UK's Diageo scoops up Philippines' Don Papa Rum brand for €260-M

MANILA, Philippines — Diageo plc, the UK-based distiller behind world-famous brands like Johnnie Walker, Baileys and Tanqueray, announced its purchase of Philippine rum brand Don Papa, in a bid to expand the company’s footprint within Southeast Asia’s highly diversified alcoholic beverage market.

In a statement on Tuesday, Diageo said the purchase will amount to €260 million, with an upfront consideration of up to €177.5 million through to 2028.

While the consideration would hinge on Don Papa’s performance, Diageo said the decision also reflected optimism on the brand’s growth potential, believing that expensive liquor consumption would remain robust despite a painfully high inflation that’s hurting the global economy.

In Southeast Asia, revenue in the spirits segment is forecast to hit $25.78 billion in 2023, according to Statista, a data provider. The region’s liquor market is expected to post a compound annual growth rate of 6.01% from this year until 2025.

“This acquisition is in line with our strategy to acquire high growth brands with attractive margins that support premiumisation, and enables us to participate in the fast growing super-premium plus segment,” John Kennedy, president of Diageo Europe and India, said.

Launched in 2012, Don Papa is a high-end rum is distilled and aged in American oak barrels in Negros Occidental, home to the Philippines’ sugarcane industry. Despite the brand’s short history, Diageo said Don Papa outperformed other brands within the European market. 

Don Papa is currently being sold in 30 countries, with France, Germany and Italy being its largest markets.

Diageo explained that the transaction would increase its foothold in the rum category which, it said, is still on the initial stages of “premiumisation”. Diageo’s acquisition will be funded through its existing cash reserves.

The deal will be completed in the first half of the year.