Edrington writes down value of Brugal rum

Edrington, owner of The Macallan Scotch whisky, has been forced to write down the value of its Brugal rum brand once again due to “extreme difficulties” in its key markets.

Edrignton has been forced to write down the value of its Brugal rum brand once again

Announcing its full year financial results for 2014/15 to 31 March, Edrington said Brugal rum had encountered “tough economic and competitive conditions” in Spain and the Dominican Republic, causing it to lose volume year-on-year.

The group said Brugal’s forecasted growth expectation has been “revised downwards”, resulting in a write down of the value of the brand to £239 million.

“Brugal’s leading markets in the Dominican Republic and Spain were significantly affected by the global recession,” said Suzy Smith, brand director for Brugal.

“Edrington has responded with a strategy of driving brand equity in core markets to position Brugal for the recovery, as well as building the brand in selected high-growth markets where the company has a strong distribution capability.

“Brugal continues to be the leading rum in the Dominican Republic and Spain, where we now see a return to growth. Brugal is also growing in the US and Asia Pacific, regions that are home to the world’s fastest growing premium spirits markets.”

This marks the second year running that Edrington has revised the value of Brugal rum, reporting another “exceptional charge” of £274.8m in its 2013/14 full-year results.

Ian Curle, CEO of Edrington, said rejuvenating the Brugal rum brand will be a “key focus” for the group.

Nevertheless, Edrington has reported a brand turnover increase of 1.8%, with revenues hitting £671.1m, while underlying earnings before interest & tax (EBIT) and pre-exceptionals grew 4.6% to £181m – excluding the write-down.

Success in distribution ambition

The group has attributed its “strong year” to the success of its recently launched wholly owned distribution arms in the Americas, South East Asia and the Middle East, as well the opening of its own global travel retail unit based in Singapore.

The Macallan Scotch whisky grew turnover by 10.5% and now occupies “market leading positions” in Russia, China, Japan, South Korea and Hong Kong, and is now the second best-selling single malt Scotch whisky in the US.

Highland Park delivered double-digit growth , while The Famous Grouse increased volume and marketshare in its key UK market. Cutty Sark also reported a successful year in its key Spanish market.

Edrington also revealed it spent almost £26m on casks in the year, suggesting it plans to continue investing heavily in the Scotch whisky sector – which has been hit by in decline in exports over the past two years.

The group revealed plans to build a new £100m distillery for The Macallan in November 2013, mothballing its existing site.

“Edrington enjoyed a good year in which we saw the benefits of controlling our distribution in the key spirits markets of the US and South East Asia and continued strong demand for our premium spirits,” said CEO Curle.

“Our whisky portfolio performed ahead of the market and this shows the strength of our brands, which are well placed to benefit further from continuing trends towards premium spirits.”
At the same time as announcing its financial results, Edrington unvield its strategy for 2020.