Diageo has actually consented to purchase the high-end Filipino rum brand name Don Papa in an offer that might be worth more than €400mn, marking the increase of the alcohol as a “super-premium” consume together with whisky and tequila.
The UK-based distiller stated on Tuesday it had actually struck an offer to obtain the brand name, which was established in 2012 by previous Rémy Cointreau executive Stephen Carroll, as it bets require for costly spirits can endure a slowing worldwide economy.
The sale follows a series of other high-end rum acquisitions by worldwide beverages groups, consisting of Brown-Forman’s purchase of Venezuelan brand name Diplomático in 2022.
Diageo, which likewise makes the mass-market rum brand name Captain Morgan, will pay a preliminary €260mn followed by a possible €178mn more over the next 5 years, based on efficiency. The offer, moneyed through existing money reserves, is anticipated to close in the very first half of this year.
The UK-based beverages group has actually sustained strong development over the last few years partially through high-end spirits acquisitions such as George Clooney’s Casamigos tequila, purchased in 2017 in an offer worth as much as $1bn, and its purchase of Don Julio tequila in 2014. It likewise got high-end Texas whisky distiller Balcones Distilling late in 2015.
Simon Hales, expert at Citi, stated: “The super-premium rum category has been highlighted by many industry observers as the next exciting growth category in spirits. Given similar craft credentials to other brown spirits, ‘sippability’ and opportunities to expand in [upmarket bars and restaurants], it clearly has potential.”
But he included that there was a “risk that the payback may take longer than envisaged. Moreover, given the ongoing uncertain backdrop for spirits — and premiumisation trends — into 2023, and the associated further cash from the Don Papa deal, this may limit the potential for further cash returns at Diageo in the near-term.”
Don Papa is distilled on the Philippines island of Negros Occidental, likewise called “Sugarlandia”, and aged in American oak barrels. Its biggest markets are France, Germany and Italy and creator Carroll will stay included with the brand name, Diageo stated.
Rum represent about 5 percent of Diageo’s sales, stated Ed Mundy, expert at Jefferies.
John Kennedy, president of Diageo’s Europe and India department, stated: “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.”