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Diageo to Buy Premium Rum Brand Don Papa

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Diageo

DEO 1.44%

PLC has agreed to buy Don Papa Rum, a high-end dark rum from the Philippines, in a deal worth up to about $473 million, as the liquor giant bids to move further upmarket.

The owner of Johnnie Walker whisky and Tanqueray gin will pay 260 million euros, equivalent to $281 million, upfront for Don Papa, with a further potential consideration of up to €177.5 million through to 2028 subject to performance.

Companies across the alcohol industry have sought to boost their exposure to higher-end products in recent years as drinkers show a propensity to pay up for pricier booze. The trend accelerated during the pandemic, boosting sales of Scotch, bourbon and tequila, though some recent data has pointed to a slowdown in growth as shoppers look to economize.

The deal also comes as distillers have sought to nudge the rum category upmarket by rolling out a growing array of pricey, cask-aged rums with tasting notes meant to be sniffed, swirled and sipped neat.

Diageo said Don Papa sits in the “superpremium plus” rum category. The company said that the segment was in the early stages of premiumization, with a compound annual growth rate of 18% in Europe and 27% in the U.S. between 2016 and 2021. 

Over that same time, Don Papa outperformed the Europe market, with a compound annual growth rate of 29%, Diageo said. 

Distillers have sought to nudge the rum category upmarket as drinkers showed a propensity to pay up for pricier booze.



Photo:

Erik Romanenko/Zuma Press

Don Papa was launched in 2012 and is now available in 30 countries, with France, Germany and Italy being its largest markets. Diageo said the rum had a unique flavor profile, distinctive packaging and a brand story rooted in the island of Negros Occidental, where the drink is distilled and aged in American oak barrels.

In the U.S., Don Papa sells from $37.99 for a 750ml bottle, according to alcohol-delivery site Drizly. Diageo didn’t disclose sales figures for the brand.

John Kennedy, president of Diageo Europe and India, said the acquisition was in line with the company’s strategy to acquire growth brands that support premiumization. 

The deal will be funded through existing cash reserves and is expected to close in the first half of 2023, Diageo said. 

Analysts at Citi said the acquisition would bolster Diageo’s presence in a category that has been highlighted by industry observers as the next exciting growth area. However, they added that the lack of disclosure of Don Papa’s financial details made it tough to fully assess the deal.

Write to Joseph Hoppe at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8


Diageo

DEO 1.44%

PLC has agreed to buy Don Papa Rum, a high-end dark rum from the Philippines, in a deal worth up to about $473 million, as the liquor giant bids to move further upmarket.

The owner of Johnnie Walker whisky and Tanqueray gin will pay 260 million euros, equivalent to $281 million, upfront for Don Papa, with a further potential consideration of up to €177.5 million through to 2028 subject to performance.

Companies across the alcohol industry have sought to boost their exposure to higher-end products in recent years as drinkers show a propensity to pay up for pricier booze. The trend accelerated during the pandemic, boosting sales of Scotch, bourbon and tequila, though some recent data has pointed to a slowdown in growth as shoppers look to economize.

The deal also comes as distillers have sought to nudge the rum category upmarket by rolling out a growing array of pricey, cask-aged rums with tasting notes meant to be sniffed, swirled and sipped neat.

Diageo said Don Papa sits in the “superpremium plus” rum category. The company said that the segment was in the early stages of premiumization, with a compound annual growth rate of 18% in Europe and 27% in the U.S. between 2016 and 2021. 

Over that same time, Don Papa outperformed the Europe market, with a compound annual growth rate of 29%, Diageo said. 

Distillers have sought to nudge the rum category upmarket as drinkers showed a propensity to pay up for pricier booze.



Photo:

Erik Romanenko/Zuma Press

Don Papa was launched in 2012 and is now available in 30 countries, with France, Germany and Italy being its largest markets. Diageo said the rum had a unique flavor profile, distinctive packaging and a brand story rooted in the island of Negros Occidental, where the drink is distilled and aged in American oak barrels.

In the U.S., Don Papa sells from $37.99 for a 750ml bottle, according to alcohol-delivery site Drizly. Diageo didn’t disclose sales figures for the brand.

John Kennedy, president of Diageo Europe and India, said the acquisition was in line with the company’s strategy to acquire growth brands that support premiumization. 

The deal will be funded through existing cash reserves and is expected to close in the first half of 2023, Diageo said. 

Analysts at Citi said the acquisition would bolster Diageo’s presence in a category that has been highlighted by industry observers as the next exciting growth area. However, they added that the lack of disclosure of Don Papa’s financial details made it tough to fully assess the deal.

Write to Joseph Hoppe at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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