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Massive Campari takeover exploits ‘underdeveloped’ premium rum

By Ben Bouckley , 03-Sep-2012

Gruppo Campari today announced a US $414.7m deal to acquire Jamaican rum company Lascelles (LdM) de Mercado and said it planned to use its new heritage brands to spur 'underdeveloped' super-premium rum sales worldwide.

Campari said it had agreed to buy Trinidad and Tobago-based CL Financial Limited’s (CLF’s) 81.4% stake in LdM, and expects to acquire all outstanding and ordinary shares via a public offer under the Jamaican Takeover Code, with both actions slated for completion by Q4 2012.

The Milanese firm said the takeover was the third largest in its history (after it bought Wild Turkey from Pernod Ricard for $575m in 2009, and became majority shareholder in Skyy Spirits in 2001) and would allow it to enter a “large and attractive rum category”.

This morning, Campari executives noted during an investor presentation that rum was the third global premium spirit in terms of 2006-2011 CAGR growth (at 2.8% behind vodka +6.9% and scotch +2.1%), with nearly 60m ‘quality’ 9-litre cases sold in 2011.

Appleton Estate ‘critical mass’

Category growth is being driven by premiumisation and innovation, with new consumers trying dark, spiced, high proof rums, and rising demand for aged rums (sippers) not just for cocktails.

“A super-premium segment, which is still underdeveloped in the rum category [is driving growth] and compared to other major spirits types, is still emerging,” Campari noted.

The deal, for 15x LdM’s EBITDA will see Campari acquire its super premium Appleton Estate brand (the inside of the estate’s Jamaican distillery is pictured) Appleton Special and White (mixing blends).

Campari will develop its “critical mass” in key international Appleton markets: the US [the largest world rum market with 35% of premium rum volumes], Canada, Mexico, and acquire a leading franchise in Jamaica, creating a platform for future international growth, the firm said.

Jeremy Cunnington, Euromonitor International senior drinks analyst, said the Appleton brand was mature in Canada, Mexico, the US and Jamaica, which could present problems given these territories accounted for 75%+ of Appleton's 8m litre sales in 2011.

"The company will hope that with its greater financial, and in the case of the US, distributional strength, it will be able to leverage growth for the brand in these markets," Cunnington said.

"The brand has headroom for growth in all these markets but it will face very tough competition from larger competitors such as Diageo and Bacardi," he added.

Cunnington said Campari could also focus on boosting Appleton in core markets Italy and Germany, where the rum has a negligible presence.

International boost for Campari

The company will also acquire Wray & Nephew White Overproof (the world’s bestselling ‘overproof’ rum: the term means rum stronger than 50% ABV) Coruba and local brands, as well as a substantial ageing rum inventory to support future expansion.

Further assets acquired will include sugar cane fields, two distilleries, one sugar factory, farms and warehouses, and a substantial aged rum inventory to support Campari’s global expansion plan.

Gruppo Campari CEO Bob Kunze-Concewitz said that with the LdM acquisition, Campari was “leveraging our acquisition framework in a very disciplined and consistent manner for future growth”.

“When completed, this acquisition will give a further boost to the internatonalisation of Gruppo Campari, further expanding our business outside of Italy, as well as strengthening our largest and most profitable business – the spirits market,” he added.

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