In the spirits business, premiumization is the name of the game. While the trend has lifted once-moribund categories like Tequila and Bourbon, one spirit that has yet to move upmarket is rum. But after years of high hopes, the category might finally be on the brink. “Consumers are dabbling in aged spirits and thus are starting to rediscover other sides of rum—specifically aged rum,” says Christine Moll, category director for rum at Campari America.
Ned Duggan, vice president and brand managing director for Bacardi rum, also sees growth potential for higher-end brands. “For the last 10 to 12 years, people have been talking about rum being a category that will premiumize, and we’re slowly seeing that start to happen,” he says. Duggan points to some “breakout players” in other categories—ultra-premium brands that redefined pricing strategies within the sector—as drivers of premiumization. But rum hasn’t seen this phenomenon yet. “It’s the last large category that hasn’t premiumized,” he says. “We see this as a matter of time, and we’re seeing the first green shoots of it happening.”
Not everybody sees it the same way. “Rum is more for consumers who seek an everyday kind of product,” says Hannah Venhoff, senior brand manager for rums at Heaven Hill Brands. At Texas retail chain Pinkie’s, there is “little or no premiumization going on,” says president Austin Keith. Noting that consumers are well-versed in the heritage, production techniques and additional aspects of other spirits, Keith says that’s not the case with rum. “Rum is humdrum,” he says. “The producers need to educate consumers about the quality attributes of different rums.”
BevMo is showing different results, with higher percentage growth coming from the above-premium price sector, according to Brian Bowden, senior vice president and general merchandise manager of spirits, beer, beverages and more. “Brands like Mount Gay, Appleton Estate, Papa’s Pilar and Zaya are starting to take share away from some of the more established rum brands in the market,” Bowden says. “Consumers are trending up from the other brands to more premium and luxury brands that are enjoyed straight, on the rocks, or maybe with a splash of soda or tonic.”
Venezuelan brand Diplomático is among the more serious rum players targeting the upscale consumer. The brand, handled by Domaine Select Wine Estates, launched two new labels earlier this year: Mantuano ($24 a 750-ml.), a 40-percent abv blend aged up to eight years and aimed at cocktail occasions, and Planas ($29), a white rum aged up to six years and filtered to remove color. The rums, currently available only in select markets, are part of the brand’s new Tradition Range, which also includes the flagship Reserva Exclusiva.
On the domestic front, Bayou, a Louisiana craft rum brand, is also looking to take the rum category further upscale. The line includes Bayou Select ($35.99 a 750-ml.), Bayou Silver ($24.99), Bayou Spiced ($23.99) and Bayou Satsuma ($24.99), a rum liqueur flavored with satsuma juice. First unveiled in 2013, Bayou is produced by craft player Louisiana Spirits, based in Lacassine, Louisiana. In late 2015, Louisiana Spirits formed a marketing partnership with Stoli Group USA, and that move has dramatically expanded its distribution. “We boosted distribution from just a few markets up to 24 states in the last year, and we want to take the brand national this year,” says Stoli Group USA president and CEO Patrick Piana. “We aim to establish Bayou as the leading American rum.”
The mixed predictions on rum’s direction come against a backdrop of flat category volume. Depletions of rum in the U.S. market were flat at 22.8 million nine-liter cases in 2016, according to Impact Databank. That’s lower than the volume achieved in 2010, illustrating the long-term challenges facing the category. “I wish I could say the whole category is vibrant, but the unfortunate reality is that it’s not,” says Daniel Clarke, brand director for Malibu at Pernod Ricard USA. “As a total category, it’s flat if not declining in some parts, particularly for unflavored rums.”
No.-3 brand Malibu, a coconut-flavored rum with an array of flavored line extensions, bucked the trend in 2016 with a 2.4-percent increase to just under 2 million cases, according to Impact Databank. Bacardi, by far the category leader with 31-percent U.S. market share, has struggled over the past decade against the onslaught of competition and fell 1.4 percent to just under 7 million cases in 2016. The brand consists of the standard white rum, along with various flavors and some dark rum labels.
Second-ranked Captain Morgan Spiced rum advanced 2.8 percent to 5.52 million cases last year. Linda Bethea, vice president of marketing for Captain Morgan at Diageo, says much of the category’s growth over the past several years can be attributed to the spiced segment, but she also acknowledges the intense competition. “Captain Morgan continues to face competition from flavored whiskies and other spiced rums,” she says.
The success of those flavored whiskies gives some marketers hope that millennials will soon turn their attention to aged rums. Amy Bidwell, senior brand manager for Flor de Caña rum at William Grant & Sons, notes an uptick in demand and some crossover. “The interest is likely coming from consumers who’ve been drinking brown spirits, specifically Bourbon,” Bidwell says. Josh Hayes, senior brand manager for Sailor Jerry at William Grant & Sons, also sees parallels with whiskey. “What’s popular right now are things with a bit of sweetness to them like Bourbon,” he says, suggesting that trend paves the way for exploration into rum.
Classics and Tiki
Americans are sipping rum, but most consumption is in mixed drinks or cocktails. The standard Rum and Coke is still massively popular, typically made with white or spiced rum, but other drinks are gaining traction too. “There are two main cocktail trends,” says Moll of Campari America. “One is the tiki movement, which is prevalent now in all major cities.” Moll notes that the original Mai Tai recipe was made with J. Wray & Nephew 17-year-old rum. “We no longer carry that SKU, but the closest to the original is Appleton Estate 12-year-old,” she explains. Moll also points to rum’s use in classic cocktails. “Bartenders are replacing Bourbon and playing with rums in classic cocktails like the Manhattan and the Old Fashioned,” she adds. “We’re starting to see more Daiquiris on menus as well.”
Tiki has made inroads over the past few years, mainly in warm weather climates and cities where the beach is nearby. “There’s an idea that tiki will become a formidable trend some day,” notes William Grant’s Hayes. “We’re still not there yet, but there’s much more momentum on that topic than I’ve seen in a while. Every major city now has several top-notch cocktail bars that are destination level. Some of those—maybe one or two in each city, if not more—are tiki-themed destination accounts.”
Michele Willard, beverage director at URBN Restaurant Group in San Diego, uses rum in a variety of cocktails, both classic and tiki. Willard, who says rum is a “huge deal” for her but less so for her customers, notes that interest is increasing. “When someone comes in just looking for a refreshing drink, I’ll most likely suggest a Daiquiri or Daiquiri variation,” she says. San Diego is a big tiki town, and is also home to other destination tiki bars like False Idol, co-owned by tiki maven Martin Cate and local hospitality operator CH Projects.
Kat Gordon, head bartender at the two-location Crave Fishbar in New York City, is also keen on Daiquiris. “I love making a traditional Daiquiri—just rum, lime juice and simple syrup—because it’s really light and refreshing,” Gordon says. “I tell people who want to explore rum to try that.”
But specialty cocktails are what drive most consumers into the rum category at Crave. One popular rum cocktail is the Black Smoke Monster ($14), Gordon’s spin on the Dark & Stormy. The cocktail is made with The Kraken Spiced rum, Sombra mezcal, lime juice and house-made smoky ginger syrup.
Extensions And Flavors
With demand for rum essentially flat and many leading brands in the doldrums, there’s an ongoing stream of new products designed to spark enthusiasm among consumers. Captain Morgan has pursued the shot strategy, developing Captain Morgan Cannon Blast, the seasonal Jack-O’Blast and its newest entrant, the coconut-enhanced LocoNut.
“Both Captain Morgan Cannon Blast and Jack-O’Blast were developed for adults in the 21-to-24 age range who are looking for a good tasting and quality flavored rum to enjoy as a shot,” Bethea says. “We expect to see similar results for LocoNut.”
Other brands continue to launch flavors, although with more restraint than in the past. At press time, Bacardi was preparing the rollout of a banana-flavored line extension. Duggan says the company still sees flavors as a way to bring more consumers into the category and the brand. “The flavor craze has died down,” he concedes. “We want to ensure that the flavors we launch make sense for the Bacardi brand. A Banana Daiquiri is a cocktail that consumers have been enjoying for years, so we see that as a great opportunity for this flavor. But we’re not putting the same level of pressure on our flavor launches to meet growth needs.”
Flavored line extensions will be “consolidated down to a core set” for Malibu, according to Clarke. “Consumers have shown us very clearly that there’s a definite preference for some flavors over others,” he says. Malibu plans to prioritize its Pineapple, Tropical Banana, Mango and Passion Fruit extensions, with another flavor planned for launch in the next 12 to 18 months. Heaven Hill is also going the tropical route with an Admiral Nelson Pineapple line extension slated to debut in May, according to Venhoff. She says flavor launches remain important because “the younger millennial consumers are looking for something new. They want variety.”
Some retailers aren’t so sure. “Our interest in flavored rums is low, as they have trended down over the last two years,” says Tom Jacob of Wichita’s Jacob Liquor Exchange. “I believe the customer interest is also low.” At BevMo, Bowden notes that the retail chain isn’t taking all comers. “With the exception of tried-and-true flavors like spiced, lemon, banana and coconut, we are being very selective on which flavored rums we will add to our current selection,” he explains.
Even as they’re pushing flavors to attract new consumers, some marketers see whisk(e)y drinkers as prime targets. They say the key to future growth is tapping into the millennial exploration that continues to occur within dark spirits, particularly whiskies. That trend goes hand-in-hand with rum’s premiumization, which some are convinced is finally beginning to happen.
Moll, for example, says Appleton Estate rum offers the same history and heritage credentials that whiskies have successfully capitalized on in recent years, along with the “fun and uniqueness that Jamaican rum brings to consumers.” Bidwell of William Grant says Flor de Caña has seen a bump in volume from its Centenario line, which features rums aged up to 12, 18 and 25 years. “People are starting to explore other brown spirits,” she says. “We’re very optimistic that high-end rum is the next new wave of the brown spirits explosion.”