Is rum shaking off its party spirit image?

The ultimate party spirit, rum is coming of age, backed by a wave of premiumisation, acquisitions and an enduring global appeal. Chris Mercer reports.

Rum is moving away from a low-cost image, according to Botran’s Frank Quinones

Rum has travelled in many guises, as a mind-altering fortification for soldiers and sailors, as a household name in the pirating fraternity and as a symbol of hedonistic dirge in Hunter S Thompson’s The Rum Diary. These days, its Latino spirit is embodied by television adverts in which bartenders defy gravity with Bacardi bottles.

Such examples demonstrate rum’s enduring appeal and scope. Euromonitor International figures bear this out, projecting a solid, yet un-flamboyant, 17% rise in global rum volumes between 2011 and the end of 2016, to 1.7bn litres. What’s more, every region should contribute to growth.

In the 21st century, however, this historically unruly, good-time liquor is tentatively absorbing a few airs and graces, thanks to acquisitions and premiumisation cues around ageing, authenticity and cocktails.

“There’s a move away from a low-cost image,” says Frank Quinones, global director of Botran Aged Rums. “Three or four years ago, rum was rum. Now people are more knowledgeable about rum. They read about it, they want to improve their rum experience.”

Dark rum’s prestige is rising. In October, Botran exhibited its Solera and Reserva aged rums for the first time at the Tax Free World Exhibition show in Cannes. Launches in Western Europe and duty free in recent years will be followed by debuts in Russia and Czech in 2013. The Guatemala-based brand sells around 100,000 cases annually, but its medium- to long-term ambition is to hit 1m cases. Keep your eyes peeled, too, for a new aged expression in the not-too-distant future.

Guatemala is awash with aged rum. This adds useful context to Diageo’s acquisition of a 50% controlling stake in Guatemala-based Ron Zacapa, a sister brand of Botran. Via the £150m deal, Diageo is both joining, and helping to drive, opportunities in premium aged rum. Zacapa has cemented its place among Diageo’s high-end Reserve Brands after seeing net sales rise by “strong double-digit” percentage points in the firm’s last fiscal year. Europe and the Americas drove sales.

Diageo looks almost certain to delve deeper into premium Guatemalan rum. Zacapa owner Industrias Licoreras de Guatemala (ILG) has a “put” option that allows it to place remaining shares in Zacapa with Diageo in return for a fee “calculated on a profit multiple”. According to Diageo’s 2012 annual report, ILG can activate the clause after 2016.

It’s thought Campari will continue to release new aged expressions of Appleton Estate following its takeover

Continuing the acquisitions thread, the biggest rum deal of 2012 so far is Gruppo Campari’s swoop for Appleton Estate owner Lascelles DeMercado Co Ltd. Jamaica-based Appleton is no stranger to premium, having launched a 50-year-old rum at US$5,000 a bottle earlier in 2012. But aligning this sort of innovation with Campari’s scale could prove transformative for Campari in Latin America’s emerging markets, particularly Mexico, and for rum’s visibility in general.

Diane Edwards, general manager at Appleton distributor J Wray & Nephew UK Ltd, sees a “dawning understanding that aged rum can rival Cognac and whisky for flavour, depth and complexity”. She cites “our successful listings of Appleton Estate 12, 21 and 30 Year Old in Harrods, 8 Year Old in Selfridges, as well as in high-end bars and, increasingly, white tablecloth restaurants”. Anyone for Appleton Estate 12 Year Old with lemon tart or tiramisu?

Edwards is not alone in seeing opportunities for aged rum among whisky and Cognac lovers. “Look at what’s happened in Spain, which is a huge whisky market and has turned out to be the largest dark rum market outside of the US,” says Havana Club International’s marketing director, Yves Schladenhaufen. The Pernod Ricard brand, of course, remains locked out of the US due to the trade embargo on Cuban goods.

Surely, then, rum distillers must be salivating over the fast-growing brown spirits markets of Asia? Indeed, Euromonitor forecasts that rum volumes in Asia will jump by 30% up to the end of 2016, although local brands will continue to dominate. “We have a seeding strategy in some [Asian] markets,” says Schladenhaufen. “It’s only a matter of time.” Marketing cues around authenticity are becoming increasingly important in rum. “Authenticity and heritage is key as consumers are becoming more savvy,” says Edwards.

Official Royal Navy rum Pusser’s is one brand tapping this opportunity. “We’ve got a true story,” says Pusser’s UK brand manager, Peter Thornton, of Cellar Trends. At up to 54% abv, so-called “Nelson’s Blood” is directly related to the rum once served daily aboard the Royal Navy fleet. Admiralty killjoys stopped that tradition in 1970, but Thornton points out that they “still authenticate every batch”.

He focuses on educating select bar staff and consumers across the UK. “We’re never going to be a mainstream rum and we don’t want to be,” says Thornton. Watch out for cannonballs flying between Pusser’s and Lamb’s Navy rum in the near future, particularly over the rights to use the Union flag on labels.

The authenticity trend raises difficult questions about what defines rum. Edwards notes that golden rum in Latin America, the Spanish Caribbean islands and British territories have “a very different flavour profile”. This is good for consumer choice but, as Edwards wisely points out: “There is no consistency in age statements between the islands, so there’s no consistent quality guide or reference point for consumers.”

Botran Reserva Blanca (far left), was launched in October 2012

Some are seeking to address this. “There is a move afoot to register a Geographical Identification for Jamaican rum,” says Edwards. “On a Caribbean level, the authenticity stamp [launched in 2008] is a good idea, but it needs a quality assurance programme, a sustained communications campaign and enforcement to make it meaningful.”

At the local level, Bardinet export manager Estelle Sauvage highlights the distiller’s AOC Martinique rhums agricoles as a direct response to “new growing demand in premium aged rums”. Launched under the Dillon brand, these rums are growing most quickly in Japan and Sweden.

White rum may not have taken centre stage in this feature, but even this volume-driven category is showing premium potential via new launches, and the Mojito is arguably still the world’s favourite cocktail. In Australia, Diageo reports early success for new white rum Bundy5, while Botran has just launched its Reserve Blanca aged white rum. “It’s not the focus of what we do, but it gives bars an option,” says Quinones. “In Europe, white rum still has potential for premiumisation, particularly in the UK, France, Germany and the Nordics,” says Schladenhaufen.

Over at Bacardi, the undisputed king of white rum, a new senior global category director of rums will be looking to inject fresh energy following the firm’s 150th birthday celebrations. Dmitry Ivanov, 36, was most recently MD of Bacardi Russia.

Despite this apparent coming of age, rum has not lost its party mojo. Alongside white rum, spiced rums including Bacardi Oakheart, Sailor Jerry and Morgan’s Spiced have shot to fame with younger consumers. Bardinet is launching Negrita Spiced, including natural vanilla flavour. It will target the UK, US and South Africa, as well as Eastern Europe, using cues such as “sexy, rebellious, charismatic and approachable”, according to Sauvage.

Diageo is also spreading the party vibe with its top rum priority, Captain Morgan. After a three-year marketing push in Eastern Europe, “both Russia and Czech are now top 10 markets for us”, says global brand director Russell Jones. “More recently, we have started getting into Latin America, and the real stand-out performance there comes from Mexico, where Captain Morgan launched four years ago and is already closing in on 200,000 cases,” Jones adds.

Fittingly, talk of Captain Morgan leads us to an unavoidable note on rum politics. The ramifications of the Diageo brand’s switch from Puerto Rico to the US Virgin Islands (USVI) are still playing out. Serralles, which produced the brand under licence in Puerto Rico, has claimed that Diageo breached its contract. Diageo denies this.

There is also continuing unrest around US federal tax breaks – known as “cover-over” payments – given to Puerto Rico and USVI based on sales of the islands’ rum. The scheme is waiting to be renewed by US Congress, although proposed law HR1883 seeks to cap the amount of subsidy that the respective territories can use directly to promote rum.

In the meantime, sb understands that several Caribbean states are still moving towards a direct challenge to the US at World Trade Organization (WTO) level, regarding the use of the Puerto Rico and USVI subsidies for rum producers. In their eyes, this skews the playing field in the world’s largest rum market. There is plenty here for distillers to chew on below deck. Meanwhile, at sea level, a premium wind continues to catch the rum category’s sails.