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Caribbean Rum Under Attack

On January 1st, our dear Congress passed legislation avoiding the "fiscal cliff". But one "add-on" to the bill gives a huge gift to two mega-distilling conglomerates - Bacardi and Diageo - in the US Virgin Islands and Puerto Rico.

The effects of this are immediate and threaten the continued existence and availbility of Caribbean rum! Here's how:

1. The USVI and Puerto Rico receive nearly a billion dollars in subsidies, much of which is simply passed along to the mega-distillers.

2. The US also gave Diageo $2.7 Billion - yes billions - to move and build a huge distillery in the USVI

3. The new fiscal cliff law also imposes a huge penalty - $13.50 per gallon - for all other Caribbean rum.

Friends, this is a huge crisis. CARICOM - which represents the rest of the Caribbean countries and distillers - are furious, as this self-dealing move threatens their continued existence as rum producers, and a devastating blow to their economies, which are largely rum based.

Especially affected are the Dominican Republic, the Bahamas, Jamaica, Barbados and Guyana who are highly dependent on the now protected US Market. They face failure and going out of business. Accordingly, the CARIFORUM is now lawyering up and plan to challenge this insult, dirty dealling and what they cite as a direct and clear violation of the WTO regulations on free trade.

They are right. All rum lovers who hope to continue to enjoy a wide diversity of rum from all over the Caribbean must band together and protest this horrible giveaway to the already hugely profitable mega-companies, and who seem to operating from nothing beyond greed and profit, even if it destroys their smaller but honest competition.

There is a a petition against these unfair subsidies and taxes:

http://www.gopetition.com/petitions/s...

Personally, I am appalled at what has happened, especially in the dark of night and slipped into the fiscal cliff bill. To favor a very few - two politically powerful conglomerates - to seriously harm the many serves no one. I sincerely hope this action can be reversed as the idea that we may lose access to our favorite Caribbean rums is simply unthinkable.

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  1. Jimbo, do you know if the 13.50 per gal is "above and beyond" whatever was previously in place, or are we talking about a prior tax of X that will be increased to Y (13.50)?

    If it's a full above and beyond, then 13.50 per gal is around $2.67 per 750ml bottle. I don't like an additional 2.67 but it won't deter me from buying my fave Carib rums. However, a 2.67 per bottle increase probably will affect total demand, no doubt.

    On the other hand, the main Diageo rums in the US are Meyers and Capt Morgan (yes?), neither of which I'm really fond of. Zacapa is a guatemalan in their portfolio and it's already priced at a point I don't buy it.

    Diageo's two venezuelans... Cacique I had my share of while on business in Venezuela in the 70's, it's okay but again nothing I buy today. Haven't tried Pampero...

    For Bacardi, I've blind-tasted every rum in their portfolio and don't like any of them...

    .... bottom line is for $2.67 they won't push me off my two fave rums, both from the Caribbean (Appleton Gold and Pyrat). But for people who are very price-sensitive and don't particularly savor one rum over the other it doubtless will have an impact. Thanks for bringing attention to this!

    1 Reply
    1. re: TombstoneShadow

      The taxes - which will not change - are not the issue. Far more important is that ALL the taxes collected - about $500M per year, are being rebated to the USVI and Puerto Rico, which funnel most of them to Diageo (Capt Morgan), Fortune (Cruzan) and Bacardi.

      That's free money which has been increasing as these Big Three take over more and more of the rum shelf space! Worse yet, the USVI have given - yes given! - just last year subsidies worth $3 Billion (yes, Billion) to Diageo and $1 Billion to Fortune.

      Diageo is actually collecting more than double the cost to actually produce the rum, and essentially is being paid to produce rum. Fortune's deal is similarly sweet, with these amazing sums paying for new facilities and allowing Cruzan to purchase molasses for just 16 cents/gallon - while everybody else has to pay about $2.00 gallon.

      These subsidies are so massive that the rums of Barbados, Guyana, Jamaica and the Dom. Republic especially, may not be able to continue in business. They are completely upset as the loss of rum distilling not only affects their small economies but is culturally damaging.

      These subsidies are hardly needed, are completely unfair, with billions of US Tax dollars going to - yes - foreign corporations, esp. Diageo. It is a travesty, completely unfair, unneeded, un-competitive, anti-quality and anti- selection.

      I have watched what were the terrific selections of Caribbean rum get forced off the shelves year by year until now, when the Big Three dominate 90% of the shelves, and 100% of the prime, eye-level displays. They have the volume and clout to demand and receive this space.

      If you love rum, the time is now to fight back and sign the petition (linked in several places here) and object to these subsidies. If we wait, it will be too late and any damage simply cannot be undone...

    2. This is not a new tax. An old tax was simply reauthorized. It was set to expire on Jan 1 and the cliff deal reauthorized it.

      Per the Washington Post and the Wall Street Journal, the tax on rum was instituted in 1917 and has been reauthorized continually since then.

      I don't think any of the tax breaks in the cliff deal were new, so from Nascar to hollywood movie tax break these are all old benefits that got extended for the future

      2 Replies
      1. re: quazi

        If it were only the taxes, it would not be an issue. Even so the taxes from the USVI and PR are rebated, to the tune of over $6 Billion dollars since 1994. In addition Diageo and Cruzan are also the beneficiaries of another $4 Billion, plus forgiveness of taxes, and more!

        The benefits to Diageo is actually double the cost of producing the rum. The USVI subsidies actually built their distilleries, and forgave them all manner of other taxes for 30 years. Cruzan received huge amounts to improve their distillery, build a wastewater treatment plant, and were guaranteed the ability to buy molasses at just 16 cents/gallon, far, far under the market cost of $2.00/gallon.

        Bottom line: roungly $10 Billion dollars of competition destroying freebies to the Big Three, They get the (massive) gold while our beloved Caribbean rums get the shaft and no real support whatever.

        Hardest hit and at greatest risk of failure are rums from Barbados, Jamaica, Guyana, the Dominican Republic, and the Bahams - which represent the heart, soul and history of rum as we kinow it.

        This is horrible and we must support our Caribbean friends. Please sign the petition, linked above somewhere...

        1. re: Capn Jimbo

          ".....Hardest hit and at greatest risk of failure are rums from Barbados, Jamaica, Guyana, the Dominican Republic, and the Bahamas - which represent the heart, soul and history of rum as we kinow it...."

          That's a fact.

      2. Oops, slight error:

        2. Should be the USVI gave Diageo $2.7 billion to move and build a distillery there. This amounts to a huge new free facility.

        This does not include other such side deals, which are many. For example the distillers there can purchase molasses for 16 cents/gallon rather than $2/per gallon.

        Sir Ronald Sanders, a Commonwealth commentator had this to say:

        "Earnings and employment generated by the rum industry in 14 CARICOM countries and the Dominican Republic (collectively CARIFORUM) are under siege and the entire industry could be severely diminished in a few years unless the governments of these countries take swift action."

        "In previous commentaries, I have drawn attention to the devastating effect on CARIFORUM countries if the US Virgin Islands (USVI) and Puerto Rico (PR) are allowed to continue current arrangements in which the governments of those two US possessions unfairly use a tax rebate from the US Federal Government to provide huge benefits to companies to produce and market rum for the US market. Now a comprehensive report commissioned by the Commonwealth Secretariat, highlights a major threat to exports of CARIFORUM rum to the 27-nation European Union (EU)."

        "When losses from the US market - that are now very real because of the actions of the USVI and PR – are added to the potential losses from the EU market, on the strength of 2011 figures DR remains the biggest loser per annum in money terms (US$88.2 m), Bahamas second (US$34.9 m), followed by Jamaica (US$25.4 m), Barbados (US$25.3 m) and Guyana (US$16.08 m)."

        " The reduction of sales in the US market will have an adverse effect on their financial capacity to survive, let alone continue to manufacture rum for the EU market at a competitive price. This is particularly true for Barbados for whom the US is the biggest rum market worth US$17.2 m, or twice as much as the EU market, in 2010."

        The five most affected countries, and who are most severely affected are the Dominican Republic, the Bahamas, Jamaica, Barbados and Guyana. CARICOM feels strongly the US subsidies are a violaton of the WTO Rules, and have lawyered up in this regard.

        As they should.

        Even smaller American distillers are concerned. According to the NY Times:

        "Distillers on the mainland are concerned about a $1 billion subsidy the Virgin Islands recently awarded Fortune Brands, the American company that makes Cruzan Rum, Jim Beam Bourbon and other spirits.".

        Quoting Phil Prichards of the wonderful Prichard Fine Rum of Tennessee:

        "“If our own federal government is also letting its taxes subsidize foreign corporations and offshore producers, it makes it harder to survive,” said Philip E. Prichard, whose independent distillery in Tennessee makes rum and bourbon. “It flies in the face of entrepreneurship.”

        The bottom line are these:

        1. The tax difference alone is substantial and anti-competitive enough, but these pale next to the huge multi-billion dollar side deals and special subsidies made to Diageo, Bacardi, Cruzan and Captain Morgan.

        2. Add to that the losses of EU's monies and the bulk of Caribbean rums that we know and love are in deep trouble and may not survive.

        3. Even American distillers are concerned over deals that favor three huge corporations that already dominate sales. These deals represent power politics and big money working to eliminate their competition using any means at their disposal, short of actually producing a better product.

        5. These mega corporations already own 90% of store shelf space, and 100% of the prime space, with ever fewer fine Caribbean sipping rums being literally squeezed out.

        6. In the last couple years, these unearned advantages have escalated dramatically, and have nearly quadrupled in about the last ten years. These are anti-competitive, anti-selection and anti-quality.

        For those who may have missed it there is a link to a petition in the OP, above. All those who love and value fine Caribbean rums, who value selection and availability of these famous rums at fair prices should be sure to sign the petition in support.

        It is the least we can do for our Caribbean friends and to preserve the wonderful rums made by smaller distillers all over the 26 countries and islands that make up CARICOM, our beloved Caribbean rums.

        1. These political maneuvers do result in price advantages to what I consider marginal rums. Flor de Cana, Centenario, Havana Club, Cacique, and Barrel 1,from Nicaragua, Costa Rica, Cuba, Venezuela, and Belize respectively, are attractively priced without subsidies. Orinoco from Brazil is an interesting premium, a cachaca-rum hybrid, but compelling. A profusion of aged rums are now getting more shelf space than ever; I'm encouraged by the trend.

          2 Replies
          1. re: Veggo

            Not true. All the 26 countries of CARICOM, including these are affected.

            The situation is so extreme that many of the Caribbean rums we love and take for granted may be forced out of business. Even American distiller Phil Prichard (of Prichard's Fine Rum) has objected publicly in the NY Times:

            “If our own federal government is also letting its taxes subsidize foreign corporations and offshore producers, it makes it harder to survive,” said Philip E. Prichard, whose independent distillery in Tennessee makes rum and bourbon. “It flies in the face of entrepreneurship.”

            The NY Tiimes article is extremely enlightening and will change your mind, check this out...

            http://www.nytimes.com/2010/10/16/bus...&

            Also, I'd ask you to check the preamble to the petition to Save Caribbean Rum and then please come back and comment. It is shocking...

            http://www.gopetition.com/petitions/s...

            The thought that the Caribbean rums we have all come to love may be driven out of business is horrifying.

            1. re: Capn Jimbo

              I signed your petition. I was unaware that these lobbyist-driven subsidies were so egregious and unbalanced, and frankly unnecessary. The beneficiaries must be laughing all the way to the bank.
              Unfortunately, when political officals make unwise or corrupt spending decisions, they can be difficult or impossible to undo.

          2. I have to say I am appalled at the low level of interest of concern over the fact that many of our favorite Caribbean rums are now at risk of either going out of business or even worse, having to sell out the Big Three - Diageo, Fortune or Bacardi.

            Caribbean rum represents over 300 years of history and tradition, with many small island distillers producing fine aged rums like Mount Gay Extra Old, Appleton Estate 12, Barbancourt, Ron Matusalem, and of course the El Dorados, and many, many more.

            The massive subsidies, especially in the last year of over $4 Billion of free money to the Big Three has completely upset the market, and our Caribbean distillers simply cannot compete and stay in business.

            How can we possibly ignore their plight? Once lost, we will never see fine rums like these again. Are we that ignorant, that uncaring?

            There is plenty we can all do, at least those with the cajones to care and to speak out. You can bring attention to this issue all over the net. You can write your congressman? You can complain. And last, you can sign the petition that has been linked above...

            For those who doubt this is real, kindly post and let's have a real discussion. I can assure you the situation is real, extreme and frightening. Our Caribbean friends are now in a fight for survival and it really doesn't look good at all.

            Speak up!

            1 Reply
            1. re: Capn Jimbo

              When I ran the numbers on the impact on price on Carib rums, it was several dollars a bottle... I just wonder what the price point has to be before there's a significant impact on demand. I'm somewhat price inelastic on these, I'll spend another couple bucks if it's what I want but not sure everyone will.

              Then there's the question of whether it affects the higher end of the Carib market or the lower end. Seemingly adding $2 to a $15 bottle of nice Jamaican rum is a bigger percentage increase than adding the same $2 to a $30 bottle of Pyrat.

              Food for thought.

            2. As the saying goes in Florida, 'That dog don't hunt'. The folks with the biggest lobbiests get the biggest rewards. Generic rum is going for $11.99 today. My favorites of Appleton Gold, Flor de Cana, Black Seal, and Sailor Jerry for a spice, all exceed $20.00 at 1.75 liter.

              If anybody can point me to a small batch CARIFORM rum that is selling in the $11.99 range in 1.75 liter bottles, I would be much appreciated.

              Care to compare the EU tariffs? And how about the unfair advantage of Martinuque and Guadalupe being members of the EU and avoiding any additional tariffs.

              I seriously doubt if Fire in de Hohe rum from the Bahamas or Stroh rum from Austria is looseing any sleep over this. And the distillers on the mainland USA can always relocate to USVI or PR to take advantage. But then they would have to pay back local government for the tax breaks they might have received to locate where they did. Which is one reason why Florida draws so much industry. Doesn't hurt that it is 78 to 80 F today.

              1 Reply
              1. re: INDIANRIVERFL

                Actually the Bahamas are very much affected in terms of sales. Stroh is not a factor. Although all the non-subsidized Caribbean rums are all now fighting for their survival, the most affected distillers are in Barbados, Jamaica, Guyana, the Dominican Republic and the Bahamas.

                It is impossible for them to compete with the USVI's Diageo and Fortune Brands (Cruzan) when these huge companies receive $4 Billion in subsidies. Diageo actually receives more than double the cost of making the rum, whille Cruzan gets practically free molasses to make it with. The unsubsidized Caribbean rums just can't compete.

                All distillers are highly dependent of sales of white, gold and bulk rums. Without these they simply cannot afford to make and age their much more expensive aged rums.

                Cut off the body and the head cannot survive. I urge everyone to read and to sign the official formal petition to Save Caribbean Rum which is linked twice, once in the OP, and once later.

              2. A few things to note. I'm not endorsing this deal by any measure, but...

                1. This deals favors producers in US territories. This is not a (un)happy coincidence.

                2. Online petitions pretty much never accomplish anything.

                3. and sorry to get personal, signing a petition with your online nickname just confirms why #2 is true. You can't expect serious people to take you seriously if you can't even use your real name.

                The US is an economic bully. Politicians are corporate whores. This is nothing new. If you really care about economic injustice, why not fight for the American small businesses that get squashed by corporations?

                5 Replies
                1. re: rcb4d

                  Your thoughts are appreciated, but let's clarify a few things.

                  1. The producers who are favored are not even American. Diageo recently received $3 Billion dollars of free money. They receive double the cost of the rum to be produced.

                  2. Phil Prichard - a very well know small American Distiller - was public quoted in the NY Times:

                  “If our own federal government is also letting its taxes subsidize foreign corporations and offshore producers, it makes it harder to survive,” said Philip E. Prichard, whose independent distillery in Tennessee makes rum and bourbon. “It flies in the face of entrepreneurship.”

                  3. The petition is NOT just another meaningless poll which does not solicit or report real names. Go Petition makes possible a real and formal petition with both a preamble and petition request. It is linked above - do click on the link and you'll see.

                  Of the first 45 signatures, I believe 42 used real names, and cities. Even anonymous signers are required to provide an email address and location. Properly designed E-petitions are now replacing written petitions and depending on the governmental entity, when properly designed and presented often become part of the legal discourse and record - just as if you testified - and must be considered.

                  These are not like the stupid click "like/dislike" or media polls which mean nothing. Go-Petition is a vehicle for legitimate and meaningful petitions of real potential impact.

                  Go-petition is a simple way for all of us to express our extreme concern over the loss of Caribbean rums, and damage to American distillers as well. It is safe to say that being silent, skeptical or walking away is a sure loser.

                  It only takes a moment to read and sign the petition if you agree. The petition is linked above...

                  1. re: Capn Jimbo

                    1. The producers that you are endorsing and trying to save aren't American either. I don't like the handouts to multinational conglomerates, but the people they employ in PR and USVI are American citizens. These employees pay US Federal taxes, serve in the military, and have a representative in Congress. Their economic well-being has more of an impact on the US, as a whole, than does the other rum-producing islands.

                    2. He's right, for the most part. But you're missing the bigger picture. Our own Federal government's willingness to subsidize ANY major corporation - foreign or domestic, and regardless of industry - makes it harder to survive and flies in the face of entrepreneurship. This isn't an isolated problem in the rum markets.

                    3. A sample listing of Go-Petitions this morning:

                    "Request Baltimore Ravens Cheerleader, Courtney L to be Reinstated & Attend Superbowl with her team!"

                    "Applebee's: Rehire Chelsea & We'll Eat At Your Restaurant At Least Once In 2013"

                    "Bring back the Windows Start Menu"

                    Hence my criticism. Even the White House's petition site has been overrun by nonsense; it's just too difficult to separate the wheat from the chaff when you're dealing with the relative anonymity of the internet.

                    I understand that you're a rum fan, on a spirits-centric message board, and I'm honestly not trying to stifle your efforts. I just think that this culture of corporate welfare far exceeds the scope of rummies and islanders, and that folks should concentrate their efforts on stopping this practice within our borders first, given the fragile state of our economy.

                    And now that my bluster is done... I signed your damn petition. =)

                    1. re: rcb4d

                      Thanks for signing. Although you managed to cherry pick a few silly ones, It should be noted that Go-Petitions has had hundreds of succesful petitions that got things done.

                      For example:

                      A small town post office was saved. An application for Canadian Heritage CAPF funding for 2013-14 and 2014-15 has been approved by the Canadian government. A Tanzanian refugee was freed from immigrant detention. A troupe of denied gymnasts were allowed to compete in the 2012. Olympics.

                      There are literally hundreds of success stories reported by other Go-Petitions...
                      .
                      http://www.gopetition.com/success-sto...

                      As far as the petition to Save Caribbean Rum (and small American distillers too) please see the link in the OP. At least read it, and if you agree, do sign. It seems the magic number will be around 20,000 signatures, a number that gets attention...

                      1. re: Capn Jimbo

                        If mt gay brings back "special reserve" they will get my support. Until then they can suck it.

                        Hello tequila. (They didn't respond to my inquiry so I'm wounded).

                        Ps- my generation feels they have no voice or power with govt hence my flippant response. U r screaming in the wind IMO.

                        1. re: e_bone

                          Giving up is not a solution. True lovers of spirits are tremendously loyal to their brands - taking a minute to sign the formal petition is no great imposition, and the chances of success rise dramatically with the number of legitimate signatures presented.

                          Already two of our US congressman are concerned and are now involved in working to correct this issue, especially because the main beneficiary of US taxpayer dollars - billions - are being funneled to a foreign corporation - Diageo!

                          Independent American distillers are also furious and are making their voices heard through their Association, and individually. The most affected: Barbados, Jamaica, the Dominican Republic and Guyana.

                          These countries pioneered rum as we know it. To lose them to Captain Morgan and Cruzan is a travesty. Look, we all feel helpless but the truth is that steps are being taken by governmental entities who have taken note. Thus, our speaking in unity as voters really does have an effect.

                          The petition - http://www.gopetition.com/petitions/s... is a formal one, designed to meet the qualifications for insertion into governmental records, and must be considered as if you actually testified. There is opportuntiy to add your comments if you choose.

                          On this website we all care about good food and drink - whether great wine, whisky, tequila, rum or whatever, and good food, we all value the wonderful offerings from around the world. We don't want to lose them to unfair subsidies and mega-corporate crushing of them.

                2. The petition to Save Caribbean Rum has really taken off, particularly since it was signed by both authors Dave Broom and Davin Kergommeaux. Davin wrote a must read article about this issue...

                  http://www.canadianwhisky.org/news-vi...

                  The petition has also been signed by a number of rum webmasters, and other spirits experts who understand this tremendous threat to both Caribbean and US distillers of rum who can simply not compete.

                  For those who wish to read and perhaps sign the petition, it is in the OP. We must all stick together on this one.