Captain Morgan spices up US spirits stakes
Diageo's spiced rum brand, Captain Morgan, has made strong gains in the US spirits market but, as David Robertson reports, it has so far been unable to replicate this success in other markets.
For almost as long as anyone can remember Bacardi has been the dominant spirit brand in North America, but Diageo's Captain Morgan is now rapidly closing the gap.
Diageo bought Captain Morgan as part of its acquisition of Seagram in 2000 and opted to make it one of its core "global priority brands", a move that surprised some analysts as the spiced rum is only really popular in the US.
Subsequent attempts to turn Captain Morgan into a global brand have faltered, but it continues to perform very well in America. So much so that internal Diageo forecasts show that Captain Morgan sales could catch Bacardi within 18 months.
Having overtaken Jack Daniels last year to become the fourth best-selling spirit, this February Captain Morgan also overtook Absolut to take third place in the US rankings. Only Bacardi and Smirnoff sell more - although there is confusion as to which brand is currently number one, with Diageo's internal figures suggesting that Smirnoff has overtaken Bacardi for the first time.
In 2004, Captain Morgan's volume sales grew by 12% - the highest growth for any of Diageo's core brands. It is now selling more than 6m 9-litre cases a year.
Stuart Kirby, a Diageo spokesman for Captain Morgan in New York, said: "There is a large gulf between us and Smirnoff and Bacardi at the moment but we have our sights set on Bacardi. If you look at Bacardi's growth rate it has been flat or slightly above flat for years. But Captain Morgan is the most successful growth story in US spirits history, and one of the most successful product launches ever. It is only a matter of time before we catch Bacardi."
Captain Morgan has achieved this success by unashamedly touting itself as America's party drink. It markets heavily during events like the New Orleans' Mardi Gras festival and even put up a Captain Morgan character as a candidate in the US presidential election. Captain Morgan was the "Americans for a Better Party" candidate and he urged (legal drinking age) voters to "party without the politics".
Although there are variations, the Captain Morgan brand has stayed largely true to its original taste: rum blended with tropical spices. Mango and pineapple flavoured Captain Morgan was introduced last year and Diageo is adding Passion Fruit in May.
"It makes logical sense to continue to exploit the flavoured rum segment as it is the fastest growing part of the rum market," Kirby said. "US consumers are much more aware of other fruit profiles so while vodka sticks to apple and watermelon - traditional US fruits - we can go with something more tropical like passion fruit."
Another new innovation to be introduced in May is Captain Morgan Tattoo. Diageo is yet to launch Tattoo officially but Kirby explained that it will be aimed at the popular shot market.
"Our primary drinking group is 21 to 24 year old males," he said. "Our consumer tends to start with a couple of beers and then, when he is ready to get into the party zone, he will drink Captain and cola. When people want to accelerate the party to the next level, we want them to stay in the Captain Morgan brand." Tattoo, a black spiced rum with a stronger taste, is being introduced to fulfil this role.
Diageo is hoping that these new products will help maintain the brand's strong growth. However, while Captain Morgan is performing well in the US, it has a relatively low profile outside that market. More than 90% of sales are in the US and Diageo's efforts to push the brand into other markets have yet to yield results.
In reality, Captain Morgan is a local brand and analysts believe that Diageo will not be able to turn it into a truly global brand without a level of expenditure that would severely test the company. "Captain Morgan is a distant number two in rum," said one leading analyst. "It would require a big investment to get it to a meaningful position outside the US."
So while Captain Morgan sets its sights on Bacardi in America, its rival remains dominant globally. Moreover, as Diageo concentrates its efforts on "global priority brands" like Smirnoff, Johnnie Walker, Guinness and Baileys, if Captain Morgan fails internationally and is recategorised as a "local priority brand", it could seriously impact on the brand's marketing expenditure and product investment in the future.
Another issue that has kept analysts cool on Captain Morgan was the botched attempt to launch a ready-to-drink version. Kirby is candid about the failure of the RTD, Captain Morgan Gold. "It was an arena Captain Morgan felt comfortable in," he said, "but we introduced a product that was not well received. All our research showed that it was not working, so we removed it from market - unlike some others who stayed and continue to lose money. Smirnoff and Bacardi have a unique offering in this area but Captain Morgan Gold was really just Captain plus ginger. Consumers didn't like the taste profile."
One analysts commented: "The failure of the RTD extensions seriously hampered the brand's ability to compete with Bacardi, especially internationally."
The failure of Captain Morgan Gold as well as the brand's very slow rollout to international markets has led a number of analysts to question whether it should still be classified as one of Diageo's global priority brands.
But given its success in North America, Diageo appears comfortable maintaining Captain Morgan within its elite stable of brands. And if Bacardi has to spend more time shoring up its position in the US because of the inroads Captain Morgan has made, perhaps the Captain's party message will find a home in markets that Bacardi has traditionally taken for granted.
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