail” movement in the on-premise. While this type of channel has been growing, there is no certainty about the rate that it will continue to grow and whether consumers will continue to shift towards niche spirits and craft cocktails.
3. Avuá’s growth is dependent upon its distributor partners. There has been significant consolidation in the U.S. distribution market, which may adversely affect the amount of attention smaller suppliers may receive from the distributor partners. European importers for smaller craft spirits remain underdeveloped and it is not certain that the trend of improved distribution solutions within the EU will continue.
4. In the market for spirits, cachaça is an underdeveloped category and, while there has been growth in the category, Avuá remains a pioneer in most global markets in which it operates and there can be no guarantee that the growth in the underlying market will continue.
5. Recent changes in the global political environment may add risk to the imported spirits market, as there is no certainty that the existing low tariffs for imported alcoholic beverages will continue. Certain of our trading partners are ending political relationships, such as the European Union and the U.K., which may adversely affect ease of trade between our European depot in Belgium and our U.K. importer.
6. Brazil remains a volatile environment politically and the company may be exposed to changes in taxes and regulatory environment that could adversely affect our profit margins. We moreover benefit from a strong USD-real exchange rate, which could change over time.
7. Avua is moderately dependent upon the image of Brazil, which maintains challenges due to news reports of corruption and violence.
8. The current category competitive set is fairly weak. However, recent acquisitions, such as Leblon Cachaça by Bacardi, may add competitive headwinds to growth.