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Rum enjoys a high level of consumer recognition and awareness |
On one level, rum is a relatively simple product. Easy to produce from an inexpensive and ubiquitous primary raw material, rum is made and consumed widely. Rum therefore enjoys a high level of consumer recognition and awareness. Unlike some of the more esoteric offerings in the drinks market, most consumers would feel they know what rum is.
In fact, that certainty is probably somewhat misplaced. As a new just-drinks/The IWSR report points out, rum is a highly diverse category. This, the report suggests, offers a "rainbow palette" of product possibilities. "Rum is incredibly diverse, both in terms of geography and style. It can be made with relative ease all over the world, and lends itself to every style from unaged and mixable to oak-matured and suitable for sipping and high-end cocktails."
However, in detailing the progress of the rum market and looking ahead to the coming five years, the report points to challenging times ahead for the sector.
While the category registered a compound annual growth rate (CAGR) of 0.6% between 2010 and 2015, global rum sales fell in 2015 by 0.8% to 141.8m nine-litre cases, with nine of the top 20 markets and four of the top five registering declines. The report forecasts a compound annual decline of -0.5% between 2016 and 2021, equating to almost 3.7m cases. Rum's top three markets – India, the US and the Philippines – are all expected to record declines, while only two of rum's ten largest markets – Cuba and the Dominican Republic – are set to grow over the coming five years.
The question is the extent to which the diffuse nature of the sector exacerbates the challenges or offers potential to place the category on a stronger footing.
In many markets, rum has a relatively low image and is viewed as a commodity product. However, while the segment profile for rum is not necessarily as attractive as some other categories, the report states, the category has several major advantages, above all its versatility. "The liquid itself is diverse, coming in white, dark, aged and flavoured variations."
The report continues: "Rum's diversity and versatility are both a weakness and a strength. Its different styles create multiple points of consumer appeal, but its chameleon nature can make it hard for consumers to understand its true identity."
The geographical diversity of rum represents a particular challenge and a potential source of consumer confusion. Rules vary wildly on how much sugar can be added, minimum maturation periods and the precise definition of age statements. According to the report, "this lack of transparency is out of step with current consumer trends, and in particular the desire on the part of a younger Millennial audience to know as much as possible about how, and where products are made".
The report goes on to posit that while stricter regulation of the industry might be one way of addressing these inconsistencies, rum's very diversity makes agreement and enforcement on new codes "all but impossible", which leaves individual countries or regions to create and communicate their own rules.
One undoubted benefit of rum's diversity is that the sector can advance simultaneously on a number of fronts. "Rum can be clear and cocktail-friendly, or mellow, aged and complex like a fine Scotch whisky or Cognac, opening up a range of possibilities for growth," the report states.
Owing to its mixability, rum has the opportunity to expand as the cocktail culture develops. Meanwhile, in complete contrast, rum's aged varieties fit well in the "discernment space" typically occupied by Scotch whisky or Cognac.
Added to this, rum enjoys favourable consumer associations with the tropics, particularly the Caribbean. "It also offers a provenance similar to that of Scotch whisky as different producing regions or islands have different styles. Rum should theoretically be a marketer's dream."
So far, however, the sector has failed to transform some of these positive factors into significant progress, not least with regard to premiumisation. With so many points of difference related to age, style and provenance, premiumisation opportunities should abound. But, in reality, rum is considerably behind other spirits sectors in terms of premiumisation, according to the report, though it notes that the super- and ultra-premium rum categories are "expanding at a healthy rate".
Super-premium rum only accounts for 0.3% of the total category, compared with 1.8% for vodka, 3.1% for brandy (including Cognac) and 5.2% for Scotch whisky.
Moreover, the report suggests that rum "seems to be held back, not exhibiting the same pace of innovation that has characterised other categories". Particularly worrying has been the performance in the US market over the last five years. Rum sales saw a - 0.9% CAGR from 2010 to 2015 during a period of growth in the US spirits market.
The report concludes that brand owners keen to pursue a rum premiumisation strategy must "carve out a distinctive identity for their products", one that significantly distances them from rival high-end spirits categories such as Scotch whisky and Cognac. In this context, rum's success over the coming years may well depend on the ability of brand owners to capitalise on the inherent versatility in the category.
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