Half Empty or Hall Full: What’s Next for Caribbean Rum?

The production of rum is a key part of the cultural identity of the Caribbean. For generations, nations throughout the region have made rum for consumption at home and export abroad. Because of rum’s ubiquity and the sizeable industry that surrounds it within this locale, it’s seen as the region’s signature drink, in the same way as wine in Italy, or sake in Japan. 

Even though this identity is well-established, it would be a mistake to regard it as static, or consider it immune from changing environmental circumstances or growing competition from abroad. As emerging trends indicate, the rum industry is set for a momentous period as it moves into a new year and new decade.

The Global Industry at a Glance

The international rum industry is projected to generate US$ 17bn of revenue during 2020. What may be surprising to some of our valued readers here, given the iconic connection between this region and rum, is that the biggest rum-producing nations of the world are not within the Caribbean but are the United States and Germany. However, there are certain caveats that factor in (see below) and unquestionably Caribbean nations have much to look forward to when it comes to growing their own market share in the near future.

A Toast to Brexit

Although some Britons may be bereft that the UK has officially left the EU, Caribbean rum producers are well-placed to celebrate such news. In March 2019 the CARIFORUM-UK Economic Partnership Agreement, signed between the UK and multiple Caribbean states, including Saint Lucia, was welcomed by the West Indies Rum and Spirits Producers Association (WIRSPA). As a result of this agreement, any exports to the UK from signatory nations will not be subject to tariffs. As well as being good for local banana and sugar cane producers for whom the UK is a key export market, it is great for rum makers, especially as the end of 2019 saw news that rum sales in the UK had broken the £1 billion ceiling. 

Such a feat is not simply a chance occurrence, or attributable to favourable trade deals alone. There has also been a concerted effort in recent times to ‘re-invent’ rum, in the same way that gin and beer have consolidated a new identity in many markets around the world. Rum producers have been seeking to give the drink a revamp that highlights its premium offerings, and the revenue data shows that the push is working.

No Hope for Havana?

US rum giant Bacardi has been trying to reclaim its title as the biggest rum seller globally. 2018 saw it make solid inroads with sales performance, lifting global case sales from 16.8 million on the previous year to 17.1 million. Nonetheless, the brand has not been without controversy lately as a Washington DC decision poured flames on the fire of a regional rum dispute.

Although Cuba accounts for only approximately 3.5 per cent of the global rum market, this share is more than that of other regional nations like Barbados (2.7 per cent), Nicaragua (1.6 per cent), Trinidad and Tobago (1.4 per cent) and Panama (1.2 per cent). While the United States’ annual production volume means that Americans are unlikely to be short of a bottle if an occasion arises, Cuba is embattled in the Trump era, trying to maintain an industry that produced almost 400,000 hectoliters of rum worth US$ 136mn during 2018. 

The Trump government’s re-activation of the Helms-Burton law is a growing headache for the nation’s Havana Club brand, with the Cuban state seeing a competing foreign ownership claim by Bacardi. Presently Bacardi distills and sells Havana Club despite the dispute, doing so via the bottling of Puerto Rican rum under the HC name. 

This means that Bacardi does not suffer from the sanctions and need not wait until this contest is settled to begin using the brand, but Cuba’s Havana Club and other Cuban producers continue to feel the squeeze. 

The Pros and Cons of a Caribbean Climate

The legacy of hurricanes – most recently the carnage of Irma and Maria – is evident in the production of local rum. The British Virgin Islands’ Tortola brand, Beam Suntory’s Cruzan Rum Distillery in the US Virgin Islands, and Puerto Rico’s Don Q Rum all suffered as a result. 

When compared to the global strength and scope of a brand like Bacardi, it speaks to a bitter reality that remains a key challenge for Caribbean rum producers, and many Caribbean industries generally: the capacity to maintain and grow market share can be wiped away in an instant by the savagery of a hurricane. That said, there is something of a silver lining in any assessment of environmental factors that can impact the local industry. 

Although climate change and its effects threaten to embattle liquor production in colder climates (a 2018 heatwave caused numerous Scottish distillers to halt production for an extended period with some reportedly losing a whole month’s work before the year ended), the distillation process in the warm Caribbean is not impacted in the same way by a change in temperatures. While rum, unlike other liquors, can easily be made in many parts of the world, the Caribbean’s warmer climate sees the maturation process occur at a significantly faster rate. By way of example, liquid evaporates in this region at a rate of up to 10 per cent per year, whereas in Scotland it tops out at 3 per cent. 

As a result, the Caribbean will retain a natural advantage for many years to come. The climate here makes it easier and quicker to produce brilliant tasting rum and, even if competition is growing from beyond the region, so too are export opportunities.