Value Creation from Internationalization of Sugar Cane by-products

21 Pages·2015·0.72 MB·English

RBGN REVISTA BRASILEIRA DE GESTÃO DE NEGÓCIOS ISSN 1806-4892
REVIEw Of BuSINESS MANAGEMENT
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Value Creation from Internationalization of
Received on
Sugar Cane by-products: a multi-stakeholder
August 31, 2014
Approved on
view of artisanal cachaça production
May 29, 2015
1. Daiane Mulling
Neutzling
Daiane Mulling Neutzling
Doctor in Business
Business administration department, Universidade FEEVALE, RS, Brazil
Administration
Universidade Federal do Rio Manoela Silveira dos Santos
Grande do Sul Business administration department, Universidade Estadual
(Brazil) do Oeste do Paraná, PR, Brazil
[[email protected]]
Marcia Dutra de Barcellos
2. Manoela Silveira dos Post-Graduate Programme in Management, Business School,
Santos Universidade Federal do Rio Grande do Sul, RS, Brazil
PhD in Business Administration
Anna Lauren Land
Universidade Federal do Rio
Supply Chain Management department, Kassel University, Germany
Grande do Sul
(Brazil)
[[email protected]]
Editor in charge: Jeffrey S. Harrison, Dr.
3. Marcia Dutra de Evaluation process: Double Blind Review
Barcellos
Doctor in Agribusiness ABStRAct
Universidade Federal do Rio Objective – The aim of this paper was to identify the strategies
Grande do Sul developed for internationalization in order to create value in the
(Brazil) artisanal cachaça sector of Brazil.
[[email protected]] Design/methodology/approach – A multiple-case study was applied
in two artisanal cachaçarias. we carried out in-depth, semi-structured
4. Anna Lauren Land interviews with different stakeholders involved in supporting
Master of Science in internationalization of these companies. To select the stakeholders we
International Food Business and used snowball sampling. The content of the interviews was categorized
Consumer Studies and analysed according to accepted theory.
University of Kassel Findings – Our study provides an overview of the organization and
(Germany) structure of the cachaçarias and reveals how internationalization is
[[email protected]] adding value to this network from a multi-stakeholder view. The
support of the multi-stakeholder network is in an early stage, but
it offers a promising future, since there is a consumer market being
developed. Political power is needed to regulate the industry.
Practical implications – Business internationalization of the
handmade cachaça sector is a challenge, as most companies are small
and do not have adequate financial resources or proper knowledge
regarding international markets. Regulatory stakeholders support the
cachaçarias in standardizing production and developing international
strategies. The results can help to better understand the importance of
collaboration embedded in stakeholder network relationships.
Review of Business Originality/value – Empirical research on internationalization in
Management developing countries, especially in small and mediums sized firms is
still very limited. We have shown that companies can benefit from
specific organization structures when developing relationships within
DOI:10.7819/rbgn.v17i55.2134 multi-stakeholder networks.
Keywords – value creation, cachaça, multi-stakeholder, competitiveness.
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Value Creation from Internationalization of Sugar Cane by-products: a multi-stakeholder view of artisanal cachaça production
1 INtRODuctION associated with low-income social classes in Brazil.
The 20th century brought a new perspective for
From the perspective of globalization, it the cachaça sector: the large national producers as
is possible to verify the breakdown of national well as the small stills and distilleries, also known
frontiers and the emergence of commercial as cachaçarias, got involved in governmental
blocks and transnational corporations, and these programs seeking for new production strategies
situations are changing business strategies all over in the sector. These programs were important
the world. Researchers have discussed, in the last for different reasons, contributing to the sector’s
few years, that companies should learn how to growth and for the international market opening
operate as if the world were one large market (Nascimento, 2006).
and, therefore, develop global strategies (Amal Today, there are two main types of
& Freitag, 2010; Andersson, 2000; Axinn & cachaça being produced in Brazil: the industrial
Matthyssens, 2002; Johanson & Vahlne, 2001). cachaça, produced on a large scale, is dominant
Thus, internationalization has become a in the national and international market, but
subject for designing operational and marketing it is exported as a commodity in large volumes
strategies in many sectors, especially in developed to be competitive. The second is the artisanal
countries, and has also gained importance in cachaça from stills, or cachaça de alambiques, on a
emergent economies (Floriani & Fleury, 2012). small-scale volume and of very high quality. This
Furthermore, in the last decade, firms have kind of product has a strong potential to reach
sought further internationalization, not only national and international premium markets.
in multinational companies, but also smaller This potential has been lately explored by the
enterprises (Amal, Awuah, Raboch, & Andersson, Brazilian government, company associations, and
2013; Amal & Freitag, 2010). In Brazil, the producers, as we see an increase in the number of
beginning of internationalization came with projects and incentives that target the cachaça de
the market opening in the 90s. Data from the alambique. Hence, there is a movement to enlarge
Ministry of Development, Industry, and Trade the international access of these small industries.
(Ministério do Desenvolvimento, Indústria e In spite of the latest developments, some questions
Comércio Exterior [MDIC], 2011) shows that arise: Are “cachaçarias de alambique” prepared for
Brazil had record trade figures in 2011, logging internationalization? Does internationalization add
$256 billion in exports and maintaining a $29.7 value to this industry? How do other stakeholders
billion surplus. Even with the significant export see the role of internationalization in cachaça value
growth, there are many global markets still to be creation?
exploited by Brazilian companies, especially those The aim of this paper is to identify the
for added-value products. From a strategic point strategies developed for internationalization in
of view, internationalization allows companies to order to create value in the artisanal cachaça sector.
amplify their access to the external market when We also intend to analyse the multi-stakeholder
facing increasing competition in the domestic perception regarding these strategies in the
market or when the domestic market is saturated. sector. Data collection was conducted in artisanal
Internationalization seems to be an cachaçarias in South Brazil, one of the most
alternative for Brazilian artisanal cachaça, an important production regions in the country.
alcoholic drink derived from sugar cane. This The structure of this paper is the following:
industry had its glorious time in the colonial after the Introduction, Section 2 summarizes the
period (1500-1815), but lost its position in the theoretical literature on the internationalization
early 1900s while competing with sugar and and value creation in the food industry as well
ethanol sectors and being considered a drink as the multi-stakeholder view. In Section 3, we
without added value, whose consumption was present an overview of the cachaça sector and the
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Daiane Mulling Neutzling / Manoela Silveira dos Santos / Marcia Dutra de Barcellos / Anna Lauren Land
consumer market in Brazil, and also in the state of also involve promotion of the local or regional
Rio Grande do Sul. The methodology is presented environment and quality (Ryan, O’Reilly, &
in Section 4, followed by the empirical analysis Enright, 2004).
and a conclusion in Sections 5 and 6. Deepening the discussion of value creation
in supply chains, Kaplinsky and Morris (2001)
introduce value chain analysis, which focuses on
2 LIteRAtuRe RevIew the dynamics of inter-linkages existing mainly
within the production chain. This analysis
This literature review aims to explore particularly relates to the way in which firms and
the process of value creation in agri-food chains countries are integrated in global supply chains. It
through the process of internationalization. This helps better analyze how the international market
discussion is complemented by the concept of is organized and also how producers, including
a stakeholders network and its influence on those from emerging and developing countries,
companies’ internationalization strategies. can introduce products that are typical in their
countries but still not well known in a global
2.1 Internationalization and value creation in market context.
agri-food chains When internationalization occurs in parts
of the chain, by establishing different processes
The food sector has experienced increased or products in specific markets, there is a specific
competitive pressures in the business environment condition of value creation. Gereffi (1994, 2001)
because of the market’s globalization (Vieira, presented the concept of a Global Value Chain
Barcellos, Hoppe, & Silva, 2013). In such business where he analyses the structure of governance and
environments, organizations seek for competitive institutional frameworks within global production
capabilities that enable them to exceed customers’ and how they directly affect the organizations.
expectations and enhance market and financial According to Gereffi (2001), the configurations of
performance (Bijman, Muradian, & Cechin, governance differ in two types of chain structures:
2011). They have also found that single firm the “producer-driven”, where large transnational
capabilities are no longer sufficient for achieving companies coordinate the entire supply chain,
a competitive advantage, and are focusing on and the “buyer-driven” chains, where retailers and
developing partnerships with suppliers and brand marketers compete intensely with respect to
clients. Managers have recognized that developing attributes valued by customers such as innovations
effective supply chains (and networks) offers in products and packaging and maintaining high
opportunities to create sustainable competitive standards of quality and price. In buyer-driver
advantages (Tracey, Lim, & Vonderembse, 2005). chains, the demands and expectations of the
One of the purposes in developing effective consumer market are crucial to the success of value
relationships among supply chain members is creation for companies. The process of finding
to create shared value for companies involved foreign markets and suitable standards imposed
(Childerhouse & Towill, 2011). To add value to by these markets ultimately changes the entire
a product, companies seek to make changes in value chain.
the products, such as processing, packaging, or The internationalization phenomenon
marketing (Tracey, Lim, & Vonderembse, 2005). does not occur just in large companies, but it
However, when the supply chain is integrated, can also be an option for value creation in small
there are possibilities of value creation by joint and medium enterprises (SME) and for the
strategies of alternative marketing channels, supply chain they are a part of (Chetty & Holm,
closer relationships to better address consumer 2000; Mort & Weerawardena, 2006; Othman,
demands and, in the case of food products, it may Vandenbempt, & Hendrickx, 2010). In small
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Value Creation from Internationalization of Sugar Cane by-products: a multi-stakeholder view of artisanal cachaça production
and medium companies, supply chains can be improve the bottom line, and develop new
short and controlled by only a few actors, which business opportunities.
creates an advantage for the generation of value. Henriques and Sadorsky (1999),
Linked to this, in these kinds of firms the use of and Andriof and Waddock (2002) classified
networks is also an important influence towards stakeholders into four groups: 1) the regulatory
internationalization. Chetty and Holm (2000) (government, regulatory agencies, associations,
state that the internationalization process of and other entities that can influence the
SME firms is influenced by several stakeholders, norms and standards interfering with the
such as other companies, suppliers, customers, organizational activity), 2) the organizational
governments, and particular entities that are (the public directly involved with the company,
connected by diverse relationships and form the such as clients, suppliers, employees, and
company’s network. The internationalization shareholders), 3) the societal/communitarian
can arise from the firm’s initiatives to respond to (environmental organizations, social, and
the stimuli found in the existing relationships in communitarian movements), and 4) the media
this network. Amal and Freitag (2009, p. 611) (mass communication technologies used to
believe that: inform the society about corporative actions).
The emergence of new stakeholder
“the internationalisation process ends engagement strategies, including strategic
up depending on the firm’s capacity
alliances and partnerships, social partnerships,
of coordinating its activities inside a
present network, but expansion will and multi-sector collaborations, means that
depend on its capacity of forming new collaborations have become a critical basis for
networks and establishing cooperation
stakeholder engagement (Andriof & Waddock,
processes among the networks in which
2002; Co & Barro, 2009). Collaboration in
it is already engaged”.
stakeholders’ relationships can be analysed in a
network perspective Rowley (1997). According
Thus, it becomes important to present a
to this author, firms tend not to respond to
short review on the theory of stakeholders, who
each individual stakeholder, but instead to the
are part of the companies’ relationship networks.
interaction of multiple influences. To comprehend
how organizations respond to their stakeholders,
2.2 Stakeholder theory
it is necessary to analyse the influences and
interdependent relationships inside the group and
Among the changes that companies have
among its members.
implemented, one can observe the engagement
Svendsen and Laberge (2005, p. 1) define
in partnerships and collaborations not only
the stakeholder network “as a web of groups,
with other companies but also with other types
organizations and/or individuals who come
of stakeholders who represent the different
together to address a complex and shared cross-
interests and expectations that exist beyond the
boundary problem, issue or opportunity”. When
traditional corporate interests (Freeman, 1984;
the process of collective dialogue and decision-
Rowley, 1997). Stakeholder theory postulates that
making involves multiple stakeholders at the
regardless of the final aim of one corporation or
same time, a multi-stakeholder interaction exists.
any other organizational initiative, the managers
Worley and Parker (2011) share this concept,
need to account for the interests of groups or
stating that when the individually oriented firms
individuals that can affect and be affected by the
are confronted with problems or opportunities
business activities (Donaldson & Preston, 1995).
arising from their network, they can choose to
According to Svendsen and Laberge (2005), the
act alone or collaborate with other stakeholders to
emphasis on managing stakeholders is to avoid or
address the issue or opportunity. They, therefore,
reduce risks to the company, enhance reputation,
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Daiane Mulling Neutzling / Manoela Silveira dos Santos / Marcia Dutra de Barcellos / Anna Lauren Land
engage in multiparty collaboration, defined by conduct to the independent society, and the
Gray (1989, p. 5) as: “the process through which European style was the most valuable one. As a
parties who see different aspects of a problem can result, cachaça, once a national symbol, started to
constructively explore their differences and search be considered as a drink for slaves or for poor and
for solutions that go beyond their own limited uncultured people (Serviço Brasileiro de Apoio às
vision of what is possible”. Micro e Pequenas Empresas [SEBRAE], 2008;
In sum, the value creation arising from Confederação Nacional das Indústrias [CNI],
internationalization strategies combined with 2010). Such stereotypes ended up defining the
the firm’s network and the discussions on multi- market and its consequences in terms of low
stakeholder interactions can be used as a manner appeal and competitiveness in the sector.
to understand how the internationalization of This identity followed the drink through
the cachaça de alambiques occurs in South Brazil. the years and today a large proportion of the
This sector is constituted by small and medium Brazilian population still see cachaça with
companies that are facing the challenges of prejudice and as a product with no quality.
designing a value chain in an industry that is not Nevertheless, in the 1990s a new perspective
regulated but has a network of actors working for the cachaça sector emerged, serving as a
together to add value to the product. There is an process of regaining the prestige and the image
emergence in the regulatory activity in the country, of the product. It started from governmental
aiming to strengthen the domestic and foreign development programs targeting the producers of
markets of Brazilian cachaça. Therefore, in this cachaça in order to establish a new strategy in the
study we first explore how these small companies sector. Those programs took different paths, but
are structured and how the relationships with their overall they contributed to the sector’s growth and
stakeholders are occurring in the network around to the market opening, mainly to large producers
them. We aim to investigate if internationalization (Nascimento, 2006).
has generated value for these companies and Other initiatives that helped with the
determine the stakeholders’ view on this process. recovery of cachaça’s prestige and image were the
National Decrees 4062/01 and 4072/02, which
established the denomination of cachaça as official
3 the CaChaça PRODuctION and exclusive to the rum made from sugar cane in
Brazil, following defined specifications in regard
Cachaça is probably known worldwide to the alcoholic degree and special characteristics
through the famous Brazilian drink called of the fermented juice (mosto) from sugar cane.
caipirinha, a cocktail that uses this distillate drink This definition provided a significant contribution
from sugar cane as its principal component, to the promotion and communication process in
combined with lime, sugar, and ice. Cachaça is the international market, highlighting cachaça as
a typical Brazilian drink born in the colonial a truly Brazilian drink.
period (1530-1815), and, during those times, In terms of strategies to add value to the
it had high economic importance to Brazil and product, it is important to distinguish the two
Portugal. The drink became popular and, during existing types of cachaça: The first one is the
the Brazilian Independence (1822), it was used as industrial cachaça, which is characterized by a
a symbol of resistance and liberty. Yet, even with large production scale, and whose distillation
a strong Brazilian identity, the cachaça “golden process is obtained from column stills, also
times” suffered with the growing economic and called “continuous stills”. In the fermentation
social importance of the “Coffee Barons” (by the process, some chemically synthesized products are
end of the nineteenth century). The economic added. To keep high productivity, the industrial
development based on coffee brought new producers require large sugar cane plantations
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Value Creation from Internationalization of Sugar Cane by-products: a multi-stakeholder view of artisanal cachaça production
(even from third parties), with mechanized The major international market of cachaça is the
harvest, agrochemical use, and sporadic burning European Union (EU), with almost 55% of the
of the straw. On the other hand, the cachaça volume commercialized. The main destination
de alambique (still) is crafted via traditional countries, in value, are: Germany, USA, France,
workmanship, handmade through natural Portugal, Paraguay and Italy (Instituto Brasileiro
fermentation, and the raw material (sugar cane) da Cachaça [IBRAC], 2013). Despite this, South
is usually from the producer’s own plantation, American and African markets are increasing
without agrochemical or burning, and the harvest their product imports, being another potential
is manual. This production system is normally consumer of the Brazilian cachaça. In the sector,
associated with family farming and a small the industrial cachaça represents more than 70%
producer scale (SEBRAE, 2008). of total production and commercializes almost
It is estimated that the national market for 50% of the exported cachaça in bulk.
cachaça was around 1.4 billion liters per year in With regard to artisanal cachaçarias
2006, and 70% of this volume (980 million/year) selling their product in international markets,
came from the industrial system, which offers estimates show that less than 2% of the total
a product with popular appeal and affordable production has been sold to other countries
prices. The other 30% was obtained from artisanal (SEBRAE, 2008). With the objectives to
cachaça production (SEBRAE, 2008), where mitigate the conflicts between the two segments
value adding strategies can be seen. Nevertheless, of cachaça in Brazil, i.e. industrial and artisanal,
informality is common in the sector, and it is not and to contribute to the internationalization of
rare to see products with low technology and this product, in 2006 the IBRAC – Brazilian
quality, which has a negative impact over the Institute of Cachaça – was created. The institute
entire production chain. As a result, in the year has been engaged in the negotiations regarding
2000 many Brazilian states initiated a specific a technical regulation defining the specifications
action to promote the formalization of cachaça of cachaça, identifying where it can be produced,
production in order to increase competitiveness in who can use this name, and even the possibility
national and international markets (CNI, 2010). of being granted a protected designation of origin
The state of Minas Gerais is the largest status – with the ultimate goal being to improve
cachaça producer within the country, with 15% the international recognition of cachaça. With
of the total volume (industrial and artisanal) a proper definition of cachaça, how it must be
and, when looking at the artisanal cachaça, this produced, and who can use this title to label it,
proportion gets larger, around 50% (SEBRAE, more protection is guaranteed to a product that
2008). The second most important producer is is genuinely Brazilian.
the state of Bahia, followed by the state of Rio It is therefore possible to infer that the
Grande do Sul (CNI, 2010), where this study international market is an important opportunity
was conducted. Detailed information about the for this sector, considering the growing exportation
production in Rio Grande do Sul will be provided values and the stable demand in the national
in the sub-section 3.1. market for the industrial cachaça. Multiple
Regarding the international market, the stakeholders in Brazil have lately been investing
major part of the exported cachaça is industrial. In in projects with the purpose of increasing the
2013, Brazil has exported almost 9 million litters export volume. One of these projects was called
of cachaça, which is approximately $17 USD the Integrated Project of the Cachaça Sector. The
million dollars. The industrial cachaça production project’s goal was to increase exports of cachaça,
chain has more than 40 thousand producers and some of the actions were the organization
(mostly SME companies) and 600,000 employees. and consciousness of the sector and the offering
Currently, the product is exported to 70 countries. of courses and seminars about technical issues
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Daiane Mulling Neutzling / Manoela Silveira dos Santos / Marcia Dutra de Barcellos / Anna Lauren Land
and foreign trade, actions directed at adding value The expansion of industrial cachaça in
and changing the negative image of the cachaça the 1990s resulted in the market opening for
in Brazil through the institutional promotion of Brazil and allowed for a significant change in
the drink overseas (SEBRAE, 2008). technologies, cost reduction, and a movement
Another action taken by stakeholders towards cachaça’s valorization, also stimulated
was an in-depth “Sectorial Analysis” made by by the creation of APRODECANA (Association
the SEBRAE, the Brazilian Micro and Small of Sugarcane and its Derivatives in the State of Rio
Business Support Service, that aimed to qualify Grande do Sul) in 1999. This entity emerged with
entrepreneurs and support their development. the goal of defending the political and economic
This sectorial analysis was very important to interests of this sector, working to organize specific
increase the knowledge of the sector and to actions and articulate strategies to add value to
develop specific actions in selected Brazilian the cachaça made in Rio Grande do Sul. For
regions, such as in South Brazil. this purpose, the entity made a partnership with
Today this sector does not have a specific FIERGS (Federation of Industries of the State from
national project to promote itself, but the sector Rio Grande do Sul) and SEBRAE/RS (Support
benefits from other broad actions headed by Service for small and micro enterprises in
the government and particular institutions, like Brazil Rio Grande do Sul Unit) to develop a
MAPA, MDIC, APEX, IBRAC, and SEBRAE. project within this sector. In 2001, the study
Support is provided mostly for international food conducted by these organizations mapped 3,000
and beverage fairs, called missions by the support cachaça producers, but less than 50 were legal
institutions. This will be further explained in the at the time (formally constituted firms), and
discussion section. The last beneficial achievement showed that the state did not have the tradition
to cachaça was its recognition as a Brazilian and the scale to compete with other Brazilian
exclusive and genuine drink by the United states. After this diagnosis, an action plan was
States. This commercial agreement will help the built with the following goals: to work on the
Origin Designation negotiation of the cachaça associative aspects, to provide the technological
with the World Trade Organization (WTO), improvement of production processes, to help
which will be a critical step for amplifying the with the management of companies, and to
internationalization of cachaça. The recent expand the participation of cachaças from Rio
recognition of cachaça as a national protected Grande do Sul in the domestic and foreign
geographical indication gave an important boost markets (CNI, 2010).
to the product’s added value. Another initiative to promote the cachaça
sector in Rio Grande do Sul was the creation of
3.1 The cachaça in Rio Grande do Sul State the Project of “Local Productive Arrangement of
Cachaça and its derivatives” inside the Al-Invest
In the state of Rio Grande do Sul, the Program, sponsored by the European Union. Al-
first register of mills processing sugar cane and Invest is an economic cooperation programme
its derivatives dates around 1800. Today, the that aims to support the internationalization of
state occupies the third place in artisanal cachaça SMEs in Latin America, in collaboration with
production but, even in this position, the state is their European partners, in order to contribute to
responsible for only 1% of exports, behind São the social cohesion in the region. The objectives
Paulo, Pernambuco, and Paraná (MDIC, 2011). of the research made by this project were to
Rio Grande do Sul produces 10 million liters of identify the local productive arrangements of
cachaça per year from 35,000 hectares of sugar cachaça in the southern region of Brazil (Paraná,
cane plantation and has approximately 3,500 Santa Catarina, and Rio Grande do Sul states),
alambiques (CNI, 2010). to characterize this region and its states with a
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Value Creation from Internationalization of Sugar Cane by-products: a multi-stakeholder view of artisanal cachaça production
focus on the export profile, and to identify and Thus, the artisanal cachaçarias were
characterize the alambique cachaça’s producers selected due to their importance considering their
(CNI, 2010). The study revealed that the cachaça frequency and volume of cachaça exportation
exported from Brazil has a low price and low in Rio Grande do Sul, and because they were,
aggregated value because the product exported at the time, the only artisanal cachaçarias in
is the industrial cachaça, and, in this scenario, Rio Grande do Sul with internationalization
the producer of artisanal cachaça of Rio Grande initiatives. Stakeholders were selected considering
do Sul has difficulties when competing in the their role in the network and in the export
international competition due to its low volume markets: APRODECANA was selected for being
and lack of quality recognition. the link between national and international
Even so, the cachaça producers in Rio stakeholders; SEBRAE-RS held a project directed
Grande do Sul are looking for new strategies at the cachaça sector in the Rio Grande do Sul
and conditions to promote their product, and state, which contributed to its organization and
one method has been the internationalization to the improvement of production processes;
of products. These strategies will be throughly and APEX is the national actor involved in the
discussed throughout this article. In the next promotion of Brazilian products abroad and the
section we present the research method. internationalization of Brazilian companies.
As this research has a qualitative nature,
we have applied in-depth interviews to the
4 MethOD respondents. The interviews were carried out
over 4 months during the year 2012 and lasted
The aim of this paper is to analyze how around one hour each. All the information
internationalization can contribute to value provided in the interviews was recorded, and its
creation of the artisanal cachaçarias from a content categorized according to the theoretical
multi-stakeholder perspective. To achieve these background developed in the paper. These
objectives, a multiple-case study was applied in categories also guided the interviews scripts;
two artisanal cachaçarias in Rio Grande do Sul, therefore, the interviews were semi-structured.
and qualitative data was collected from different The categories were: (i) relationship between
agents involved by analysing members of the
stakeholders, (ii) roles and contribution of
same stakeholder network. The cases allowed
stakeholders in the internationalization process,
for the exploration of the relations between
(iii) strategies for internationalization, (iv)
internationalization and value added in the
cachaçarias’ internationalization process, (v) main
cachaçarias from Rio Grande do Sul.
motivations to start an internationalization
To obtain data we have used Snowball
process, (vi) problems and difficulties regarding
sampling, defined as a technique for gathering
the internationalization process, (vii) value
research subjects through initial subject
creation through internalization, and (viii)
identification. These subject then provide the
cachaça’s production process and market. We
names of other actors that belong to the sector the
further analysed these categories considering the
researchers are investigating. These actors should
paper’s objectives (Miles & Huberman, 1994).
themselves open possibilities for an expanding
web of contact and investigation (Faugier &

Sargeant, 1997). Therefore, we first contacted the
5 ReSuLtS
manager of APRODECANA, which led us to the
two artisanal cachaçarias and also a representative
of APEX. When interviewing the managers of The results section starts with the
the cachaçarias, they led us to the institution presentation of the two investigated cachaçarias
SEBRAE-RS. regarding their strategies on added value through
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Daiane Mulling Neutzling / Manoela Silveira dos Santos / Marcia Dutra de Barcellos / Anna Lauren Land
internationalization. Thereafter, we present the in the Brazilian capital (Brasília), beyond the state
main stakeholders in the artisanal cachaça sector of Rio Grande do Sul. The company started to
and their influence on the value creation process internationalize its products a few years ago, in
throughout the product’s exportation. 2007, focusing on European markets, mainly
Germany and United States of America. In these
5.1 case 1: cachaçaria casa Bucco markets, the consumption of the artisanal cachaça
gaúcha has increased, according to the industry
This industry is located in the Rio das manager.
Antas valley, a touristic region settled by Italian The company has won the 2011 Cachaça
immigrants. The artisanal cachaçaria was founded National Award, the prize for best white cachaça
in 1925 and is run by the same family. Currently, in Brazil in 2011 (called white because it does not
it comprises a still, a venue, and a small guesthouse go through the process of aging in barrels, so its
(for customers), and here the cachaça made is colour is transparent, e.g., “white”). The company
situated in the main wine-producing region of the has also the aged cachaça that undergoes a double
country. The distillery has an annual production distillation process to become smoother, especially
of 45 thousand liters of cachaça and an expansion recommended to be used in fruit cocktails. The
project that will enable its production to reach firm also sells these products in foreign markets
180 thousand liters of cachaça per year. The area and they developed a second brand called
comprises 16 hectares, 6.5 dedicated to sugar cane Calor Brasilis, that is especially used to prepare
production. There are 8 people working in the caipirinhas. In addition, the company exports
business (between partners, family, and staff) and a rum liqueur, and the owner foresees a great
a number of croppers who are hired seasonally for potential for sale expansion with this product.
harvesting sugar cane. The internationalization process started
The company invests in the local sugarcane with their participation in international
production, use of new technologies, and in exhibitions of food and beverages (such as Anuga,
packaging and labeling processes seeking to in Germany, and Sial, in France), with the help
produce drinks with higher quality and, therefore, of FIERGS (National Federation of Industries)
higher prices. The company is certified by the and APEX. Initially, the sales were held abroad
National Institute of Metrology, Quality, and through contacts made at fairs with representatives
Technology (INMETRO) and is pursuing an of European countries and the United States.
organic production certification as well. As the Currently, in addition to continuing to attract
interviewed manager stated: “We want to offer to potential customers in the fairs, trade negotiations
our clients products that they can taste and verify as are also made through trading companies. The
“cachaças” that can be considered as fine beverages international integration is still negligible (around
for an international standard, without being 5%), but the company’s project is to increase its
intimidated by other good drinks in the world” participation in foreign markets, so that 50% of
(interviewee Casa Bucco). production is sold internationally.
The supply chain is vertically integrated. When asked about the main reasons for
The company controls the beginning of sugar the start of the internationalization process, the
cane production to the final bottling and sales. company says that they saw business opportunities,
The main suppliers provide bottles, corks and mainly due to the fact that the internal market
labels, and any product needed to maintain the leads to a high tax (80%), which is practically
infrastructure of the industrial plant. non-existent in the foreign market. Therefore, it
In the domestic market, the company becomes a form of compensation to operate in
provides cachaça to restaurants, steakhouses and both markets (that’s also why they are looking for
specialties liquor stores, mainly in São Paulo and foreign market expansion). With the inclusion of
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Value Creation from Internationalization of Sugar Cane by-products: a multi-stakeholder view of artisanal cachaça production
products in international markets and because that audits and applies a traceability check from
they have won the national award, the respondent the management of cane fields to the bottling and
asserts that there was also considerable brand the delivery of the final product. Since 2005 they
value spilling over in the domestic market, which are certified by Ecocert2 as organic producers of
constitutes an important opportunity. Good cachaça, following high international standards
economics in Brazil and the attraction of social of quality.
classes A and B1 to added value products is also In a similar way as the first case, the
something to be considered. production chain can be characterized as vertical
The major difficulties in the company’s and the main suppliers are limited to the supply of
value chain refer to the informal sector, which bottles, corks and labels. In the domestic market,
covers companies whose production and the commercialization of the products takes
standardization are not legalized, but compete place in specialized stores, specific supermarkets,
in the market with cheaper products (due steakhouses and selected shops. The company also
to not paying taxes), negatively impacting manufactures “kits” of cachaça and caipirinhas (the
in the market for legitimate businesses. The bottle plus a set of special glasses, for example)
restricted distribution and supply of glass bottles that are used by medium and large companies to
formats were also cited as difficulties. Since the present the product to their customers.
commercial structure of the organized sector sales The product portfolio includes the white
is made primarily with clients at trade shows in cachaça, the cachaças aged in wood barrels of
distant regions, lower volumes of purchases end North American and French oak, and Brazilian
up increasing the product price, reducing its woods, such as Balsam, Amburana and Cabriúva.
competitiveness. There are also spirits and liqueurs
Regarding future challenges, the company International integration began in 2006
.
highlighted that they want to maintain their with the sale of cachaças for caipirinha in the
quality standards while increasing the production, Bermuda Triangle. Later, other markets were
standardizing the process and investing in accessed, such as Canada, USA (primarily
technology and certification (of the organic California), Ireland, Germany and Italy.
production process). These future projects are Contacts with these markets began mainly in
mainly aimed at foreign markets because they are the international fairs of food and beverages.
fundamental to creating value for the company. However, unlike the previous company, they do
not rely on trading companies, but are involved
5.2 Cachaçaria weber hauss in the entire export process, including following
product delivery to final destination.
Located in Vale do Rio dos Sinos, the For the foreign market, the company
region settled by German immigrants, this has created a specific brand, aiming at future
cachaçaria was founded in 1948. It is also a contacts and increasing their participation in
family company that preserved the tradition of these markets. The brand was launched with a
producing cachaça over the generations. Eight series of compounds with Brazilian fruit brandies
people work in the business (mostly from the alongside the football World Cup held in Brazil
family), and 11 hired people are responsible for in 2014.
the sugar cane fields. Regarding the importance of
As in the first cachaçaria, this one is also internationalization, just as the previous company,
located in a tourist area called the Romantic Road. the manager of the second cachaçaria interviewed
It has an annual production of 100 thousand liters stressed the reduction in tax payments as a
of cachaça, which is partly sold and partly stored financial advantage and the value creation linked
for aging. They are also certified by INMETRO, to the brand, with recovery in the domestic and
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Rev. bus. manag., São Paulo, Vol. 17, No. 55, pp. 890-910, Special Edition 2015