Why did Brown-Forman buy Diplomático?

01 December, 2022

The timing of the acquisition is perfect, as the premium sector continues to gather pace. Oli Dodd reports.

In October, news broke that American drinks giant Brown-Forman was set to purchase Diplomático Rum and the brand’s related assets from Spain’s Destillers United Group for an undisclosed fee purported to be $775m by the US Securities & Exchange Commission.

It marks the first move into the rum category by the owner of Jack Daniel’s, Woodford Reserve, and El Jimador and, while that fact may come as some surprise, with the premium-and-above rum category never being in better health, the timing doesn’t.

According to the IWSR, global premium-and-above rum volumes rose by a compound annual growth rate of 8% between 2014 and 2019, outpaced slightly by value, which rose by 9% over the same period.

Post a strong Covid recovery, that growth is expected to continue, volumes are forecast to climb by 6% CAGR and values by 6.5% CAGR between 2021 and 2026.

“We continue to see strong performance across all of our markets,” says Edouard Beaslay, global marketing director for Diplomático Rum.

“The increased interest in premium and super-premium rums with authentic heritage and provenance has helped to establish the growth trend, along with more rum-focused concepts and programmes in the on-trade and it’s the premium [rum] category that is growing the most.”

Rum is a global business but it’s Brown-Forman’s home market of the US that is seeing the greatest concentration of premium-plus rum consumption and it’s still growing. According to the IWSR, the American market has seen volumes increase by 2% between 2014 and 2019 but that growth is set to accelerate, growing by a forecasted CAGR of 7% between 2021 and 2026.

It makes sense then for a US market leader to bring Diplomático into its portfolio, but outside of the US, demand is still strong. Havana Club, a brand not available within the US, has nonetheless enjoyed a surge in popularity.

“It’s clear that rum is diversifying and attracting a growing number of consumers, evident in our record-breaking sales, 4.6 million nine-litre cases in FY22, and 20% year-on-year growth driven by double-digit growth in core markets and increased exports to emerging markets,” says Anne Martin, global marketing director for Havana Club.

“We are currently witnessing a surge in the demand for premium rum in our key markets –such as the UK, France, Germany, Italy and Spain – and we’re not expecting this to slow down yet.”

Conquering marketability

It appears premium rum has managed to crack the problem often levied against it in the past – its marketability.

While Scotch is Scotch and Cognac is Cognac, premium rum can be found in any number of styles, as Jose Luis Hermoso, research director at IWSR, notes: “The lack of a clear geographical indicator makes rum both more flexible and simultaneously harder to market than single malt.”

But it could be that very point that is now working in the category’s favour.

“What makes this category so interesting and appealing to an increasingly large number of consumers is its richness and diversity,” says Beaslay.





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