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BEHIND THE HEADLINES: Open more markets to rum


TONY BEST

BEHIND THE HEADLINES: Open more markets to rum

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IT’S NOT A CASE of Hobson’s choice, which when it comes down to the bottom line is no choice at all. But it’s a matter of diversifying Barbados’ rum export markets.

So, as Barbados, its CARICOM neighbours, the Dominican Republic and Puerto Rico grapple with the conundrum caused by the massive, unfair and potentially illegal subsidies the United States Virgin Islands (USVI) is providing to the British-owned rum producer Diageo, and Cruzan rum, a company owned by Jim Beam, that in turn in turn is controlled by Suntory, a Japanese enterprise, the question Barbados rum exporters must face soon is where do they go from here?

Should they continue to rely on the US for their rum export earnings or diversify their markets by going into China?

Dr Chelston Brathwaite, Barbados’ ambassador in Beijing, raised the issue in a recent conversation with BARBADOS BUSINESS AUTHORITY, insisting that diversification is the answer.

johnbeale450x350While John Beale (left), the island-nation’s top diplomat in Washington agrees, he was clear about a key thing: yes, he said, Barbados and other countries in the region are seeing their rum exports to the US fall because of the USVI subsidies to the foreign-owned companies with plants there, but the truth is that America offers Barbados its best export choice as a market.

“We should make every effort to open new markets for our rum. That’s fine,” he said.

“It is good business sense. It gives you opportunities. But having said that there is no doubt about it, the United States is the major market for us.

“Not only that. It’s a market in which we are known. We are known in the US for a very long time.

“We have clients; we have a reputation, a brand and all the things that go with them. So while China can be interesting as an addition, China should never be seen as a substitute for the US.

“Stated simply, it should be seen as another market, another area for expansion.”

Of course, Brathwaite, a former director general of the Inter-American Institute for Co-operation on Agriculture, didn’t suggest Barbados should jettison the US market altogether and turn exclusively to China. Essentially, he shared Beale’s view, which was seek another place where Barbados rum can make a name for itself.

“We can sell to China as well as the United States,” Brathwaite said.

What he was also urging the rum producers to do was to emulate Chile, which was now a major supplier of wines to China. After all, the ambassador to China was quick to point out, the distance between the South American wine producer and China is greater than the space which separates Barbados from China.

But Beale was quick to insist it would take time for Barbados to develop a viable market in China.

“In business it is not like switching on and off a light bulb. Then there is the question of the marketing and distribution centres. China and Japan, for instance, have different levels of distribution and all kinds of rules and regulations,” he said.

“These things present some opportunities but they also have their challenges to overcome.

rum-barrels-2015Rum is one of Barbados’ main exports.

Federal taxes

No matter how good you are, you can’t do these things overnight. We didn’t spend all of these years creating the brand and developing the market in the US then to have it disappear,” Beale said.

The hard fact of life is that Barbados’ share of the US market is under threat and something must be done to stem the erosion caused by the use of US federal excise taxes collected on rum produced in and imported from the USVI and Puerto Rico, but returned to the two countries and then used to subsidise the production of rum in the US territories.

“The level of subsidies introduced by the USVI is so huge that it covered 100 per cent of the construction cost of the rum facilities in the USVI; all production, marketing and distribution costs; as well as customs duties, corporate income taxes and exemption from all sales taxes and property taxes,” asserted a Caribbean diplomat in an aide memoire on the rum issue.

The impact on Barbados, the Dominican Republic and other Caribbean rum producers was so great that it could “decimate, if not destroy, the Caribbean rum industry,” the document warned.

And that’s where China can come as the battle against the subsidies continues on the legislative front in Washington. Lawmakers there can place a cap on the amount of
“cover-funds” Puerto Rico and the USVI can pass on to its producers. But the House of Representatives and the Senate are unlikely to place such a ceiling on the subsidies, and that’s particularly true now that both houses of Congress are in Republican hands.

So as the effort which Beale is leading continues, Barbados and other Caribbean producers should accelerate their search for new places to sell their rum, and China is one of them.

“It would make good sense to try to diversify your clients,” Beale argued.

“That’s something the – liquor producers [in Barbados and elsewhere] should really look at and come to terms with the real potential of that market,” meaning China.

Clearly, it is not a case of the US or China, but both markets.

 

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