Rum makers looking to push premium brands
Bengaluru: Indian makers of rum are finding it tough to upgrade customers to premium categories of the liquor that’s been long celebrated as the sailor’s drink.
For India’s tipplers, the drink of choice is whisky, which offers a range of brands from mass-market to super-premium, affording consumers the option of moving up to more aspirational brands.
Brandy is a distant No. 2 in terms of consumption, and rum is a poor third. Unlike whisky, more than 90% of India’s rum is mass market while the rest is premium, with little in between. This means buyers baulk at the wide gap and tend to stick to their inexpensive favourites. But therein lies an opportunity, and rum makers are latching on to it.
“In the whisky category, over the years, the industry has launched several brands to provide a clear premiumization journey for consumers,” said Subroto Geed, senior vice-president of marketing at United Spirits Ltd, India’s largest alcohol maker, owned by Diageo Plc. “However, rum has not evolved in this manner. Diageo India is looking at leading the premiumization journey in rum with the launch of Captain Morgan Original Rum,” Geed said in an email. This is a variant of the Captain Morgan Spiced Rum that the company has been selling for some time.
Upgrading consumers from cheaper mass-market brands to premium brands with better margins is critical for spirits makers struggling to expand sales in a weak market. In the last four years, rum sales have been particularly disappointing, with volumes falling 6.1% on a compound annual growth rate (CAGR) basis.
Rum volumes are expected to grow only by 0.3% CAGR over the next five years, according to research firm Euromonitor International. Liquor companies are hoping their efforts to expand the category will change this.
“Rum in India is a (roughly) 41 million case category; 92% of it is low priced. These consumers are actively seeking to upgrade to better tasting, better looking products. Here’s where Bacardi Black, a semi-premium product offering, fits perfectly,” Vijay Subramaniam, managing director of Bacardi Ltd for India and southeast Asia, said in an email.
Focusing on rum is also a way for firms to extend their portfolio premiumization efforts beyond whisky. That need to diversify is spurred by a slowdown in whisky sales. Whisky volume growth has slowed from 5.04% in 2013 on a year-on-year basis to 2.87% in 2016, Euromonitor data showed.
Sales of Bacardi Black have more than quadrupled between 2014 and 2016 from 55,000 cases to over 250,000, the firm said, citing International Wine and Spirits Research (IWSR) data. Most Bacardi rums in India are premium—from its white and flavoured varieties to dark and gold rums. While the firm plans to premiumize and super-premiumize rum, it expects Bacardi Black to help customers upgrade to its higher-end products.
USL-Diageo already commands a significant market share in the mass segment with its McDowell’s No. 1 Celebration rum (16.24 million cases in 2016 according to IWSR) that has outstripped iconic economy brands like Mohan Meakin Pvt. Ltd’s Old Monk and Khoday India Ltd’s Khodays XXX and Hercules by leagues. The firm’s Captain Morgan Original Rum, launched around eight months ago, will now provide it with a presence in the semi-premium dark segment too.
Home-grown Amrut Distilleries Pvt. Ltd too has spotted the opportunity. A year-and-a-half ago, the single-malt maker launched the Two Indies rum. Sales of Two Indies have grown by at least 25-30% since then, says executive director Rakshit Jagdale. John Distilleries Pvt. Ltd, also known for its single-malt whiskies, is in the early stages of developing a premium rum.
Still, premiumization will take time, according to executives at liquor firms, since it has traditionally been a price-sensitive category. And the more premium rum gets in terms of pricing, the more it will be pitted against whiskies—by far the largest spirits category in India with volumes of 1,585 million litres in 2016 versus 378.5 million litres for rum, according to Euromonitor.