Diageo to buy Don Papa Rum for initial €260m

Global drinks giant Diageo said it was buying Don Papa Rum of the Philippines for €260m up front.

Diageo added that it could pay out an extra €177.5m to 2028 subject to performance, "reflecting the brand's current growth potential"

"The 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. Through the same period, Don Papa Rum consistently outperformed the market in Europe, delivering a 29% CAGR," the company said on Tuesday.

Launched in 2012 by former Remy Cointreau executive Stephen Carroll, together with Andrew John Garcia, Don Papa Rum is owned by the UK-based Bleeding Heart Rum Company. The spirit is currently available in 30 countries, with France, Germany and Italy being its largest markets.

The acquisition will be funded through existing cash reserves and is expected to close in the first half of 2023.

"While Diageo owns more than 200 brands, it has just one rum... Captain Morgan, so Don Papa will add to its rum portfolio and allow the drinks giant to focus on premiumisation - 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," said Interactive Investor analyst Victoria Scholar.

"Hand-in-hand with this is the explosion of low and no-alcohol drinks which is the fastest growing segment of the drinks market. Today’s acquisition will add to Diageo’s already extensive and varied brand offering that should help it weather the economic downturn."

Reporting by Frank Prenesti for Sharecast.com