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Caribbean Rum Producers Look to EU Grant
Impact International / January 1, 2002

By Larry Luxner

GEORGETOWN -- Guyana's Demerara Distillers Ltd. (DDL) and 17 other rum distilleries across the Caribbean will benefit from a 70 million-euro grant aimed at helping the region recapture rum markets lost through trade liberalization.

According to a press release issued Dec. 19 by the European Union office in Georgetown, Guyana, the four-year project will begin in June 2002, with the objective of boosting the Caribbean rum sector, "thereby contributing to economic and social development, and preventing socio-economic deterioration triggered by trade liberalization" and the loss of European trade preferences.

In 1996, the United States and the EU agreed to open up the rum market in a "zero for zero" arrangement. Producers who previously had enjoyed quotas under the Lomé Convention and were involved mainly in the export of bulk spirits now face competition from cheaper rums. This has resulted in lower export volumes and lower profit margins, say officials of the West Indies Rum and Spirits Producers Association (WIRSPA), a regional trade group.

"After many years of hard work and lobbying in Brussels, WIRSPA was able to get the EU to agree that damage was done to the Caribbean rum industry, and that there was a need for some form of redress," said Yesu Persuad, chairman of DDL in the Guyanese capital of Georgetown.

Benefitting from the EU grant are the Dominican Republic and the 15-member Caribbean Community (Caricom), which is headquartered in Georgetown and includes leading rum-producing nations like Guyana, Jamaica, Barbados and Trinidad & Tobago.

Persaud confirms that DDL will be the sole beneficiary of the program in Guyana, because it's the only company in the former British colony that distills its own spirits and is a member of WIRSPA. He says that with the EU funds, DDL will be able to address environmental issues, acquire new distillery equipment, improve training for its staff and be able to better market its branded rums in EU member nations.

"The sum of money seems very large, but it has to be shared among 18 distilleries in the Caribbean," said Persaud, denying reports in the Guyanese press that DDL alone would receive a 13 million-euro grant. "Not a single distiller knows what he'll get, because it'll be based on proposals, submissions and the backing up of those submissions of the need for such a sum of money."

With annual sales of around $50 million and well over 1,000 employees, DDL is easily Guyana's largest privately owned company. The entity, which claims it's been distilling rum since 1670, was nationalized in 1975, though the government no longer owns any shares in DDL.

The company today is owned by 9,200 shareholders; these include all 1,000 DDL employees, as well as individuals in Europe and North America. It has thrived despite economic stagnation in Guyana -- an impoverished, sparsely populated country that depends largely on remittances from Guyanese living abroad, as well as on exports of diamonds, gold, bauxite, rice, sugar and timber.

"We've never sat still," said the 66-year-old Persaud, who has headed DDL ever since its 1975 nationalization. "We were always looking for new avenues of development, even when things were very difficult in Guyana. This is nothing. Today at least you have a free economy. During the days of the controlled economy, we were allowed to exist as a company, but all the foreign exchange that we earned went straight to the Central Bank. But we survived."

Persaud adds, however, that "the domestic market is very small, so you've got to export. We always had bulk exports to the U.K. and Canada, but it was restricted to a few customers. Then in the 80s we decided we had to get out of that trap and broaden our base, so we started selling to the rest of Europe. We're doing very well there today." DDL's top customers in Europe include Finland, Spain, Italy, Great Britain, Germany, Holland and Belgium.

"We also have great plans for the U.S., not only for premium but also standard products," he said, noting the recent establishment of an import subsidiary, Demerara Distillers U.S. Inc., in Miami.

Unlike other rum-producing countries in the region, most of Guyana's rum exports by volume are in the form of "high wine," an overproof rum that comes off the stills at 90-95% alcohol-by-volume, and between 163 and 167 proof. DDL reduces the strength of the high wine to 140 proof, after which it is aged in open barrels for up to 15 years, blended and bottled into various brands.

In 2001, the company's total rum production came to 25 million liters, of which bulk rum represented 60%. The remaining 40% consisted of branded products, led by its flagship brand, El Dorado 15 Year Old, which retails for $35 to $40 in the United States. The company also produces 12-year-old, 5-year-old, standard, dark, gold and white brands, as well as El Dorado Spice.

On Dec. 21, Persaud announced that El Dorado 15 Year Old had been named "Best Rum" for the fourth consecutive year at this year's International Wine and Spirit Competition in Great Britain.

Persaud said the achievement has aided in solidifying Guyana's status on the global rum market, particularly since products at the annual contest are judged by experienced rum makers and former managers of top distilleries around the world. DDL says its quest for rigid quality standards and a substantial investment of time and money through which the company attained ISO 9000 certification in 1995 -- the first Guyanese entity to do so -- was largely responsible for the success.

According to Persaud, DDL's biggest rivals come from the Dominican Republic -- particularly Ron Brugal -- though the competition also includes Mount Gay and Cockspur of Barbados, as well as Jamaica's Appleton Estate and, to a lesser extent, Haiti's Rhum Barbancourt. Puerto Rico's Bacardi, one of the world's top-selling spirits, doesn't even

"Bacardi is in a different category," said Persaud. "We in the distilling industry don't consider Bacardi rum, but it's rum. They've done an excellent job in terms of marketing, and they've now taken a few leaves from our books and have begun producing aged products."

Despite Guyana's location on the northern edge of South America, until recently it has had little trade with Brazil or the Spanish-speaking countries to its west and south. Persaud hopes to change that. His company's rum is now available in Peru, Ecuador and Bolivia, thanks to a subsidiary in Peru, and El Dorado rum is also sold at duty-free shops throughout Brazil. DDL has also begun distributing in Mexico, and recently sent its first rum shipment to Costa Rica and Panama.

"We were cut off during the British colonial days. There was no connection at all with South America, because we were considered part of the Caribbean," says Persaud. "That's changing. The mere fact we have an operation in Peru is an indication of that."

In addition to rum distilling -- which accounts for $45 million of the company's $50 million in annual sales -- DDL is also involved in shipping, distribution, insurance and local bottling of Pepsi-Cola, Seven-Up, Slice and other carbonated beverages. DDL also owns a minority share in Demerara Bank Co., as well as a 40% stake in BEV Processors Inc., which exports Guyanese shrimp and other seafood products.

In December, DDL began utilizing a new $5 million bottling line to produce Red Square, which Persaud describes as a "vodka-based energy drink" with 5% alcohol content. DDL says Red Square, being produced for Hailwood International, a Liverpool-based concern, will help lift total sales in 2002 by around 10%, with profits also expected to rise 10% from last year's $10 million.

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