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With DonQ On The Rise, Serrallés USA Eyes Wider Portfolio

August 24, 2011

Up to now, Puerto Rican rum maker Destilería Serrallés has derived the lion’s share of its business from its contract production of Diageo’s Captain Morgan. But with the Captain’s production being moved entirely to the U.S. Virgin Islands by next year, Serrallés is set to lose around 70% of its volume. Accordingly, the company is now shifting gears and investing to drive sales of its own rum brand, DonQ, in the U.S. market through its Serrallés USA unit. With that effort proceeding, Serrallés is also now eyeing partnerships and new brand introductions to broaden its U.S. portfolio.

A well-known brand in its domestic market of Puerto Rico, the DonQ rum range has made impressive progress since entering the U.S. market just three years ago. The brand rose 61% by volume in each of the past two years to reach 190,000 cases in 2010, according to Impact Databank. The DonQ line-up includes Cristal, Gold and Anejo offerings ($12.99-$15.99 a 750-ml.), an ultra-premium Gran Anejo ($59.99) and a range of flavored rums ($13.99) featuring Limón, Coco, Mojito and the newly introduced Pasión (passion fruit).

For 2011, Serrallés expects DonQ to hit more than 210,000 cases, and has set a longer-term goal of reaching 1 million cases, according to John Eason, vice president, national sales manager for Serrallés USA. “The time is really ripe for a firm number-two player in the silver popular rum category,” he says, noting the relative lack of meaningful competition in the segment compared with other spirits categories. “In rum, and silver rum in particular, it’s always been Bacardi. We definitely think there’s an opportunity to make a challenge and take some share in the category.”

Roughly 70% of DonQ’s sales are currently achieved off-premise—driven primarily by rising retail sales of its core Cristal label—but the brand is also growing in the on-premise, thanks in part to its focus on cocktails and a partnership with the U.S. Bartenders Guild. “The mixology trend has driven a lot of our success. Our on-premise business is up almost 60% versus last year,” says Eason. DonQ has performed strongly in several top rum markets, including Florida—the brand’s largest market—New York, Texas and Illinois, but it has also gained unexpected traction in markets like Georgia and Colorado.

Meanwhile, Serrallés has reinforced its portfolio with the addition of a new spiced rum, Blackbeard ($14.99), launched in the fourth quarter of last year. It has also added a long-term U.S. distribution and marketing tie-up with Wisconsin’s Death’s Door Spirits, whose portfolio includes craft vodka, gin and white whisky offerings ($29.99-$34.99). “[These brands] give us a little more clout with distributors—the more boxes we can put in a truck, the more important we become,” explains Eason. “We’re actively looking at other brands and other categories that could be a good fit for our portfolio.”

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