Diageo is deepening its roster of top-tier brands in reaching an agreement to acquire super-premium dark rum label Don Papa Rum for an initial fee of $281.5 million, the company announced today.
Launched in 2012 by entrepreneur Stephen Carroll with Andrew John Garcia, the Philippines-made rum is currently available in 30 countries, with France, Germany and Italy being its largest markets. Carroll will continue to remain involved in the business.
Signaling confidence in the brand’s future growth potential, Diageo could also pay up to an additional €177.5 million (approximately $192 million) in performance-based bonuses to Don Papa through 2028.
“We believe this acquisition is a great opportunity to take Don Papa into the next exciting chapter of its development,” said Carroll.
While rum sales by volume fell 1.4% from 2020 to 2021 according to the Distilled Spirits Council of the United States (DISCUS), premium-plus rums have been a bright spot for the category. Super-premium-plus rum is developing as a segment, with an annual growth rate of 18% in Europe and 27% in the U.S. between 2016 to 2021.
Through the same period, Don Papa Rum consistently outperformed the market in Europe, delivering a 29% annual growth rate.
Don Papa will join Diageo’s portfolio of rums which includes Guatemalan brand Ron Zacapa, spiced rum Captain Morgan, and Cuban brand Ron Santiago de Cuba. Last year, Diageo-backed incubator also made an investment in Ten to One, a rum founded by former Starbucks VP Marc Farrell and co-owned by artist Ciara.
“This acquisition is in line with our strategy to acquire high-growth brands with attractive margins that support premiumisation, and enables us to participate in the fast-growing super-premium-plus segment,” said John Kennedy, president of Diageo Europe and India.
Other global spirits companies have been recently looking to tap into the premium-plus trend by bolstering their respective rum portfolios. In October, the Brown Forman Corporation announced it had reached an agreement to purchase the Diplomático Rum family of brands, which hold top placements for super and ultra premium rums.
The deal comes after a year of premiumization-driven growth across spirits, particularly for agave spirits and whiskey. Last November, Diageo boosted its whiskey portfolio with the acquisition of super premium whiskey maker Balcones Distilling.
In 2022, total spirits volumes were up 2%, with premium-plus up 13% according to drinks data company the IWSR. While inflationary pressures in 2023 may shift how mid-to-lower income consumers shop, analysts expect premiumization trends to continue as luxury consumers remain more insulated.