Bacardi bets on premium rum
Bacardi, Ltd., is banking on being able to make rum upscale and is launching two new premium products and reintroducing another one, according to Bloomberg.
The spirits industry has seen positive growth in recent years from premium brands of tequila, gin and bourbon, and Bacardi execs say it’s time for rum to join in.
Out of all rum brands sold in the U.S., premium varieties only make up about 15% of total sales. If more upscale positioning can push that up to 25%, Bacardi says it could mean $550 million for the spirits industry.
While Bacardi hopes premium rum will be the next big thing in the spirits market, there are already plenty of premium rum brands out there — Cruzan, Papa's Pilar, Plantation XO and Brugal among them. Also, Constellation Brands recently bought a minority stake in barrel-aged The Real McCoy rum.
According to Nielsen data reported in The Spirits Business, in the 12 months before July 2017, ultra-premium rum sales in the U.S. jumped 15.8%.The U.S. rum market posted the third-highest sales volume in the industry in 2016, just behind vodka and whiskey, according to the most recent data from Statista.
Some of this growth is coming from millennials, whose interest in vintage cocktails and premium sipping liquors have increased retail sales of whiskey, tequila, bourbon and gin. A 2016 survey found that millennials are more interested in drinking alcohol than baby boomers or Gen Xers. They also like to experiment more with different brands and types of alcohol, researchers say.
Bacardi will soon be introducing two new premium rums — Añejo Cuatro, aged at least four years, and Gran Reserva Diez, aged at least 10 years. It is also introducing a new version of its premium aged Reserva Ocho. These new products are scheduled to hit the market sometime in May.
The challenge is convincing consumers who pay $20 or more for a bottle of rum to shell out more for a premium variety. It may be difficult to accomplish that with a medium-grade bottle of Bacardi, but it could be a different story for longer-aged products with greater sipping potential.
"About a third of those premium-spirits consumers do drink rum, but they trade down when they do," Ned Duggan, Bacardi rum's vice president and brand managing director, told Bloomberg. "What this shows us is that as a category, we’ve been leaving a lot of business on the table."
It's been difficult for rum — traditionally produced in Caribbean nations and a main ingredient in breezy cocktails — to find the classifications and sophistication as other beverages. However, new investments and enthusiasm for the sugarcane spirit at other distilleries could boost the premium category, making Bacardi's move timely and wise.