Yo Ho Ho and A Bottle of Pricey Rum
Perhaps, this time will be different.
For several years, rum distillers have been trying to ditch the product's image--which is so closely linked to pirates, palm trees, and cheap daiquiri drinks--hoping to capture their fair share of sales to cocktail-swilling trendsetters.
The goal is to join vodka, bourbon, and tequila in creating a tier of "superpremium" brands by winning the attention of the fickle and fashionable, and convincing them--and those who aspire to be them--to trade up to pricier brands.
There are some small signs that the effort may be starting to pay off.
According to statistics compiled by the Distilled Spirits Council of the United States (DISCUS), the fastest-growing segment of the $2.1 billion rum category is the small sliver that accounts for its superpremium brands. Loosely speaking, rums in this group are priced above $25 for a 750 millileter bottle. In 2007, this segment saw its volume grow by 43% to 220,000 cases.
Granted the category’s growth is skewed somewhat by its small size. The double-digit pace equated to an additional $29 million in revenue last year, but if the trend continues it will be a notable development for the rum category.
Although vodka, which tops rum as the largest spirits category, was responsible for about 28.5% of the industry's volume last year, it contributed nearly 31% of its revenue growth, according to DISCUS. The reason is that the lion's share of vodka's growth comes from its superpremium brands.
The growth of superpremium rum brands appears to be rooted in the same trends that are helping to grow overall spirits sales. These factors include a growing interest in cocktails, consumers' increasingly sophisticated palate and their desire to experiment with new flavors. The last trend is especially pronounced among adults under the age of 30, or the so-called millennial generation.
But there are other factors that are also helping. One example has been events where cigars are paired with high-quality, aged sipping rums such as Ron Zacapa Centenario, Appleton Estate Extra, and Mount Gay Extra Old Rum.
Another is an increased knowledge about the history of the cocktail and a desire to try more traditional drinks. With its long history in American cocktails, rum is likely to benefit.
"I think these microtrends will influence the bigger picture," said Peter Wijk, a brand director at Absolut, a subsidiary of Sweden's Vin & Sprit. "They are the embryos that educate mixologists, bartenders, and consumers."
Some brands, including Tommy Bahama and 10 Cane, are pushing hard for a fashionable, trendy image as they work to move the rum category up the price scale. In doing so, these brands are competing directly with superpremium vodka brands to win consumers.
And it may be a good time to make this attempt. Despite continued healthy growth in the vodka category, there are some industry watchers who say they detect early signs of “vodka fatigue.”
Tommy Bahama is a brand created by Sidney Frank Importing, of Grey Goose vodka fame, while 10Cane is marketed by LVMH Moet Hennessy.
Absolut, which is well known for its vodka brand, became a bigger player in the rum category with its acquisition of Cruzan International about a year and a half ago. The company is examining the packaging, price and positioning of its Cruzan Single Barrel Estate Rum in order to make sure it is taking advantage of the emerging trends toward pricier rums, Wijk said. He expects new packaging to be introduced later this year to help distinguish it as a superpremium brand.
One of the challenges that has faced the rum industry in pushing for higher prices is that for so long it has been dominated by one player, Bacardi, a privately held Bermuda-based company with a large rum factory in Puerto Rico.
Bacardi has fueled its own growth by rolling out flavored rum products aimed at the mass market. Although the company has higher-priced products such as Bacardi 8, it doesn’t appear that concerned about pushing the price envelope.
“It has been hard to break through with Bacardi being such a dominant player,” Wijk said.
Another challenge is that the rest of the category has largely developed as a cottage industry, with products made by smaller companies that lack the money and marketing might to break into the competitive U.S. market. Still, with consumers become more daring and seeking out brands that are well-made, they are going to find there are plenty of well-aged, well-blended rums to try, according David Wondrich, a mixologist and author of "Imbibe!"
“Those are starting to be discovered,” he said.
According to Wondrich, there isn’t any reason that should prevent a well-made rum from commanding as much attention as other types of superpremium spirits, including vodka.
Still, the trend is still emerging and it may still take some time before it really gains momentum, according to Wijk.
He cautioned against expecting a sudden "boom" to happen because with rum so much is about taste and it will take some time for the products to gain a loyal following. This is different from vodka, which can be hard to distinguish by taste, and may have more to gain from a fancy bottle or a captivating backstory.
“With vodka, whether we like it or not, it’s more about the badge,” he said.
Christina Cheddar Berk is a News Editor at CNBC.com. She can be reached at firstname.lastname@example.org