The rum wars that have been escalating since the large increase in the subsidies began in 2009. The problem doesn't look like it is going to go away soon either. The purchase of Lascelles DeMercado (Appleton, Coruba and Wray & Nephew) by Davide Campari-Milano SpA, seems to be part of the fuel for the latest salvo. There are arguments on both sides of the battle, but there doesn't seem to be any solutions coming from either side.A report in the Washington Post makes this clear.
By Associated Press, Published:
September 10
KINGSTON, Jamaica — Rum,
the sugar-based liquor that has fueled the development of the Caribbean for
centuries, has become the focus of an increasingly bitter dispute with the U.S.
Small producers in
countries such as Antigua, Guyana and Jamaica complain they are being punched
by unfair trade and marketing advantages for global beverage corporations
operating in U.S. territories, and say U.S. rum subsidies threaten to drive
some beloved top-shelf Caribbean labels out of business, or force them to sell
out.0
“The amounts that are being doled out now
are staggering,” said Frank Ward, chairman of the West Indies Rum & Spirits
Producers’ Association. “We were able to live with the level of U.S. subsidies
as they once were. But the massive increases, we believe, have skewed the
market.”
It’s a high stakes battle because rum,
first developed on Caribbean sugar plantations in the 17th century and deeply
engrained in local culture and history, is one of the few competitive
industries for the tourism-dependent region’s tiny, vulnerable economies. The
tipple, which can range from colorless to coppery, from almost tasteless to richly
layered, generates roughly $500 million in foreign exchange for independent
Caribbean countries and more than $250 million in tax revenue.
The subsidies come from money raised
through an excise tax on liquor sold in the United States. Under an obscure
federal law, almost all of the money generated by rum goes to the treasuries of
Puerto Rico and the U.S. Virgin Islands. Those tropical territories in turn
hand a share of it to the producers as a subsidy to do business there.
Distillers in other countries say they
lived fairly comfortably with the U.S. subsidies for decades, even if they
thought the rebates gave advantages to rum giant Bacardi Limited in Puerto Rico
and Cruzan Rum, a U.S. Virgin Islands brand now owned by Beam Inc., the U.S.
maker of spirits such as Jim Beam and Maker’s Mark.
But they are alarmed by
recent deals that sharply increased the subsidies for already powerful
corporations in the two territories.
“Our Caribbean distilleries need to export
rum in order to survive. But bigger subsidies in the U.S. islands means we
don’t get a level playing field for our exports, and it’s going to affect both
small and large producers here,” said Anthony Bento, managing director of the
80-year-old Antigua company that makes English Harbour Rum in copper stills and
ages it in oak barrels.
Clifton Shillingford of Shillingford
Estates Ltd, a small Dominica distiller that makes its Macourcherie rums from
local sugar cane juice instead of molasses, said the subsidies for big global
brands in the U.S. islands will “destroy” his rum business.
Diageo argues the complaints of smaller
producers are overblown. Spokesperson Brooke Lawer says the subsidies the
British company receives are similar to incentives from U.S. states or other
countries to attract industry and do not create a competitive disadvantage.
This little war is really going to hurt the entire rum industry if it doesn't get settled very soon. I know that large corporations here in the US have purchased rum from Barbados for their new brand "Shellback", and I hope events like this can happen in other places around the Caribbean to help soothe some of the financial woes of other Caribbean distilleries. ;o)
