Slow going: rum eyes growth in travel retail
Rum’s growth in the travel retail sector is not exactly quick, but there are signs that interest is speeding up.
*This feature was originally published in the December 2024 issue of The Spirits Business magazine.
With rum’s share of total spirits in travel retail at just 7% by volume, the category has some way to go in this crucial channel. It “still mostly consists of standard-priced rum”, like Captain Morgan and Captain Morgan Spiced Gold, says Nicolas Wyckaert, head of marketing Tequila and premium core, who is part of Diageo’s global travel team. “However, due to the premiumisation trend of recent years, we have seen more premium price segments growing at a fast pace.”
As much as 76% of rum volumes are in the ‘standard and below’ tier, according to IWSR senior insights manager for global travel retail (GTR) Charlotte Reid. However, the premium-plus category (retailing at more than US$59.10 a litre) grew by a compound annual growth rate (CAGR) of 5% from 2018-2023, compared with a 2% drop for total rum.
Quoting more IWSR data, Nick Mogford, vice-president director GTR Brown-Forman, says the super-premium-and-above category “is projected to grow at a CAGR of around 8% between 2024 and 2028, ahead of total rum”. Within this relatively small category, the company’s Venezuelan brand, Diplomático, was in second place as of 2023.
Retailers are keen to embrace brands with high cash margins, and there’s a corresponding willingness from travellers to trade up. “Consumers in airports exhibit a unique mindset,” says Marco Cavagnera, managing director of GTR at Campari Group, who believes “the perception of duty-free shopping as a tax-free, value-driven experience further encourages trading up”. Other factors he mentions include the opportunities for gifting, having access to travel retail exclusives, and being in vacation mode and “more open to premium options”.
“Premiumisation and experiential shopping are two major trends in GTR, with consumers increasingly seeking high-quality rums for sipping, not just mixing,” says Mogford. The premium-plus category is almost entirely dark rum, and skewed towards the US and Europe, which account for 86% of sales by value.
Cavagnera says: “The premiumisation journey is well under way for the dark rum category in travel retail. Enhanced packaging, compelling brand storytelling, and immersive in-store tasting experiences further elevate dark rum’s status as a luxury choice, aligning it with other premium spirits, like whisky and Cognac.”
Sophie Cookson, CEO and founder of Craft & Culture – a Dubai-based incubator for liquor brands, sees great potential in the Middle East and India, where last year total travel retail grew by a third. Representing Tidal Rum in the region, she says: “Duty-free operators are aware the category is small and is never going to out-compete whisky, but they are still open to innovation in rum. I have seen a lot of interest in dark rum, particularly when there is a strong story, whether that be related to the production process or through corporate social responsibility initiatives. This is where craft and artisan brands can have a point of difference versus big-box brands.”
Tidal Rum talks up its rare botanicals, foraged at low tide, its age statement, and the fact it gives back to marine conservation. While Cookson accepts that rum can be hard to navigate and trade up in, she feels there’s an opportunity to do so in travel retail.
She says: “It’s the perfect channel to do this in, since they provide large amounts of space to build brands, with brand ambassadors on the shop floor to educate, compared with domestic, where the shopping experience is sometimes compromised.”
For Nicaraguan rum Flor de Caña, “travel retail gives us the possibility to showcase our novelties and most exclusive SKUs in stores with interactive and experiential activations”, says GTR manager Rodrigo Bazan. Like Cookson, he believes “consumers are increasingly looking for brands with a story, with purpose, and that can demonstrate responsible practices towards employees, the community, and the environment”. He adds: “Next year we are preparing to launch an exclusive ultra-luxury vintage edition of Flor de Caña to celebrate our 135th anniversary.”
Rae Gibson, brand director premium and super-premium spirits at Pernod Ricard GTR, lists a number of other key trends, including “more brand awareness among consumers”, “smaller basket sizes because of premiumisation” and “more value-conscious consumers”. With the latter in mind, Malibu is launching an exclusive bottling for Royal Caribbean cruises, while for Havana Club has developed a new Icónica range.
But it is Sovereign Brands’ Bumbu rum, which Pernod Ricard distributes and has a significant stake in, that thrills her the most.
“Bumbu is a relatively new brand that is exploding in many new regions in GTR,” she says. “Some of the most exciting launches we have done are with Bumbu in the Americas, in airports and on cruises.” She claims it is the world’s fastest-growing super-premium rum, allowing Pernod to capture share in the category.
Gibson says: “Dark rum has not fully rebounded to pre-pandemic levels and showed a decline [in 2023] versus 2022”, while flavoured spiced rum managed to increase its share of value from 6% in 2019 to 9% in 2023. By then, in the top 15 markets for rum, only the Caribbean, Germany, Spain and Australia were trailing below their 2019 levels.
Category growth
With a dominant 26.4% share of travel retail rum, and growth of 19% from 2019 to 2023, Bacardi GTR declares it is “strategically placed to lead the premiumisation and growth of the rum category”. The company’s share of premium-plus rums is slightly lower at 14.5%, and here its portfolio includes Santa Teresa 1796 from Venezuela, Caribbean island blend Pyrat Rums, and Facundo, which is “curated from the private rum reserves of the Bacardi family”.
Bacardi GTR concedes it can be a “complex category to navigate”, and that “the numerous terms used to describe different rum styles, production techniques and the lack of international regulations around ageing and labelling can be hard to decipher”. In response, in October 2023, the company launched Rum Tales, a major activation in Miami airport. It featured an interactive lifestyle quiz called ‘Rum Selector’, an omnichannel ad campaign, and an immersive sound-and-sense experience, sampling and a photo opportunity. A second Rum Tales followed at Frankfurt airport last December, and more activations are planned.
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