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Brugal takes Dominican rum market by storm
The San Juan Star / June 28, 2004

By Larry Luxner

SANTO DOMINGO -- As recently as 10 years ago, the three B's of the Dominican rum industry — Barceló, Brugal and Bermudez — each controlled about a third of the market in this rum-drinking Caribbean nation.

Today, however, Brugal & Co. dominates that market to such an extent that even its competitors concede there's really no competition.

"All of us have good products, but there's a snowball effect," says Alex Dupuy Barceló, manager of promotions and events at Ron Barceló, the country's No. 2 rum producer. "If you go into a colmado and ask for rum, nine times out of 10 you'll get a Brugal, because that's what's selling."

And selling it is. Jorge A. Torres, export manager at Brugal, says the company enjoys an 86% market share with its flagship Brugal rum and other brands in its portfolio. Barceló has another 6%, he says, followed by Bermudez, with 3%. The remaining 5% piece of the pie is shared by several smaller rum brands.

Dupuy disputes those figures, saying Barceló's share is more like 20-30% and that Brugal's is only 70%. Bermudez, which bottles its rum in Santiago de los Caballeros, couldn't be reached for comment.

No matter how you slice it, there's no question that Brugal's success has been nothing short of astonishing. Despite the Dominican Republic's population of only 8.5 million inhabitants, Brugal is the second-largest rum producer in Latin America (behind Bacardi), with 2003 production of some 4.0 million cases out of a total market of 4.7 million cases.

Even more impressive, says Impact Databank, the Brugal rum brand is now the world's 17th largest premium distilled spirit, just behind Dewar's whiskey and ahead of both Kahlua and Johnnie Walker Black.

Asked to explain the secret of Brugal's success, Torres says it's simple: "Consistency, quality and knowing what the people want," he said. "You have to move with the new generation. We have even convinced a lot of whisky drinkers to start drinking rum."

At present, Brugal ranks as one of the 10 biggest companies in the Dominican Republic, with annual revenues of nearly $300 million. Of that total, around $75 million is profit; another 10-15% of the company's budget goes to marketing and promotion.

"Our vice-president, Franklin Baez Brugal, has successfully moved Brugal from a family-owned company to an internationally oriented corporation," said Torres, 33. "We try to combine tradition — because rum is made the same as it was 100 years ago — with standards for modern industry."

Brugal traces its roots to Cuba, which is also the birthplace of Bacardi rum. By coincidence, company founder Andrés Brugal Montaner traveled from Spain to Cuba in the same ship as Don Facundo Bacardí; both men later established rum operations in Santiago de Cuba. In 1888, Brugal's operations were transferred to Puerto Plata, on the north coast of the Dominican Republic.

The company later opened a distillery in Puerto Rico to serve the U.S. export market, but in the late 1960s transferred that distillery to St. Croix in the U.S. Virgin Islands in order to not lose its U.S. liquor license. That distillery in St. Croix, which served smaller islands in the eastern Caribbean, was closed in 1995.

Brugal currently produces six distinct rums: Brugal Blanco, a mellow and clear white rum; Brugal Carta Dorada (gold label); Brugal Añejo, rum aged from between five and eight years; Brugal Extra Viejo, rated internationally as one of the world's best aged rums; the ultra-premium Siglo de Oro, which sells for $80 for a 700-ml bottle, and Brugal Limón, a lemon-flavored rum aimed at the youth and female market.

Recently, the Chicago-based Beverage Testing Institute gave Brugal Añejo a score of 94, deeming it a "best buy" at $13.99. It also gave an 86 to Brugal White Label, calling it a "'best buy" at $8.99. Ron Siglo de Oro Brugal Reserve Centenaria 1888 rum, which earned a 92-point rating.

"We are the leaders, but we keep doing our work as if we were in second place," said Torres. "A few years ago, we began moving into the international market, because we know that in order to grow even one extra percent [in domestic market share] will cost a lot. That's why we are now focusing on the international market."

Torres said that in only three years, exports — which now constitute 17% of total production — have jumped from only 50,000 cases to 700,000 cases this year.

Europe currently represents 40% of all exports (mainly Germany, Spain, Italy, Switzerland and Finland). Another 30% of Brugal's exports go to the United States (principally Florida, New York and New Jersey) and the remaining 30% to Canada, the Caribbean, Central America. Another 50,000 cases are shipped to Russia, "which is becoming a great market for us," and roughly 10,000 cases a year go to Puerto Rico.

In Europe, Brugal competes with Cuba's Havana Club, and in the United States with Bacardi and Captain Morgan's Spiced Rum. Both of those two brands are distilled in Puerto Rico and thus benefit from U.S. federal excise-tax rebates.

"The price level will always be an obstacle for us in the U.S. market," he says, adding that "all the rum we produce is sold under our own brands. We do not sell bulk rum to anybody."

According to Dupuy, the internal Dominican rum market used to be much larger, around 6.0 million cases a year compared to 4.5 million cases today.

"Before, the tariffs on whisky were much less than they are today, so Dominicans started drinking whisky because it was imported," he explained. "Now tariffs for whisky are high, but the damage is already done."

While Brugal rum is certainly its most important product, the Brugal empire doesn't include only rum. Vinícola del Norte S.A., founded in 1962, produces and markets wine, vermouth, whisky, gin, vodka, liqueurs and brandy, with Whisky MacAlbert and Lagrange liqueur among its best-known products.

Another company, Pedro Justo Carrión & Co., which had been producing Ron Macoríx since 1898, was acquired by Brugal in 1993. Two years later, Brugal acquired yet another subsidiary, Vinos S.A., which for the last 20 years has imported and distributed over 20 wine brands from Chile, Spain, Italy and France. The company also represents Absolut, J&B and Moët Chandon.

In addition, Brugal owns Punto & Corcho S.A., a liquor store in Santo Domingo, while another subsidiary, Industrial Macorisana C. por A., produces alcohol in San Pedro de Macoris. It is now the most modern distillation plant in the country, with an installed capacity of 80,000 liters of alcohol per day. From molasses — a byproduct of cane sugar production — 95% alcohol can be distilled, which in turn is used as raw material for the rums, liqueurs and other spirits processed by the Brugal Group.

Torres said Brugal has invested nearly $10 million at its distillery in Puerto Plata. That plant employs 600 out of the company's 2,000 workers, and produces around 25,000 cases of rum daily — going up to to 30,000 cases a day if demand warrants.

"Right now, our major competitor is not rum or whisky but beer," he said. "One of the things that have helped us is that all our advertising campaigns have been on a high level. We don't go in for sex or vulgarity."

That's a thinly disguised reference to a recent ad campaign for Barceló, whose mascot until recently was a Don Juan-type character who drank Barceló rum and had his way with women.

"Back in the early 1990s, we launched an advertising campaign featuring El Matatán, the guy everybody wants to be," said Barceló's Dupuy. "Brugal completely destroyed the message we were trying to send. They turned it around and discredited it."

Asked if Barceló ever recovered, he said: "No, because then we got into difficulties." Dupuy, the 31-year-old grandson of company founder Julian Barceló, alluded to internal disputes within the company's management, but he declined to elaborate, and also refused to say how much Barceló made last year or what its total revenues were.

"Our goal is to recover our market share and increase exports," he said. "One leader usually stays in that position for a couple of years and then just comes down. It's a cycle that's been going on for over 80 years."

Dupuy suggested that Brugal's dramatic jump in market share has come more at Bermudez's expense than Barceló's. "The reason Brugal is selling so well is that they're doing a lot of publicity, which at the moment we're not."

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