International beverage company Diageo on Tuesday said it would acquire premium Filipino rum brand Don Papa for an upfront consideration of €260 million (about P15.48 billion). Diageo said the deal could be worth an additional consideration of up to €177.5 million through to 2028 “subject to performance.”
What’s notable about the deal:
1. The brand is 10 years old, after only founded in 2012. Whoa!
2. Don Papa is the brainchild of Englishman Stephen Carroll and Andrew John Garcia, whom upon holidaying in the heart of the sugar cane plantation Hacienda Sta Rosalia in rural Negros Occidental. This means that some of the best business ideas can be made during holidays. Imagine, it took a foreigner to realize that money can be made amidst all that sugar.
3. It only took 10 years for Don Papa to conquer 30 countries, with France, Germany and Italy being its largest markets. This meant the guy could EXECUTE. You can’t be dumb and sell liquor in 30 countries, given all the licenses, government regulations, etc. That took hard business skill.
4. Don Papa Rum consistently outperformed the market in Europe, delivering a 29 percent CAGR. According to the Diageo release, the compound annual growth rate (CAGR) of super premium rum was at 18 percent in Europe and 27 percent in the U.S. between 2016 to 2021. This means the team running Don Papa are AGGRESSIVE.
5. Diageo said Carroll will remain involved with the brand and will work alongside Diageo to build on Don Papa Rum’s growth potential. This is smart. It’s highly likely the startup entrepreneurs are a critical key to the brand’s success.
6. According to my rum loving BIL, many rum enthusiasts do not consider Don as a real rum because they spike their rum range with sugar post-distillation, masking the nuances of flavour and smoothing out the flavour profile. This makes Don Papa a “mass-market premium rum”, but not a true premium rum, or even a “real rum”. To which I said, “How many of these rum enthusiasts have sold their brand for EUR 260 million?” Sometimes, the results speak for themselves.
7. Don Papa was created by a British former Diageo executive, who has sold his brand and business to his former employer. Now, THAT’s not burning your bridges and maximizing your connections.
It was a good partnership between Carroll and Garcia. For Don Papa to be successful, EXECUTION is key.
Since Stephen Carroll was a Rémy Cointreau executive, I’m sure he met a lot of people working in the industry… bar owners, government officials, etc. during his tenure at Diageo.
To enter 30 foreign markets, Carroll had to use his connections extensively, marketing Don Papa to his connections so they can sell in their bars. While many Filipinos could do the manufacturing side, it takes a very special type of manager to have their alcohol enter the European market. Without each of the partners, the deal would not have happened.
8. Don Papa is a foreigner-created, foreigner-owned brand despite allegedly being made in the Philippines. Diageo said the rum had a unique flavor profile, distinctive packaging and a brand story rooted in the island of Negros Occidental, where the drink is distilled and aged in American oak barrels.
If so, success is rewarded to those who work for it, and congrats to these two entrepreneurs for doing business right.
So while many rum enthusiasts may turn up their noses, nobody has EUR 260 million after just a few years work. The owner did not keep drinking as a hobby, but made it as a legit business.
Kudos to Stephen Carroll and Andrew John Garcia for getting it right, leveraging their connections at the right time, and obviously being very lucky.
Kaya naman pala e. Wish there are more Filipino-led billionaires that arise from the Philippines!