Cyrodiilic Brandy is required as an offering in the Shrine of Sanguine.
You may purchase it at The Gilded Carafe and The Main Ingredient, in the Imperial City Market District. In Skingrad, across from the store All Things Alchemical there is a house of a rich man. Upstairs in his bedroom is a bottle of the brandy. There are three bottles in the Odiil Farm on the way from Weye to Chorrol. It can also be found when looting dremora in some Oblivion Gates, but this is rare. You can also find a bottle in Cloud Ruler Temple. There is also a bottle on the second story of Rythe Lythandas's House in Cheydinhal.
Cyrodiilic Brandy is also featured in The Elder Scrolls III: Morrowind. There it is a quite expensive drink, imported from Cyrodiil, with its own bottle design. In The Elder Scrolls IV: Oblivion, it is found in normal pink potion flasks, making it harder to recognize.