Drinkers paid up for pricier versions of Scotch, bourbon and tequila during the pandemic. Rum makers say it is their turn.
THE WALL STREET JOURNAL // APRIL 9, 2022
Yo, ho, ho and a bottle of limited edition, oak cask-aged rum with notes of butterscotch. The liquor of choice for fictional 18th-century pirates and college students seeking sugary cocktails on spring break is trying to go upmarket.
Bacardi Ltd., Rémy Cointreau SA and Davide Campari-Milano NV have rolled out a growing array of pricey, cask-aged rums with sophisticated tasting notes, meant to be sniffed, swirled and sipped neat. They hope to benefit from drinkers’ willingness to pay up for pricier booze, which accelerated during the pandemic and boosted sales of Scotch, bourbon and tequila.
A recent rise in demand is stoking optimism among rum makers. U.S. rum volumes grew at their fastest rate for a decade in 2020, the most recent year for which data was available. They rose 2.2% from the year earlier, according to alcoholic-drinks industry tracker IWSR, as drinkers made more cocktails such as mojitos and daiquiris at home.
It is not yet clear if high-priced rum will grab a hold of America’s palate. Previous efforts to nudge the drink upmarket have fallen flat. Rum makers will have to overcome the liquor’s image as a cheap, occasional vacation drink as well as health concerns some have about sugar. Rum is typically made from molasses.
Ned Duggan, global senior vice president of Bacardi rum, said he draws inspiration from tequila, which was “once known for margaritas and shots” and now is “seen as much more credible and respectable.” Bacardi’s strategy is to convince younger drinkers to start enjoying rum in ready-to-drink cocktails and eventually gravitate to more expensive varieties. It is the final spirit yet to benefit from the trend toward premium liquor, Mr. Duggan said.
“People have given rum a second look,” he said. “We’re seeing that change now.”
Rum comes from molasses that is refined from sugar cane juice. To create the alcohol, distillers add yeast and water to the molasses and then heat and condense the liquid in stills. The liquor first gained popularity in America in the 17th and 18th centuries, mostly coming in on ships from the Caribbean, according to Wayne Curtis, author of “And a Bottle of Rum: A History of the New World in Ten Cocktails.”
Pirates sometimes raided these ships, a connection that author Robert Louis Stevenson would later popularize. In the book “Treasure Island,” which was set in the 1700s, Mr. Stevenson described a pirates’ song that included the chorus “fifteen men on the dead man’s chest, yo-ho-ho and a bottle of rum.”
The consumption of rum declined in the wake of the American Revolution after molasses became harder to import and, amid a wave of nationalism, Americans increasingly favored beer and whiskey. It picked up again during Prohibition, smuggled in through Florida from Jamaica and Cuba. “When it came back it was much spiffier, a gentleman’s drink,” said Mr. Curtis. “Before that sailors and fishermen drank rum.”
In more recent decades, rum became a cheap drinkers’ favorite that was often mixed with a strong flavor such as Coca-Cola or stirred into a daiquiri. It was affordable because rum was one of the least expensive spirits to distill. It didn’t have to be aged in a particular way, could be produced almost anywhere, and it was easy to add coloring and flavoring to mask imperfections.
But starting in 2007, rum sales started to stagnate and for years remained roughly flat while vodka, tequila and whiskey attracted more drinkers. The industry sold more than 22 million cases of rum in the U.S. during 2020, according to IWSR, the most since 2017. Yet rum still is No. 4 as measured by sales volume behind vodka, whiskey and tequila.
The largest U.S. rum brand by volume is Bacardi, which has dabbled in upscale rum before. In 1996, it launched a version of the brand aged for eight years. Last August, it launched a limited-edition variant of its Bacardi Reserva Ocho rum aged in oak barrels for eight to 12 years and finished in sherry casks. Bacardi said the drink, intended to be sipped neat, has notes of caramel, vanilla and orange, with hints of walnuts and almonds.
A bottle sells for $29.99, compared with $12.99 for Bacardi Superior. Since 2019, Bacardi has also been selling a $100 bottle of rum aged for a minimum of 16 years in American white oak barrels at duty free shops in Asia and North America.
Campari is also counting on dark, aged rum to buoy growth. The premium-plus rum category, regarded as bottles priced above $22.50, is set to grow almost 10% globally in the next three to five years, estimates Chief Marketing Officer Julka Villa.
Campari last year began selling a limited-edition, 37-year-old single marque rum costing 1,000 euros a bottle, equivalent to about $1,100, and another 18-year-old version at 220 euros a bottle under its Appleton Estate brand.
To lure whiskey connoisseurs the brand has invited Scotch collectors and whiskey club members to rum tasting sessions. It says Appleton Estate can be used to make cocktails like Manhattans and Old Fashioneds, and that aging rum in Jamaica’s tropical climate gives its eight-year old liquor the same depth of flavor as a 24-year-old Scotch.
Mount Gay, which claims to be the world’s oldest rum brand, is also targeting whiskey drinkers.
The brand, owned by Rémy Cointreau, last year began selling a twice-distilled pot still rum, aged for 14 years in ex-Bourbon casks and finished for 11 months in virgin Andean oak casks. Mount Gay says the limited-edition rum, priced at $195 a bottle, should be drunk neat to appreciate its subtle vanilla aromas and spicy, smoky notes.
The Barbados-based brand, which makes most of its sales from bottles costing less than $20, says one challenge is to overhaul rum’s reputation.
“When a student is getting a huge hangover with a frozen daiquiri or whatever…the challenge for us is changing the perception of rum and show that there is refinement, expertise and complexity of taste,” said Raphael Grisoni, Mount Gay’s managing director. Last fall the brand set up tasting tables at a major whiskey industry event in Paris to talk up its rum to Scotch and bourbon aficionados.
Some executives say rum has struggled to move upmarket because of a hodgepodge of different country-specific regulations, which result in varying quality. Unlike Scotch whisky, which has an active trade association that fastidiously polices the category, rum can be made anywhere and has no such single body.
Vaughn Renwick, chief executive of the West Indies Rum & Spirits Producers’ Association, which represents small rum makers, said big brands aren’t doing enough to capitalize on growing consumer interest in upmarket liquor.
“We’ve been talking about the decade of rum for the last two decades,” he said. “Standard rum’s time has come and gone.”
Diageo PLC’s Captain Morgan, which vies for the position of America’s largest rum brand with Bacardi, has focused on attracting people who drink beer and local liquor brands rather than launching more premium lines. It has been sponsoring the National Football League and Major League Soccer.
Chief Executive Ivan Menezes recently indicated he doesn’t believe the company can influence consumer preferences for rum.
Diageo in February reported an 11% decline in Captain Morgan’s North American volumes for the second half of last year, though the company says recent data shows the brand’s U.S. market share is improving.
Diageo did make a past attempt to market premium rum, launching Oronoco. In 2010, it discontinued the upscale rum brand after five years. It now owns a 50% stake in Zacapa, a small pricey Guatemalan rum whose North America sales, according to Diageo, grew double digits in the second half of last year.
Pernod Ricard SA’s Malibu is also not looking to push upscale. Johan Radojewski, Malibu’s vice president of marketing, attributes its recent growth–sales rose 9% in the second half of 2021—to the brand’s versatility, with many consumers not considering it a rum at all.
“I like to see Malibu as a flavored spirit, gaining volume from flavored vodka, gin, rum, but also hard seltzers,” he said.
Even before the pandemic, the brand was growing at around 5%, said Mr. Radojewski. Sales of full-strength rum have been buoyed by flavors like watermelon and strawberry, while Malibu canned malt beverages that come in flavors such as lime and pineapple have also sold well, he added.
Pernod is nonetheless hedging its bets by raising its exposure to higher-end rum. Last year it bought a majority stake in Colombian brand La Hechicera. The rum is aged for between five and 25 years in bourbon barrels, and costs between $45 and $65 per bottle.
Despite the industry’s efforts, some rum watchers still say the drink’s best days may be behind it.
“Every year someone tells me this is going to be rum’s year but it never is,” said Mr. Curtis, the author. “If I had 50 cents every time someone told me that I could retire now.”
Write to Saabira Chaudhuri at firstname.lastname@example.org