Shifting global conditions are not only presenting the rum category with several challenges but with opportunities, too. Factors such as the current attitude towards reduced sugar consumption, a focus on environmentally sustainable operations, and the increasing premiumisation trend, are weighing heavily on rum producers around the world. How producers react to these conditions will be crucial in shaping the category’s fortunes going forward.
The wellness trend impacts supply of sugar cane used in rum production
Chris Budzik, Senior Analyst at the IWSR, notes, “the current focus on wellness has decreased global sugar consumption, especially among the younger generations. This trend is having widespread impact on the rum industry’s raw materials.”
Many of the rum-producing countries in the Caribbean do not grow their own sugar cane, and must import either raw sugar cane, cane juice, or molasses for their base. This creates a distinct set of issues for these nations. Molasses is a by-product of sugar production and is therefore a less expensive option than using pure sugar cane in rum production. However, as demand for sugar decreases, so does sugar production – resulting in less molasses available to producers.
Slower demand is also driving down sugar cane prices, causing concern that some growers will abandon sugar cane in favour of more profitable crops. Some in the industry also fear that, as the wellness trend gathers pace, some governments or regulatory agencies may impose sugar-content limits that could further affect both sugar availability and the cost of the final product.
New initiatives focus on the environmental impact of rum production
Sustainable operations are also coming to the forefront as we learn more about the environmental impact of rum production. Sustainability boils down to satisfying the needs of the present without endangering the future. Rum production has a high environmental impact due to the land required to grow the cane, the fuel required to create the heat needed to convert the raw sugar cane into a fermentable medium, the amount of water used in production, and the resources needed for packaging.
Initiatives focusing on the sustainability movement include additional resource management and/or conservation, recycling, creating environmentally friendly products and biodegradable packaging. Budzik adds, “These initiatives must be spearheaded and promoted by company owners, as they can’t happen organically without increased investment.”
Consumers are willing to pay more for sustainable and/or environmentally conscious products.
While sustainable operations are more expensive than traditional production methods, surveys have revealed that consumers are willing to pay more for sustainable and/or environmentally conscious products. Budzik remarks, “consumers have shown a willingness to refuse a brand that they feel is ‘not doing the right thing’ by the environment. With this consumer drive, sustainable operation practices can have a positive impact on both current and future business.”
Increased market penetration lies in the opportunity of premium rum
While rum producers can invest in sustainability and secure access to raw materials, the category’s success ultimately relies on producers bringing products to market that consumers desire.
“In many global markets, rum’s growth lies within premiumisation,” advises Budzik. In the US, for example, although ‘super-premium and-above’ rum offerings only accounted for 0.8% of rum volumes in 2018, they accounted for 4.4% of total value for the category that year. “Vast opportunity lies within increasing the 0.8% share. Strong growth from established super-premium brands, as well as innovative offerings such as English Harbour Rum’s barrel-aged line, are leading the way in the US,” notes Budzik.
Consumers will gravitate towards the category’s increasing sophistication
As the category breaks from its “rum-and-cola” image and establishes itself as a sophisticated spirit worthy of today’s craft cocktail culture, consumers will gravitate towards the movement. The rum category is in the early stages of its premiumisation trend, but is growing, not only in the US, but in countries such as France and the UK as well.
Looking forward, by combining environmentally sustainable production operations with the increasing premiumisation trend, rum should be able to maintain its relevance and fuel future growth globally.
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