Bacardi Wagers That Rum Will Be the Next Liquor to Go Upscale

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(Bloomberg) -- Premium tequila, gin and bourbon has spurred alcohol industry growth. Now Bacardi Ltd. says it’s rum’s turn.

Bacardi is introducing two new premium rum products and relaunching an existing brand to push the category in a fancier direction. Across the market, pricier varieties make up only 15 percent of rum sales, according to the company. Driving that number up to 25 percent is worth $550 million to the industry.

In the premium space, Bacardi already has Grey Goose vodka and Dewar’s scotch. Those cater to a group of consumers who consistently spend upwards of $20 for a bottle of booze, regardless of the drink type. That’s missing for rum, according to Ned Duggan, vice president and brand managing director of Bacardi rum.

“About a third of those premium-spirits consumers do drink rum, but they trade down when they do,” he said. “What this shows us is that as a category, we’ve been leaving a lot of business on the table.”

Total rum volumes in the U.S. have declined 3.6 percent over the past four years. While super-premium lines made up just 2.2 percent of volume in 2017, they jumped 34 percent in that four-year period, according to the Distilled Spirits Council, a trade group.

Rum could follow the path of tequila, which has been on a growth spurt for more than a decade, Duggan said. Fifteen years ago, most tequila drinkers imbibed standard lines, with few trading up to more expensive varieties. Today, 58 percent of tequila sold is at a premium price point or higher, he said. High-end tequila volumes in the U.S. more than quadrupled between 2002 and 2017, and super premium volume grew ninefold, according to the council.

‘Similar Opportunity’

“We look at tequila and what’s happened there and see a very similar opportunity for rum,” Duggan said.

Bacardi stepped up its tequila holdings when it announced in January it was buying Patron Spirits International AG in a deal valuing the company at $5.1 billion. Its new premium rums are Añejo Cuatro, aged at least four years, and Gran Reserva Diez, aged at least 10 years. Bacardi will also offer a revamped Reserva Ocho, and all the spirits will reach U.S. store shelves in the next 45 days.

Bacardi, which is based in Bermuda, wants to see rum join the cocktail renaissance.

“We’ve seen classic cocktails come back into favor in a huge way, and rum as a category has kind of sat on the sidelines while that has happened,” Duggan said. The strategy moving forward is “really a combination of the cocktail culture and rum cocktails as well as neat and sipping consumption.”

©2018 Bloomberg L.P.

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