Golden age is in full flow
As rum begins to fulfil its early promise on the global stage, it's the aged premiums that are leading the way, as Dave Broom reports
27 August, 2008
Drinks analysts looking at the rum category have for years shaken their heads sorrowfully as rum never quite achieved its potential. "Always the bridesmaid, never the bride" would be an accurate summation - until now.
In the decade from 1996-2006, rum sales increased in volume by 3.5 per cent, according to IWSR statistics, outperforming the overall spirits market at 2 per cent. This rise has accelerated in the past two years, with rum up by 5 per cent, again faster than the overall spirits market. Specifically this growth is coming from the premium (aged) sector which is showing double-digit growth. To use one brand as an example: in 1993, Havana Club sold 400,000 cases. Last year sales topped 2.8 million 9-litre cases and Pernod-Ricard has set a target of 5 million by 2013.
"What you are seeing is white rum in decline in many markets while premium aged rums are growing in the UK, Italy, Spain, Germany, US and Canada," says Peter Martin, regional manager, Europe, for Jamaica's J Wray & Nephew. "Spain, for example, was 70 per cent white, 30 per cent dark a decade ago. Now those figures have been reversed. In any market where Bacardi has declined, premium aged rums are growing."
What is behind this switch? "Aged rum has done it because white cannot," says Martin. "White is fighting vodka on price and has become another white spirit. We are putting rum elements into the mix and creating something new with a new generation."
At Angostura, marketing manager Brian Woods sees it as part of a general upward trend among consumers. "The age of connoisseurship has arrived for rums - a trend we have only seen previously in Scotch and Cognac," he says. "There's a lot of innovation just now and with the introduction of premium aged rums, consumers are more knowledgeable about rum and are demanding challenging aged rums for both sipping and mixing.
"For consumers hitting their late 20s and early 30s there has been nowhere for them to go. They don't want to be seen to be drinking what they were 10 years ago. Scotch is still a bit challenging, but rum - and especially aged rum - fulfils their emotional needs as well as their functional requirements."
What was the tipping point? "A combination of things," says Marc Beuve-Mery, managing director of Havana Club International. "There is an overall global trend to premium, but rum was late into this. Even now, less than 25 per cent of sales are premium, which is considerably lower than Scotch. Therefore, there is potential. There is no reason not to be premium. In fact, consumers think rum should be more premium than vodka."
It's a thought but there have been years of false starts. A belief that Bacardi's dominance could never be challenged and negative associations with old-style, dark navy rum meant rum as a category had begun to believe its own negative hype. Aged rums existed but there seemed the same sense of weariness felt by whisky markete rs in the UK, or (until recently) their colleagues in gin. Rum may be good, but people wouldn't try it. It was a niche and would remain so.
Winning hearts and minds
Maybe it just needed outside influences to change the mindset. "I think consumers are embracing the appeal of relaxed Latin values in today's hectic world," says Jonathan Welch, who looks after Nicaraguan brand Flor de Caña in Europe. "Lack of personal time, desire for discovery and shared indulgence are driving our consumer choices - kicking back with a Caribbean rum hits all those buttons, and unlike malt whisky, you don't feel as if you're bound by rules of engagement with the category."
Mindset, driven conceivably by increased tourism, may have played its part, but maybe rum simply needed investment. "I think a lot of credit should also be given to Havana Club, wh ich w as probably the first rum brand to develop and invest in the premium rum category," says Andreas Redlefsen at Elements Eight. "It is this, plus increased investments from other rum companies, specifically in the aged/gold sector, which has helped aged rum to come into its own."
It has done so at the expense of other spirits, most noticeably blended Scotch in Spain, while it is making inroads against brandy in Mexico and pisco in Chile. "Aged rums are offering consumers an alternative," says Redlefsen. "Aged white rums are giving vodka drinkers the ability to switch. Gold rums offer bourbon and whisky drinkers an alternative as well."
There is a bullish confidence at work within the rum category. "I think malt whisky is in danger of disappearing up its own retort in its quest for differentiation between distilleries," says Welch. "There are only so many cask styles and finishes consumers are willing to try before they are pigeonholed as obsessives. There is definitely a trade-out momentum within brown spirits from whisky to rum."
Sense of identity
Rum is clearly making a significant jump from "product" to "brand". "I saw the same phenomenon with tequila," says Havana Club's Beuve-Mery. "There were no brands at first and then you got companies, both big and small, trying to be consistent with the product, selling at a consistent price with a consistent image and the sales message was clearer for the consumer."
This has necessitated a change in thinking ,
as Martin outlines. "We were guilty of being the marketing arm of the Jamaican tourist board, whereas the key is in the brand," he says.
"We used to bring in rums for the Jamaican community, but to entice people we had to have something credible so we started promoting the estate, which gave credibility. We don't want to be a Jamaican rum called Appleton, but a rum called Appleton which comes from Jamaica." It is a subtle shift that does not mean brand owners are turning their backs on heritage as part of the marketing mix.
"Our heritage means more than geographic origin," says Richard Seale, whose family owns the Foursquare distillery in Barbados. "We can actually show how the heritage is reflected in the style of the rum. Pot still is a big part of our style because, being relatively poor, our industry came late to the continuous still. Contrast that with rums from Puerto Rico where the pot was abandoned. Contrast the role of heritage in our rums with Morgan or Malibu."
This emphasis on roots is also being explored by Havana Club. "It's for good reason I am based in Havana," says Beuve-Mery. "It might not be the easiest place to do business, but it is vital for understanding the brand. We believe in authenticity."
But Redlefsen was wary of overplaying the heritage card. "I believe that heritage is important, but that it is often over emphasi sed. It does signify experience and denotes a certain 'quality' aspect . However, it can easily be invented and isn't the be-all and end-all of a brand. A brand with no heritage can be just as successful - look at Grey Goose."
Spreading the message
The fact remains that premium aged rum has global reach. How, though, do firms promote their brands to very different markets? "Our strategy varies in terms of the brand variants," says Angostura's Brian Woods. "The UK is much more a white and gold rum market than Spain, where añejo and gran añejo variants are more important. Our portfolio approach therefore varies from market to market."
The situation is similar for Havana Club. "In a mature market such as Spain we lead with 7 Year Old," says Beuve-Mery. "In addition, we compete against different brands in different markets. In Germany we fight against Bacardi; in Italy it is Pampero; Spain it is Cacique, Barcelo and Brugal; in Mexico it is Appleton and Bacardi; in Canada it is Appleton."
Appleton, on the other hand, is sticking to a strategy that has seen it establish its V/X brand in top-end bars globally and then slowly seed it into the off-trade. For Martin, education remains key. "Until we started, no one had been on a rum course. Now everyone is doing something like it."
This proactive work in an increasingly influential global on-trade doesn't cover up the fact that many of the opinion-forming rum brands are owned by small producers. Can they compete long term with the big boys?
Martin says: "Interestingly, the big players are playing catch-up, and it's not that easy. Diageo doesn't seem to have decided what its rum strategy is, Bacardi is suffering and isn't playing in premium, while Pernod-Ricard is playing the discount card. You can't invent a rum. Bartenders want credibility and heritage." [Both Bacardi and Diageo declined to participate in this feature.]
"It is almost impossible for us to develop a strategy against the major players because a realistic strategy needs major funds," says Seale. "We believe we have a good story and the challenge is to communicate the story. The key difference when we communicate is that we tell the story of rum. We educate and inform. Hype, by contrast, needs a sustained bombardment at all levels and the majors have the resources to hype their brands, but education is the best weapon against the hype."
So is distribution. The smaller firms are at the mercy of needing to build an often fragmented selection of agents - it is noticeable that Angostura acquired its own distribution network before it started to build its brands.
Goodwill is one thing, ensuring the brand is available globally is quite another. Beuve-Mery predict s that in a few years there will be a couple of strong international brands, while others will be local. With E50 million being invested in a new distillery and ageing facilities in Havana you can see what Pernod-Ricard thinks one of these majors will be.
It might be finally walking up the aisle in the white dress, but you get the feeling that the rum story is far from over.
----=== Mature beyond its years? ===Does rum age faster in tropical conditions or just differently?
l Joy Spence, master blender, Appleton Estate, Jamaica: "Rums aged in the tropics [35°C/95°F) age three times as fast as those aged in cool climates [4°C/40°F]. The reason for this is that during the day the rise in temperature in the warehouse causes the rum to expand. The higher the temperature, the greater the expansion of the rum , the further into the pores of the wood it moves.
"At night as the temperature falls, the rum contracts, and as it contracts and moves back into the cavity of the barrel it pulls extracts out of the wood. In temperate climates the rum does not expand very much because of the cooler temperature, so the movement is very small. As a result, it takes up to three times as long for rum aged in a cooler climate to acquire the characteristics of a rum aged in the tropics."
l Richard Seale, master distiller, Foursquare, Barbados: "The simple answer is yes it ages faster, though some of the 'benefits' of the higher temperatures in the Caribbean have been offset by using a higher filling strength than found in malt whisky or Cognac. This also leads to a perception that the rum ages differently rather than simply
"In the Caribbean the temperature is very consistent and this influences the process as well. The perception of the extraction also varies by the style of rum being aged. So, higher temperature makes for a faster result, but this is complicated by different strengths, temperature variations and different rum styles which can give the perception of ageing differently."
l Jonathan Welch, Flor de Caña, Nicaragua: "Faster and differently, depending on the liquid components, the still used, the barrel size and type, the maturation location and time. Flor de Caña is aged on the more temperate Pacific coast of Nicaragua, so the velocity of maturation and thereby the necessity to control it, is lower than in the Caribbean islands. This shines through in our [single aged] 12 Year Old and 18 Year Old variants."
l Andreas Redlefsen, Elements Eight: "I believe that tropical ageing increases the speed at which the spirit matures, however there are so many other factors that play into this: whether the climate is dry or humid, the size of the barrel and how many times it has previously been filled. Looking at the evaporation rate of rums in the Caribbean I often wonder how much liquid would actually remain in the barrel after 21-25 years of ageing. I believe that age is over-emphasized. It is not a sign of quality but of style."
l Brian Woods, Angostura: "Yes, rum ages faster in tropical climates. We have been able to conduct experiments on ageing in both tropical and temperate climates and have found that chemical changes taking place during ageing which contribute to the flavour characteristics of aged rum are accelerated with the temperature and humidity conditions in tropical conditions."