Diageo Agrees to Buy Don Papa Rum for Up to $473 Mln

Diageo buys Don Papa for a record sum - and from petty cash. :nerd_face:

What do you think about the deal?

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Three thoughts:

  1. it will not change the relevancy of the product or brand for me personally

  2. there might be a negative impact for consumer pricing overall when Diageo raises prices, introduces „limited released“ and marketing spent and it works, others might follow and market prices might rise. If LVMH joins, this will be amplified

  3. Diageo made way too much money with the practices in (2) such that they can just spent the cash like this in an economy like today

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„Diageo said the “super-premium plus” segment of the rum category that Don Papa Rum resides is in the early stages of premiumization…“

:joy::joy::joy:

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It’s a statement of intent, just phrased as an observation. Wait for it…

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Kann man auch als Drohung verstehen, das ist richtig

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Since Don Papa is definitely not one of my rum I prefer, I personally do not care!

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I couldn’t care less. I don’t care at all for Diageo, except for Caol Ila, Lagavulin and maybe Port Ellen Maltings, which they sadly own…

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What amazes me is the amount that they are willing to dish out for Don Papa. The sales figures of Don Papa “Rum” must be huge. I knew that Don Papa sells a lot, in Paris you can buy a bottle in every wine store in the city and there are hundreds of them but up to 473 million is out of this world. :flushed:

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When taking over Patron Tequila in 2020, they paid 7,5 times sales revenue. Assuming the same metric (questionable), we would get sales revenue of about 63 million for Don Papa. With an average price of 40 Euros, that would be roughly 1,5 million bottles a year. Just a thought experiment, not sure how close to reality that is.

Edit: Bacardi was the one acquiring Patron, not Diageo.

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To be honest … a full on Don Papa craze that takes the flippers and investors attention is the best that could happen :joy:

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It is also interesting to note that another heavyweight was also recently acquired:

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As Diageo is a listed company, they will publish more detail on their IR outlet eventually.

They claim to provide more detail after their interim reporting on 26. Jan.

At least after closing, their reporting should provide enough detail to guesstimate sales / earnings contribution to see ballpark multiples :mag::nerd_face:

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Such takeovers are sometimes accompanied by quality deterioration of the product. My opinion on Don Papa rum quality is already not very high, it’s interesting if there will be further changes in the recipes.

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I don’t think it can get much lower, as it is quite artificial already. But this will certainly increase the price of those perceived-premiums and thus have a little effect on higher quality offerings as well.

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Around 1.8 million liters in 2019 and it has grown significantly since then :slight_smile:

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Matt Pietrek also had some thoughts on the Diageo deal

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I find the statement interesting that Don Papa is not allowed to declare the rum as rum!

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That certainly depends on on the “where” and “when” of the question. According to current EU regulations, a sugar content of >20g/l is not allowed to be called rum. Don Papa still has the word “rum” on the label last time I checked. No idea if they reduced the sugar content or plainly ignore the the regulation.

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They did. They launched the Baroko as a Spirit Drink similar to the old Don Papa. The new Don Papa Rum has reduced sugar content to meet EU regulations.

At least it is like this in Germany (and the EU). In other countries they might have a different portfolio.

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I find the addition of glycerine (low-grade alcohol) and vanillin more serious and dubios than the added sugar!
Sugar was still common in the past, but the other somehow reminds me of the wine scandal from the Mosel region at the time!

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