Spotlight - Movers and shakers target rum category
Recent deals by both Diageo and Edrington underline the growth potential major spirits companies see in the premium rum market. Jessica Harvey examines the latest moves in the context of a growing and vibrant international spirits category.
As the consumer thirst for rum grows, more and more drinks companies are getting in on the action, with recent deals by both Edrington and Diageo only serving to confirm the interest the category is generating.
Whether shaken into cocktails, or poured as a straight-sipping beverage, the premium dark rum category's versatility is being championed by bartenders across the world. The spirit continues to broaden its consumer reach by appealing to a broad range of drinkers, while its growing appeal - and the fact that in some markets consumers are switching from Scotch to rum - is being recognised by leading drinks companies.
Pernod Ricard has been investing in the rum category for some time, and Bacardi clearly has a strong vested interest in the expansion of the sector. And with other companies, most crucially Diageo, jumping on the sugarcane bandwagon, the prospects for further growth are extremely positive.
Among recent activity, Diageo's entry into the market is clearly a critical development. The company signed a three-year global distribution and joint marketing deal for Zacapa rum with Industrias Licoreras de Guatemala this month.
Diageo described the Zacapa deal as an "enormous opportunity", founded on the luxury rum category's global potential for further growth. Zacapa will join Diageo's Reserve Collection, being marketed alongside super-premium brands such as Johnnie Walker Blue Label and Buchanan's Red Seal. Certainly, this is not the last we have heard about the Zacapa investment.
At the same time, the drinks giant has passed over the UK sales, distribution and marketing for its Myers Jamaican dark rum to independent drinks force Global Brands. Global says it sees this as a chance to throw a more concentrated focus on the smaller rum brand, which, until now, has had to play second fiddle to Captain Morgan within Diageo's wider portfolio.
In terms of target markets, both Diageo and Pernod's joint venture with the Cuban government, Havana Club International (HCI), have noted that the Mexican, German and Chilean markets have seen fruitful growth, while travel retail still holds much potential for offering rum to the captive consumer.
At the beginning of the year, the Distilled Spirits Council of the United States (DISCUS) said that super-premium spirits have grown by 11.3% in volume and US$397m in value, with rum among the categories leading the US market in revenue growth.
HCI has also reported rising sales with annual volumes recently topping 3m cases, a rise of 15% over the past year. The increase, which keeps it on target for its goal of 5m cases by 2013, has left the company confident that it will comfortably meet its aim, perhaps even sooner than the suggested deadline.
HCI director general Marc Beuve-Mery said last week that "in certain countries, consumers have been frustrated for years" and now want to try "any kind of fashionable or great product". Beuve-Mery added that in the case of tough markets, the issues presented are never the same.
Beuve-Mery explained that an example can be seen in the Spanish market, which can be challenging due to the sheer number of dark rums on offer and the pressures of battling against competitors. The fact that consumers are switching from whisky to rum has attracted many companies into the category.
Mexico, although a lucrative market, has also been described as a tough playing-field, due to the heavyweight dominance of companies such as Bacardi. Also, in a country where whisky is still very fashionable, there is less of the fluid transition between whisky and rum being seen in other markets.
Edrington Group's recent acquisition of a majority shareholding in Brugal suggests the company feels the growth opportunities for rum complement those for its Scotch whisky brands. Branching out for the first time into a new sector is big news for a company that is known for its whisky offerings alone.
Edrington says the move is part of a planned corporate expansion, stemming from the "exciting" prospects that the dark rum category has to offer. "There are great synergies for growth between the two alcoholic beverages," an Edrington spokesperson adds.
While Bacardi is better known for its namesake white rum, it is also putting considerable effort behind its Bacardi 8 aged rum, suggesting that it too has recognised the potential on offer in the premium dark rum category.
Recent deals by both Diageo and Edrington underline the growth potential major spirits companies see in the premium rum market. Jessica Harvey examines the latest moves in the context of a growing and...
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