Diageo PLC (LSE:DGE) has bolstered its drinks cabinet buying Don Papa Rum, a super-premium, dark rum from the Philippines.
The FTSE 100-listed group, which owns brands such as Johnnie Walker, Guinness, Smirnoff and Baileys, will pay an initial €260mln and up to a further €177.5mln through to 2028 subject to performance.
In a statement, Diageo said this super-premium plus segment of the rum category is in the early stages of premiumisation, with a compound annual growth rate (CAGR) of 18% in Europe and 27% in the US between 2016-2021.
During the same period, Don Papa Rum consistently outperformed the market in Europe, delivering a 29% CAGR.
Don Papa Rum was launched in 2012 and is currently available in 30 countries, with France, Germany and Italy being its largest markets.
John Kennedy, president, Diageo Europe and India, commented: "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."
Stephen Carroll, the founder of Don Papa Rum, will remain involved with the brand, working alongside Diageo to build on Don Papa Rum's growth potential.
The acquisition will be funded through existing cash reserves and is expected to close in the first half of 2023.
Victoria Scholar, head of investment, interactive investor, pointed out while Diageo owns over 200 brands, “it has just one rum brand, Captain Morgan, so Don Papa will add to its rum portfolio and allow the drinks giant to focus on premiumisation within the rum category”.
She noted “premiumisation has been a major theme for Diageo which aims to focus on quality over quantity” to tie in with drink awareness campaigns and to appeal to increasingly health-conscious consumers.
Adding to Diageo’s already extensive and varied offering, Scholar suggested the deal “should help it weather the economic downturn”.