Last month (October 2022), an important rum-related news story crossed the business wires with relatively little fanfare. Shanken News Daily’s headline noted: Pernod Ricard Increases Stake In Sovereign Brands.
Unless you follow spirits companies closely, the story’s significance might slip by unnoticed. Sovereign’s flagship holding is Bumbu Rum Company, makers of Bumbu Original, Bumbu XO, and Bumbu Crème.
While Bumbu gets little love from the rum cognoscenti, one can’t deny Bumbu’s increased visibility on store shelves and back bars – reportedly 300,000 9-liter cases in 2021. While I generally don’t cover heavily-hyped private label brands, I cover anything that influences the rum industry, not just my particular favorite brands. This news falls squarely within those parameters.
Pernod-Ricard’s announcement comes just over a year after their initial minority investment in Sovereign Brand in late 2021 and described as a “long-term sales and marketing collaboration.”
The more recent announcement hints that Pernod Ricard may take a majority stake in Sovereign:
Pernod Ricard announces today that it will significantly increase its minority stake in Sovereign Brands’ portfolio of super premium wine and spirits brands. This additional investment will strengthen the already successful and ambitious long-term partnership initiated in September 2021.
At the closing of this transaction, Pernod Ricard will fully consolidate Sovereign Brands in its financial statements due to various call options through which Pernod Ricard may look to further increase its stake in the partnership in the future.
It’s a common story throughout the spirits industry: Big brand takes a bet on a small brand via a minority investment and helps the small brand grow its market share. If the bet pays off via significantly increased market share, the big brand typically has the option to purchase a majority stake in the smaller brand.
Brown Forman’s recent purchase of the Diplomatico brand is a prime example of major spirit houses showing increasing interest in acquiring rum/rum-based drinks brands. Pernod Ricard’s announcement is yet more evidence of the trend, and complements its earlier acquisition of Colombia’s La Hechicera.
Should Pernod Ricard take over Sovereign Brands, Bumbu will sit alongside Havana Club and Malibu in Pernod Ricard’s portfolio, and we can safely assume that significantly increased marketing dollars will go Bumbu’s way. Whether this is good or bad depends on your feelings about how rum’s premiumization arc should play out.
About Bumbu
Bumbu, the Original, is described as “rum with natural flavors” (aka “flavored rum”) on the Bumbu site. It’s currently produced at the West Indies Rum Distillery in Barbados.
Bumbu XO is made in Panama; some sources state it’s made at the “Don Jose distillery,” better known as Varela Hermanos and famous for the Ron Abuelo brand.