Rum producers moving to secure local sources of molasses

Concern about the future of the sugar industry is leading some CARICOM rum producers to purchase sugar estates to obtain secure long-term access to local molasses.

The issue stems from changes to the EU’s Common Agricultural policy which is having the effect of reducing prices to a level at which Caribbean producers that are high cost and subsidised become unviable. Consequent closures, actual or considered, have however become a matter of great concern to industries such as rum and other users that have previously relied a local industry to provide essential inputs.

In Guyana, Demerara Distillers Ltd (DDL), a major producer of branded products and bulk rums, is in the process of negotiating the purchase of the Enmore Estate in Guyana and other sugar lands (See Caribbean Insight Vol 40, Issue 5). Similar concerns are also emerging among distillers in Barbados who are understood to be interested in purchasing quality land under cane for similar reasons.

DDL’s Chairman, Komal Samaroo, said in a release, “we are optimistic that the Government of Guyana understands what is at stake, not just for the sugarcane industry, but for all other stakeholders that are a part of the GuySuCo value chain, including the many thousands who are directly and indirectly involved in the production, distribution and sale of DDL’s value-added products, both locally and internationally”.

Although no formal announcement has yet been made, the Guyana government has restarted the Enmore sugar estate largely to support the production of molasses and as a part of a decision that may eventually result in DDL taking over Enmore, and possibly some other estates. DDL’s molasses requirement for 2018 is reportedly 70,000 tons.

According to Colvin Heath-London, the Head of the Special Purpose Unit (SPU) of Guyana’s National Industrial and Commercial Investments Ltd (NICIL), the Enmore estate will restart operations this month.

Mr Heath-London said: “With the advent of the closure of three factories in Guyana, it means several alcohol-producing nations in the region are in the jeopardy of either closure or scaling back operations. It is imperative that Guyana leads the way in maintaining stability of rum production and pharmaceutical production in the region”.

PriceWaterhouse Coopers is understood to have been appointed to value the estates NICIL wishes to privatise. Some reports suggest that in addition to DDL, Pepsi-Cola as well as other companies based in Trinidad and India are interested in investing in sugar in Guyana for food production.

Insight understands that consideration is also being given in Barbados to the purchase of around 2,000 acres of productive sugar lands to guarantee the long-term supply of molasses to most but not all the island’s distilleries. A group of companies are said to be concerned that following elections there, the country may have to enter an IMF programme and that this would require the winding down of the country’s heavily subsidised and largely unviable sugar cane production.

Speaking recently about the broader challenges facing the Caribbean rum industry, Mr Samaroo, who is also the Chairman of the West Indies Rum and Spirits Producers Association (WIRSPA), noted the need for a more general review of the regulatory framework for the local rum industry.

“Some producers in some countries enjoy subsidies, but we do not and therefore we have to be internationally competitive in what we do. The way forward has to be based on a competitive strategy so that we can carve our space in the global market,” he told the Guyanese media.

Mr Samaroo said that WIRSPA had recently undertaken an exercise to document the regulatory framework for the industry in the Caribbean and to compare it to the frameworks that exist internationally to produce other spirits such as whisky. He said that the industry was hoping to propose to CARICOM governments a regulatory framework that would bring it in line with international best practice, to better compete internationally.

A CARICOM working group chaired by Guyana is addressing challenges facing rum in relation to subsidies and unfair trade practices relating to spirits and other products that compete with rum.

This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication. Please follow the links on the right-hand side of this page to subscribe, or access a free trial.