Market Structure as a Vehicle for its Plasticity: an Introduction to the International Cachaça Market from the Perspective of the Industrial Organization Paradigm

Abstract

Objective: The objective of this study was to present how market structure serves as a vehicle for market plasticity. To achieve this objective, the example of the international cachaça market was used.   Theoretical Framework: To understand the structure, we utilized the theory of the Industrial Organizations paradigm. This paradigm specifically considers three areas of concentration for its study efforts: the firm, the markets, and the industries.   Method: Using secondary data provided by the English beverage magazine Millionaires, a quantitative study of the distilled beverages market, and more specifically the Brazilian cachaça market, was developed. For the empirical study of the market, measures used included the Concentration Ratio (Cr), the Herfindahl-Hirschman Index (HHI), and the Theil Coefficient (ET).   Results and Discussion: In the direct competition of the international distilled beverages market, the cachaça industry stands out with 55.71% of the total market. In terms of concentration in the international distilled beverages market, the concentration ratio (Cr) of the four largest companies was 59.76%, indicating a moderately competitive market. The HHI (Herfindahl-Hirschman Index) was 928.99, which suggests a competitive market according to the standards of the U.S. Department of Justice. The Theil Coefficient (T) was 0.92, indicating a low concentration market.   Research Implications: Supported by the Structure-Conduct-Performance approach, Industrial Organization enabled the identification of some dynamics of the cachaça market in this study. Finally, we believe we have contributed to the understanding of the structure of the international cachaça market and some of the influences of this structure on market plasticity.   Originality/Value: As presented in this study, the market structure denotes the potential to reshape the market, promoting responses to the actions of its players.