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Spirit producers eye spiced rum market potential

To track the growth of spiced rum you only need look at the flurry of new players falling over themselves to enter the marketplace. Rewind to the noughties and you would have seen just one or two brands on the shelf, brands considered revolutionary and exciting for sailing into uncharted waters.

Nowadays the category is awash with high-profile launches from established brands like Bacardi’s Oakheart, as well as soft, low budget entrances from smaller players in domestic markets spotting the chance to succeed in a burgeoning category. As one of the newest categories in the spirits market, spiced rum is also one of the fastest growing, adding 13% volume over a five-year period to 2011 (IWSR). But much of this volume change has occurred in the past 12 months or so (9% during 2010), for several reasons.

In 2010 Sailor Jerry, which had been on the US market for 10 years and the UK for eight, famously altered its flavour profile. Its British product was a sweeter spiced rum than its US counterpart and, after taste tests, owner William Grant & Sons moved to align the brand globally by swapping the UK version.

The change caused outrage among many British fans who had become used to the taste. Spotting a chance to resolve the upset, and fill a new gap in the category, several brands flew in at once with promises to do what Sailor Jerry no longer could.

“We were asked by major supermarket chains in the UK and France to add a spiced rum to our existing range,” says Chris Lake, UK sales director at Toorank Distilleries, which launched Rebellion Spiced earlier this year. “That’s when we noticed the demand for a sweeter, spicy vanilla flavour as a result of Sailor Jerry changing their flavour profile. It’s the easiest launch we’ve ever had.”

Spiced rum lead
Already launched in the UK, France, Spain, the Netherlands and Poland, Toorank aims to take the Rebellion rum range global, starting next year with Germany, Italy and the US. Already three times ahead of its forecasted volume, Toorank has very achievable plans to own at least 10% of the spiced rum market in the UK within the next five years. High-profile sponsorship of events like the MOBO Awards this year will almost certainly help its cause.

Despite producing a dark and a white rum for around 15 years, Rebellion intends to lead the range into new markets with the spiced variety. The reason, Lake explains, is because both the dark and white categories are already dominated by too many major players.

“White and dark rums in reality are difficult markets because unless you spend a lot of money on advertising, the markets are largely tied up,” he says. “We use the spiced as the lead rum because it’s still such a new and open market. There’s no real brand loyalty yet.”

Diageo spied the potential for its Captain Morgan’s Spiced way back in the 1980s, and is undoubtedly the category leader after playing for so long on its own. The group is hesitant to divulge the exact volume of its spiced variety, although Russell Jones, global brand director for Captain Morgan, claims it is the biggest driver behind the Captain Morgan rum brand’s sales, which grew by over 500,000 cases in the last financial year to hit the major milestone of 10m cases in December 2012.

Fun branding
While he also agrees that positioning a spiced rum at the core of the business is a winning strategy, Jones believes that new brands entering the category will need to be built around a credible story if they are to succeed.

The brand moved from its Got a Little Captain in You marketing campaign in the US to the equally successful Life, Love and Loot strategy a few years ago, centring the brand around the escapades of the 17th century pirate and governor of Jamaica Captain Henry Morgan, who features on every bottle.

“The future – as far as we plan it differently from our spiced rum competitors – is that we have a unique asset in the original Captain Morgan,” explains Jones. “He’s loud and proud on our bottles already, but we’ll bring him more to the fore in our marketing as he’s fun and interesting for young guys the world over who want to be a pirate.”

The same strategy has worked for Sailor Jerry, whose muse is the legendary tattoo artist Norman Collins. It has outperformed the category with 47% volume growth for the five years to 2011, achieving 10% in 2011 alone.

“We believe we have a great liquid, but so many other players out there claim the same,” explains Enda O’Sullivan, global brand director for Sailor Jerry. “It’s the depth of our story, the authenticity of Norman Collins and the brand values that people buy into, the same way they buy into Red Bull or Harley-Davidson. We tend not to be the mass-market brand, but rather the one that’s not for everybody.

“We have a real story and we attract consumers that want to be part of that brand world. We’re very targeted about the type of person we go after.”

But with more players in spiced rum, the need for innovation from the category’s two main stalwarts is more important than ever, particularly with the category entrance of Pernod Ricard’s Malibu Island Spiced this spring.

While William Grant is aligning Sailor Jerry with live music events and historic tattoo exhibitions to underpin its “independent, rebellious” brand values, Captain Morgan is also ensuring its longevity with liquid innovations. Captain Morgan Black Spiced launched in May last year in the US following trial runs in Austria, and has also recently appeared in the brand’s second largest market of Canada, where Captain Morgan sells over 1m cases.

A “darker, bolder” spiced rum with heavier spices such as clove and cassia bark, finished in a double-charred blackened oak barrel to 47.3% abv, it is positioned to appeal to mature lovers of brown spirits such as whisky and aged rum.

“From our side it’s a way of playing into the space occupied by Jim Beam and Jack Daniel’s,” explains Jones. “There’s a large amount of those brands being drunk when people are out partying with their friends, and Captain Morgan has more right to win in that area. Black Spiced takes us into a different space as it’s for people who prefer their spirits neat.”

Since launch, Black Spiced has already sold “six figures-worth of cases” and will be rolled out to a further five markets over the next nine months, likely targeting Captain Morgan’s additional core regions of Germany and the UK.

When it comes to entering Asia, however, Diageo is happy to leave its rum presence to the likes of premium aged rum brand Zacapa. Spiced rum, being more of a party spirit and less associated with status, is not expected to flourish in the short term, unlike its fellow brown spirits.

“I wouldn’t want to stretch Captain Morgan Spiced into places where it doesn’t naturally sit,” says Jones. “I’d rather we were playing aged rum brands we know have the right positioning to win in that segment.”

That’s not to say all spiced rum players will be avoiding Asia for the time being. Dmitri Ivanov, Bacardi’s new senior global category director of rums, sees “no fundamental reasons why spiced rums cannot be a success in Asia”, while burgeoning boutique brand The Kraken is looking at the market “closely”.

Untapped potential
For now, the US, Canada, Mexico and select Western European markets, particularly the UK and Germany, lead the charge as far as spiced rum demand goes, while emerging markets sparking interest from producers are restricted to the Philippines, India, Russia and Eastern Europe, and Latin America, to the latter of which Diageo already ships 400,000 cases a year.

The one large but relatively untapped western market all brands are desperately trying to grow their presence in is Australia, where native Diageo-owned rum brand Bundaberg holds sway.

While its spiced variety Bundaberg Original Spiced Rum, which only launched in March 2012, is already showing signs of popularity down under, Diageo feels its Captain Morgan brand is primed to do even better.

“The reason it’s taken the Captain a while to get there is that we’ve had enough on our plate with Bundaberg, so the Australian business hasn’t felt the need to diversify up until now,” says Jones. “Diageo feels the growth trend on spiced rum is unstoppable, so it’s time they got in there ahead of the competition to be the first big spiced rum in that market.”

And Diageo are facing stiff competition from William Grant, which has ramped up investment in the market, partnering with the Amsterdam Tattoo Museum to ship Collins’ largest collection of artwork to date over to Melbourne and Sydney following a successful show in the UK this year.

Perhaps it’s Sailor Jerry’s recipe change, the example set by Captain Morgan’s Spiced, or even the attraction of a brand personality driven, burgeoning category that’s attracting so many new players to spiced rum. Whatever the reason, Jones aptly says: “I’m amazed it took people so long.”

Source: The Spirits Business