Research in Focus - Rum Set to Benefit from its Versatility
The many facets of rum reflect a versatility that looks set to keep an already growing category moving in the right direction, according to a new report from just-drinks and The IWSR.
If a key strength for a spirit in today's market is versatility, then rum would appear to have a considerable amount going for it. Indeed, a new report from just-drinks and The IWSR makes this the primary reason for its positive prognosis for the rum category, pointing to multi-stranded growth opportunities.
"The real strength of rum is its diversity," the report states. In addition to the comparatively undeveloped position of rum in a number of regions where it is already achieving "high rates of growth", the report cites other factors which point to continued growth for the category.
Among the key trends favouring growth in rum is the boom in flavoured spirits. Arguably, this trend plays to a longstanding strength in the rum category. The leading spiced rum is a brand that has already established an enviable position as an international spirit, namely Captain Morgan. Backed by multinational brandowner Diageo, Captain Morgan surpassed global sales of 10m cases in 2012. Captain Morgan is now the number three best-selling spirit in the US.
"The increasing general interest in flavours across all spirits categories has greatly benefited the flavoured and spiced rum market, opening up the category to a wider audience and drawing in a large number of new consumers," the report states. Underlining the growth potential in flavoured rums, Diageo is targeting sales of 20m cases by 2020.
The general interest in flavoured spirits has increased consumer awareness of flavoured rums and fuelled growth in the rum sector. "The popularity of spiced and flavoured rums is soaring, successfully attracting new consumers to the category and strengthening the market," the report continues.
The report also cites rum's suitability to be drunk with Coca-Cola as another "key driver" for growth in the category. Leading brands, such as Bacardi and Captain Morgan, are widely ordered with Coke.
As Captain Morgan global brand director Russell Jones explains: "The reason that Captain Morgan is working on a global basis is just the simplicity. We do broadly similar things in different markets and young guys the world over seem attracted to the Captain Morgan icon. The suitability of mixing spiced rum with Coca-Cola is probably the major driver. The reality is that about one in six drinks worldwide are consumed with Coca-Cola."
Rum's cultural links with Coca-Cola go back to the earliest days of the iconic soft drink. The Cuba Libre, a mix of rum and Coca-Cola with lime, is one of the most popular cocktails throughout the world and dates back to the Cuban War of Independence, or the Spanish-American War, which brought American soldiers to Cuba at the end of the nineteenth century, and who in turn brought Coca-Cola to the island. 'Rum and Coca-Cola' was later even immortalised in the hit song of the same name by the Andrews Sisters in 1945.
In fact, cocktail usage in general is having a positive impact on the rum category across a range of markets according to the report. "As a sugar-based product, rum is readily mixable and the Caribbean is widely associated with cocktails such as the mojito and piña colada."
Moreover, bartenders are no longer just using low-priced or standard white rums for cocktails but are increasingly using aged and premium rums, which speaks to another key growth factor for the rum category, premiumisation.
That the rum sector has so much potential for premiumisation is partly due to the fact that the sector is rather late to the premium party. "In much of the world rum only really began premiumising to any great extent over the past decade and its premium-and-above tiers are still relatively underdeveloped," the report states.
This is underlined by some key IWSR statistics. For instance, volumes of premium-and-above qualities reached around 4.8m cases in 2011, compared with premium-and-above vodka sales of 24m cases and premium-and-above whisk(e)y volumes of 46.8m cases. At the super-premium-and-above level the contrast is even more marked. Total super-premium-and-above rum sales totalled just 423,000 cases, compared with 7.6m for vodka and 5m for whisk(e)y.
The lack of a strong premiumisation trend in rum comes down in part to the original structure of the rum industry. Rum traditionally had a fragmented production base dominated by Caribbean, Central or South American producers. Essentially local, regional or national in scope, few of these had the ambition or financial muscle to develop internationally. For a long time, Bacardi was the only truly global rum brand but today there is a substantial participation in the rum category from multinationals which are more than interested in exploiting its premium potential.
"These companies are attracted by the growing consumer groundswell and premiumisation potential of the category," the IWSR report states. "The multinationals are bringing much-needed investment, brand-building expertise and distribution clout to the category."
The "quality gap" between rum and other prestige categories, such as Scotch and Cognac, is now "closing" as a result, the report suggests. In particular, the premiumisation process is moving fast in the Caribbean and Latin America. "Premiumisation is strong across the Caribbean and Latin America, with volumes of super-premium brands growing at a much faster rate than at the lower price points."
However, the premiumisation journey for rum carries some challenges that Scotch whisky and Cognac have not had to cope with. In particular, the question of ageing in rum is "highly contentious", the report points out. There are no uniform standards and different producers and countries have diverse controls and regulations, a far cry from the highly developed structures in Cognac and Scotland.
In addition, rum tends to age faster than other spirits because of the warmer temperatures in the Caribbean and Latin America. This brings investment advantages, IWSR states, but also means an age statement is less likely to offer the kind of marketing value it would for a Scotch whisky or Cognac.
Global market review of rum – forecasts to 2017
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