Smiley culture

Until recently, rum meant Bacardi.  But not any more, says Dave Broom. Today, this Caribbean category is blossoming into a diverse, quality-driven success story.  And it makes us smile, too

OF ALL the spirits categories, rum has been the slowest to build a premium sector, but there’s evidence that it now has some momentum.  Rum is now the No.  2 global spirits category and the growth for the past five years has come from aged products and the strong performance of the spiced category (dominated by Captain Morgan).

In the UK, Nielsen stats for Jan/Feb 04 reveal that gold rum is the fastestgrowing spirits category in the UK (up 16%) and is now worth £47m.  "It is now stealing market share from dark rum in the off-trade," says John Cameron, brand manager for Mount Gay at Maxxium.

Appleton, Havana Club, Mount Gay and Bacardi’s two entrants (Oro and 8 year-old) are all putting on significant growth in the UK.

Pampero and Havana Club are booming in Italy, while Appleton, Cruzan, Bacardi and Matusalem are all putting in good numbers in North America.  The question is, why now? There are many answers: the trend to premium, the rise of bar culture, fear of terrorism, mass tourism, and a wider restructuring of the industry influenced by cultural and global politics have all played their part.

"Spirits culture has returned," says Gabriel Faria, executive manager, marketing at Angostura. "You have TV shows such as Sex and the City regularly featuring sophisticated drinks – and doing so prominently.

It’s cool again to be seen with a cocktail.  There is a return to elegance and sophistication on the part of consumers." Rum, he adds, has a certain level of mystique.  Maybe it is good to be last on the bandwagon.

"The resurgence of cocktails has helped," agrees Fraser McGuire, senior trade marketing manager at Bacardi.  "Bars, which are at the cutting edge of drink trends, can now offer their customers a wide and sophisticated choice of brands.

This, in turn, is helping the consumer to understand the usage of different rums."  Behind this lies something very simple – but potent. "Rum makes people smile," says Peter Martin, European director for Appleton.

"Cognac has a deeply conservative image, Scotch has a dour image, but rum is made in the part of the world which is all about enjoying life, and with increased tourism people are seeing rum in a new light. It is no longer a generic white product or something drunk by salty sea-dogs."

With Americans preferring to take cruises to the Caribbean rather than flying to Europe and the the increasing influence of black (Caribbean) culture on music and fashion, rum is on a roll.

"We’re riding the wave," says Martin.  "Those aspirational drinkers need a product with aspirational skews.  We’re in the fortunate position of being Jamaican when Jamaica is fashionable."

As McGuire points out, bartenders are turning to premium rum for its versatility.  "Vodka has been the default youth spirit," he says.  "Until recently many people had a very dated opinion of rum, not considering it to be as versatile, or as credible.

Since the launch of the Welcome to the Latin Quarter campaign, attitudes towards Bacardi have shifted and it is now a core part of the drinking repertoire of 18-35 year-olds, and sales are at a 10 year high."

There’s more to this growth than just versatility, feels Ken Coates, sales director for Demerara Distillers, which owns the el Dorado brand. He argues that rum can also appeal to connoisseurs in the same way as malt whisky or Cognac.

Could rum be the new malt whisky? It has heritage, a range of different styles, and brands such as Appleton and el Dorado can trade consumers up through a range with different age statements and flavour profiles.  It’s an approach taken by Bristol Spirits whose Classic Rum brand offers a selection of single estate and single still rums. 

"We’re following a malt whisky lead," says John Barrett at the firm, "and building on all the work which has been done in creating spirits connoisseurs around the world. Rather than just converting people to rum, we’re talking to people who are already spirits enthusiasts."

Though Coates and Cameron agree with the malt analogy, Martin and Faria see similarities with other categories: Faria with vodka, while Martin sees similarities with bourbon.

"Malt has tried, but never reached this younger market of 23-33 year-old professionals. I’d say Appleton is much closer to Jack Daniel’s in consumer profile and also in terms of heritage. Bourbon is our competitive set, not malt."

 Rum is a broad church – and therein lies its success.  While premium rum has tapped into a general attitudinal shift in consumer behaviour, its growth has been organic rather than marketing led.

The feeling is that the category is at a crossroads.  "Trends come and go," says Coates, "but we believe that the rum category has a foothold in the market.  More questions are being asked about the manufacturing process, the origins and how to distinguish between quality levels.  It’s not just about Bacardi anymore."

This presents challenges to producers: a general need for education and greater penetration into the off-trade.  "The challenge for us as marketeers is to now make the leap from niche to brand," says Adriaan Eksteen brand manager for Havana Club. 

Once we have the bars on board, the challenge is to get people drinking at home.  You need some sort of volume before any brand becomes consumer-led and Havana Club is now at that point.

So far, the effort has been in seeding the brand and building distribution. You get reasonable organic growth via this – but we now need to get the right message mix to take the brand forward."

Why though has it taken rum so long to reach this point? "It simply wasn’t effectively promoted in the past," says Barrett. "What was rum? It was oldfashioned.  We owe Bacardi a great debt for keeping the rum flag flying."

Martin puts the blame squarely at the door of the drinks multinationals: "Allied, Diageo, Seagram … they all had their chance to develop this sector and they all walked away and developed other products.

Now the trend is towards premium and the Caribbean and suddenly they don’t have the brands."  Diageo has in Pampero but, other than in Italy, it has preferred to concentrate its efforts on the spiced sector.

It is noticeable that, bar Bacardi and Havana Club (a joint venture between the Cuban government and Pernod-Ricard), the running in premium rum has been made by smaller firms.

"The industry in the Caribbean has been dominated by distilling of bulk, base product, which is fine if you are making Malibu or a young rum," says Barrett.  "Now the challenge is to establish brands, think long-term and invest in stock."

It is also noticeable that today’s premium sector, however, is controlled by rums which have been bottled at source and not by "international" brands.  It points to a significant structural shift in the rum industry, partly stimulated by the ending of trade subsidies between the EU and Caricom countries, though a £70m EU fund has been created to help a restructuring of the industry.

Rum had to grow up fast – and that meant building brands.  As Faria points out, rum producers didn’t just need to establish their own brands globally, they also needed to develop them

As McGuire points out, bartenders are turning to premium rum for its versatility.  "Vodka has been the default youth spirit," he says.  "Until recently many people had a very dated opinion of rum, not considering it to be as versatile, or as credible.

Since the launch of the Welcome to the Latin Quarter campaign, attitudes towards Bacardi have shifted and it is now a core part of the drinking repertoire of 18-35 year-olds, and sales are at a 10 year high."

There’s more to this growth than just versatility, feels Ken Coates, sales director for Demerara Distillers, which owns the el Dorado brand. He argues that rum can also appeal to connoisseurs in the same way as malt whisky or Cognac.

Could rum be the new malt whisky? It has heritage, a range of different styles, and brands such as Appleton and el Dorado can trade consumers up through a range with different age statements and flavour profiles.  It’s an approach taken by Bristol Spirits whose Classic Rum brand offers a selection of single estate and single still rums. 

"We’re following a malt whisky lead," says John Barrett at the firm, "and building on all the work which has been done in creating spirits connoisseurs around the world. Rather than just converting people to rum, we’re talking to people who are already spirits enthusiasts."

Though Coates and Cameron agree with the malt analogy, Martin and Faria see similarities with other categories: Faria with vodka, while Martin sees similarities with bourbon.

"Malt has tried, but never reached this younger market of 23-33 year-old professionals. I’d say Appleton is much closer to Jack Daniel’s in consumer profile and also in terms of heritage. Bourbon is our competitive set, not malt."

 Rum is a broad church – and therein lies its success.  While premium rum has tapped into a general attitudinal shift in consumer behaviour, its growth has been organic rather than marketing led.

The feeling is that the category is at a crossroads.  "Trends come and go," says Coates, "but we believe that the rum category has a foothold in the market.  More questions are being asked about the manufacturing process, the origins and how to distinguish between quality levels.  It’s not just about Bacardi anymore."

This presents challenges to producers: a general need for education and greater penetration into the off-trade.  "The challenge for us as marketeers is to now make the leap from niche to brand," says Adriaan Eksteen brand manager for Havana Club. 

Once we have the bars on board, the challenge is to get people drinking at home.  You need some sort of volume before any brand becomes consumer-led and Havana Club is now at that point.

So far, the effort has been in seeding the brand and building distribution. You get reasonable organic growth via this – but we now need to get the right message mix to take the brand forward."

Why though has it taken rum so long to reach this point? "It simply wasn’t effectively promoted in the past," says Barrett. "What was rum? It was oldfashioned.  We owe Bacardi a great debt for keeping the rum flag flying."

Martin puts the blame squarely at the door of the drinks multinationals: "Allied, Diageo, Seagram … they all had their chance to develop this sector and they all walked away and developed other products.

Now the trend is towards premium and the Caribbean and suddenly they don’t have the brands."  Diageo has in Pampero but, other than in Italy, it has preferred to concentrate its efforts on the spiced sector.

It is noticeable that, bar Bacardi and Havana Club (a joint venture between the Cuban government and Pernod-Ricard), the running in premium rum has been made by smaller firms.

"The industry in the Caribbean has been dominated by distilling of bulk, base product, which is fine if you are making Malibu or a young rum," says Barrett.  "Now the challenge is to establish brands, think long-term and invest in stock."

It is also noticeable that today’s premium sector, however, is controlled by rums which have been bottled at source and not by "international" brands.  It points to a significant structural shift in the rum industry, partly stimulated by the ending of trade subsidies between the EU and Caricom countries, though a £70m EU fund has been created to help a restructuring of the industry.

Rum had to grow up fast – and that meant building brands.  As Faria points out, rum producers didn’t just need to establish their own brands globally, they also needed to develop them domestically to combat the growth ofblended Scotch.

"There’s a new vigour within the supply circle as a result of diplomatic negotiations between the Caribbean and Europe," says Coates, "and new money will definitely help the smaller brands, but we won’t see the benefit until the end of 2005.  Then we can judge the impact of legislative effects."

If premium rum is to succeed it now needs to start establishing global brands.  As it stands, it is the firms who had a long-term strategy of laying down stock (Appleton, Mount Gay, Bacardi, Havana Club, el Dorado) who are best placed in the short- and medium-term as far as stocks are concerned, though Mount Gay might struggle in terms of production capacity.

The second issue is distribution. Angostura/CL Brands, though growing aggressively, still has to build a global distribution network; Mount Gay is better placed with Maxxium; Appleton has links with Brown-Forman, while Havana Club has Pernod, and Bacardi is Bacardi.

Where does this leave firms such as Demerara? "Smaller brands can offer consistency of aged rums," argues Coates.  "Also, smaller distributors can build on their brands on the back of the domination of the market by the major distributors.

Distribution can be bought at a price and, though the big brands will always be able to wield the power, consumer trends cannot usually be stopped. It’s the smaller brands’ goal to produce quality, desirable products, and look to innovation as a way of differentiating themselves."

You could argue it also leaves them exposed to multinationals sleepily waking up to the new realities of the rum business.  There’s one other factor which needs to be minded if premium rum is to have legs.

"It would be lazy to think this trend is just driven by the fashionability of the Caribbean," warns Martin.  "The trend is to quality – the Caribbean image is useful, but you always have to back that up with premium quality."