Diageo hits back at Bacardi in rum war

An astonishing war of words has broken out between Diageo and Bacardi, with the world’s biggest drinks company accusing the rum producer of leading a “hidden campaign” to drive Captain Morgan out of the United States and “destroy the economy of the US Virgin Islands”.

Diageo says Bacardi is seeking to protect its own substantial rum subsidies from the Puerto Rican government.

Guy L. Smith, executive vice president of Diageo North America, said: “An historic and innovative public-private initiative forged by the U.S. Virgin Islands that would lift the US Virgin Islands’ economy out of crisis is under attack by the entrenched corporate interests of a wealthy family seeking to maintain their decades-long grip on rum subsidies.
 
“Bacardi Limited, which receives tens of millions of dollars a year in annual government rum subsidies, has made a calculated decision to try to drive a competitor out of the United States even though it would be a disaster for the U.S. citizens of the Virgin Islands.

“And why is Bacardi doing this? They know that because of a quirk in federal law they can protect their huge government subsidies by driving Captain Morgan rum production anywhere rather than the US Virgin Islands.”

Diageo has an agreement with the US Virgin Islands for a new rum distillery on St. Croix, where it will produce Captain Morgan for a minimum of 30 years from 2012, when its contract with Puerto Rican rum producer Destileria Serralles expires.

The National Puerto Rican Coalition (NPRC) last week claimed that Diageo will receive $2.7bn in subsidies from US taxpayers for the move, and quoted Felix Serralles of the Puerto Rican producer as saying the subsidies will be “almost twice the cost of production of the rum.”

Smith hit back saying that Bacardi, which is a supporter of the NPRC, is “using a campaign of misinformation to get Congress to retroactively overturn” the Virgin Islands arrangement.
 
He added: “The company has been working behind the scenes in collaboration with other self-interested constituents and corporations and has used front groups and Puerto Rican politicians to make spurious claims about the U.S. Virgin Islands initiative.”

Bacardi denies it is motivated by the location of the new Diageo plant. Spokesperson Patricia M. Neal said: “This issue is about one point — the appropriate use of approximately 2.7 billion dollars in taxpayer money.

"This isn’t about where Diageo receives a free distillery, but about the proper use of federal tax dollars. Diageo has some explaining to do to the US Congress and American people.”

Alan Lodge, 24.02.2010