Wednesday, July 20, 2011

Serralles In Tough Fight Over Puerto Rico Rum Rebates

(by Shanken News Daily) Diageo’s decision to move production of Captain Morgan from Puerto Rico to the U.S. Virgin Islands (USVI) continues to send ripples through the Caribbean rum industry. Diageo was enticed by the USVI’s offer to return much higher tax rebates than the company was receiving in Puerto Rico. The Diageo USVI distillery is now operational and is slated to handle all of Captain Morgan’s output by next year. In all, Puerto Rico lost 9 million cases of Captain Morgan annual production in the deal.

Puerto Rico has since reached new incentive agreements to keep Bacardi, as well as smaller player Club Caribe, on the island for the next 20 years. But one holdout is Destileria Serralles, Captain Morgan’s former Puerto Rican producer, which lost 70% of its volume when the Captain set sail for USVI. Thus far, negotiations between Serralles and Puerto Rico on a new incentive pact haven’t borne fruit.

Serralles complains that it’s being offered a far less favorable tax rebate than Bacardi, mainly because Puerto Rico is making a distinction between branded and bulk rum. Bacardi will receive 46% of tax revenue on its branded rum production (similar to Diageo’s deal with USVI) while Serralles is being offered only 25% on its bulk production. Serralles’ branded business is led by DonQ, but bulk production constitutes most of its business. Bacardi rum’s U.S. volume is 9.4 million cases, nearly all of which is produced in Puerto Rico. Bacardi’s Castillo rum brand, which depleted 940,000 cases in the U.S. last year, is also produced in Puerto Rico.

Click HERE for the complete story. Please visit us at The Rum Shop for all your rum-related needs, including purchasing rum on-line, rum recipes, rum tasting notes, rum event information and rum consulting services. "Got Rum?" Magazine is back in circulation, get your free copy HERE.

No comments: