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Barbados: New U.S. Laws Fuel a Spirited Rum Export Drive
The Wall Street Journal / October 2, 2000

By Larry Luxner

Barbados, which produces one of the world's oldest and most expensive rums, is hoping that recent legislative changes in Washington will open the door further to U.S. bulk rum imports.

"Our rum industry has done extremely well," says Patrick Mayers, chairman of the Barbados Rum Committee and deputy managing director of Goddard Enterprises Ltd., which produces Cockspur rum. "In the last 10 years, we have tripled our exports of rum, in spite of declining sugar production. We have spent a lot of time and money modernizing our distlilleries and making them more efficient. And we're trying desperately to break out of bulk rum exports and sell more rum as a branded product."

Barbados exports nearly $14 million worth of bottled and bulk rum annually. Mount Gay Distilleries Ltd., which produces only branded rum, represents about half that total. Goddard Enterprises accounts for most of the remainder, while a third entity, R.L. Seale & Co.'s Four Square Distillery, also has a sliver of the rum export market.

About 50% of those exports are bottled, branded rums like Mount Gay and Cockspur, while the other 50% consists of no-name bulk rum used to produce private-label and other brands. That's a significant improvement from 10 years ago, when the proportion was 90% bulk, 10% branded.

"In the long term, we will not survive in a commodity bulk market," says Mayers, "because we are a small island country and we cannot go head-to-head with massive rum producers like Brazil. Our future is niche markets."

A prime example of this is the upscale U.S. boating and yachting community. Thousands of well-to-do Americans who've never been to Barbados are familiar with Mount Gay -- an amber rum that's been produced in the northern parish of St. Lucy since 1703.

"We sell over four million bottles annually, and we're growing," says Claire Jordan, international brand manager at Mount Gay. "There's a unique historical connection between the islands, New England and Canada's maritime provinces, when in the early days, codfish and other commodities were shipped to Barbados and we exported rum. Those areas are still pretty strong rum consumption markets."

Jordan estimates that exports account for 80-85% of Mount Gay's total production, and that the United States buys 40% of all exports.

"Our brand has grown almost 40% in the last five years, having been the first brand to be exported," said Jordan, one of only 75 Mount Gay employees. "We then saw erosion of the brand when other Caribbean territories started to produce their own rums. Volumes from Mount Gay dwindled, but in the last 10 or 15 years we've made a concerted effort to increase quality, and we've firmly established ourselves in this part of the world for quality aged rum. We've been able to rebuild the brand significantly."

Mount Gay, which is 90% owned by the Remy-Cointreau Group of France, produces several branded rums from molasses purchased locally and on the world market. Its flagship brand, Mount Gay Eclipse, retails in the United States for an average $13.50 per 750-ml bottle. Sugar Cane Rum and Special Reserve sell for around $16 a bottle, while Extra Old -- Mount Gay's super premium rum -- goes for $32-35 per bottle.

Unlike the three other brands, Mount Gay Eclipse is bottled at the Jim Beam facility in Kentucky using rum imported from Barbados, says Jordan, "simply because it's cheaper to ship liquids than finished goods."

A $1 million ad campaign, coordinated by Clockwork Advertising, a division of Adair-Green in Atlanta, employs posters in New York subway trains as well as outdoor advertising aimed at Mount Gay's target audience.

"Our brand benefits from a larger-than-life imagery. Consumers visit us and are often surprised at how small our facility is," says Jordan, estimating that 25,000 visitors tour the Mount Gay distillery every year. "For us, this is an excellent tool for brand exposure."

Major competitors include Bacardi, the world's No. 1 rum brand, as well as Jamaica's Appelton Estates, Haiti's Rhum Barbancourt and Cruzan Rum of the U.S. Virgin Islands.

Bulk rum exports, meanwhile, could get a boost, thanks to the recently passed U.S. Caribbean Basin Trade Partnership Act. An attachment to the new law, which took effect Oct. 1 and focuses mainly on the apparel and textile industry, allows duty-free access into the U.S. market for Caribbean rum, even if it's bottled across the border in Canada.

Before this, rum from Barbados and other Caribbean countries could take advantage of the CBI trade loopholes only if it came direclty into the United States. But that created problems for brands like Cockspur, said Mayers, who's also chairman of the West Indies Rum and Spirits Producers Association.

"Many of us had traditionally been bottling in Canada, so we wanted to use our facilities in Canada to bottle also for the U.S. market, in order to take advantage of economies of scale. But because the product was coming through a third country, when it got to the U.S. it was subject to duty," explained Mayers.

"As a result of this correction, Caribbean rum is now in a better position to access both the American and Canadian markets. It helps us reduce our costs, and gives us flexibility. This cuts both ways. Some of us who only bottle in the U.S. and Canada can now concentrate mainly on bottling in the U.S. It's a benefit for the U.S. as well because it allows us to consolidate and be more competitive."

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