Komal Samaroo has played a pivotal role in the extraordinary changes in the rum industry over the fifty years he’s been a part of it, starting with Booker’s Rum Company in 1969. Today, he’s the Executive Chairman of Demerara Distillers Ltd. (DDL), one of the largest Caribbean rum producers, and home of El Dorado Rum.
During a recent trip to Guyana, I interviewed Samaroo in his office at Demerara Distillers Limited. In a separate interview we spoke about his role in as Chairman of the West Indies Rum and Spirits Producers Association, which you can read here.
Note: My two-part look at DDL and the Diamond Distillery is here.
Komal Samaroo: We produce a range of rums from the light, to medium body and the heavy rums. Our brand, El Dorado, is a blend of rums. We put together different distillates to create a rum that is balanced, that is smooth through aging, and that has character.
Matt Pietrek: Demerara Distillers Limited recently split its product lines into El Dorado and the Diamond lines. What was the thinking regarding that?
El Dorado’s position is a premium and aged brand. We found that because the
range was quite wide, we had standard El Dorado rums and very premium, aged El
Dorado rums. We were getting to a stage where consumers were becoming confused,
having tasted very premium product, and then come across a standard product in
the market. We thought it wasn’t doing our aged rums any justice.
We decided to separate the two, with the aim of making the Diamond Reserve a more versatile economy brand; a wider range of flavored rums and things like that. It got us greater flexibility in the standard end while preserving the premium-ness of El Dorado.
Matt Pietrek: Some rum enthusiasts have said they’d like to see a drier version of the El Dorado 12, 15, and 21-year rums. Is this on the horizon, and is there room for both your existing expressions and a drier version of them?
Komal Samaroo: Yes, I think so. We are conscious of consumers’ views, and as we go forward and set aside new stocks for aging, we will try it. Also, we will try to get our vendors to come up with rums that are drier expressions. It will be something phased in over time.
Matt Pietrek: Molasses sourcing has been an issue in Caribbean rum for decades. Many islands such as Barbados and Jamaica don’t grow enough sugar to meet their rum industry’s molasses needs. Even Guyana that has recently been in the news, as it was unable to supply the usual amounts it exports. What changes do you expect to see on this front, both Caribbean-wide and within Guyana?
Komal Samaroo: The sugar industry has been going through extremely difficult times. I believe, by and large, across the region they’ve given up on the industry being viable at all. However, in Guyana, while there has been a scaling down on production, the approach by the owners of the sugar industry, (which happens to be the state), is to invest to make it financially feasible.
They’re looking at things like mechanical harvesting,
power generation, using excess bagasse and selling power to the power companies
and things like that. There is a commitment by the shareholders in Guyana to
get the industry on a viable footing.
As a rum producer, we have been engaging with the industry to see how we can work together to meet the total requirements for our production. Yearly we need about 70,000 tons of molasses. We’re hoping that over the next few years we can work with them to get back to totally self-sufficient regarding molasses requirements.
Matt Pietrek: Do you see movement back towards producers like DDL owning their own cane fields, like in the past?
I personally don’t think so. We had looked at possibly
acquiring one of the sugar estates, contracting out the cultivation aspect
and directly managing the factory aspect. One of our board members worked in
the sugar industry, and we took all the inputs that we could get. In the end it
wasn’t a viable proposition for us.
In the final analysis, I believe that the existing industry with three sugar factories, if managed properly, could be viable and meet our molasses requirements.
Matt Pietrek: Yesterday we were talking about how Guyana had once nationalized the sugar industry. Can you give us a brief history of DDL since then, with key points along the way?
the mid-1970s there was a nationalization process. The government of the day
was pursuing socialist strategies, acquiring the interest of multinationals in
the sugar and rum industries, as well as other businesses.
Obviously under state management several of the other businesses have not been successful and they have since gone back to the private sector. The sugar industry remained owned by the government.
Over time, by raising additional capital from the private sector, the government’s controlling interest in DDL was diluted down to a very small minority, which they finally disposed of in the early 1990s. Now, the DDL is a public company with about 8,000 shareholders.
The sugar industry remains totally government owned – GuySuCo. I believe part of that was because of trade agreements the country had with the European union under preferential pricing arrangement associated with sugar. In addition to that, sugar had a very large workforce and they were part of a very active union, which was aligned with political parties. It became a very political organization.
Matt Pietrek: Was the privatization of DDL part of creating the El Dorado brand?
Komal Samaroo: Yes. We were primarily bulk rum suppliers, supplying European and North American bottlers. We were supplying European bottlers under the Lomé convention that gave us duty-free access for rum into Europe. But as you know, global trade was reorganized under the WTO and preferential access was no longer allowed. We anticipated the changes that were coming, so in the late 1980s we started transforming our existing domestic brand El Dorado into a premium international brand.
We launched the first international El Dorado expression
in 1991. The El Dorado 15-year-old was positioned at the very top end of the
rum market. We contracted designers from the UK and designed special packaging
and I think we were trailblazers at a time; there was no other rum in the
market at that price.
At first the market thought retailing around for $20 was not feasible. We’re delighted that times have changed, and people now accept that you can buy rum for $100 a bottle.
Matt Pietrek: As one of the larger Caribbean distilleries, DDL sells a lot of bulk rum. Do you see a day when all DDL’s rums go into your own house brand rums?
Komal Samaroo: Obviously we aspire to that day. I believe it will be some way off, but I definitely believe that eventually a combination of circumstances can make it happen. It depends on molasses availability on the one hand to meet the bulk rum market, and on the other hand, the growth in our brand. We can get to where our distillery production is primarily geared to supply our own brand.
Matt Pietrek: Why has rum been slow to premiumize relative to other spirits?
Komal Samaroo: Because we [rum producers] were never in the branded business up till 25 or 30 years ago, there was basically one international brand of rum.
Still in today’s market, a significant percentage of the population still knows rum as the white spirit they drink with Coke. Marketing of premium aged rums has been something that is fairly recent. In addition, apart from the brands owned by the large multinational companies, the smaller producers do not have the resources for aggressive international brand building that is required for their brand.
However, I believe that smaller producers can now capitalize on the whole concept of craft brands that have been growing quite significantly; it’s a big opportunity.
Matt Pietrek: Does the existence of multiple distilleries selling bulk rum make it harder to premiumize the rum market?
Komal Samaroo: Yes. There is such a capacity of bulk rum floating around that many small producers are buying bulk rum, bottling it, and adding their own brand story to it. I think the market is a bit confused. There is a need for the origin and unique profile of rums from particular origins to be taught in the marketplace. Unfortunately, that message is not very cohesive and I think that’s where much work needs to be done.
Matt Pietrek: What are some products or services besides rum where DDL is using its manufacturing and your bottling capacity?
Komal Samaroo: We recover carbon dioxide from our rum fermentation process to use in the production of soft drinks and carbonated water. We are the Pepsi bottlers in Guyana. We do Pepsi, Seven Up, and Slice for Pepsi, plus our own brand Soca. We produce [bottled] water which is a really growing market in Guyana.
Twenty years ago we acquired a small juice company using local fruits to produce juice. We established a Tetra Pak plant about fifteen years ago. That business is now expanding quite dramatically. We are expanding the Tetra Pak operation to go into the one-liter size. And, we are engaging the farming communities to expand their food production to feed into the process.
We also designed that process with flexibility to package milk as the government is moving to develop a dairy sector. We are looking at non-alcoholic beverages in the widest possible terms. We are also looking at our service areas, logistics, shipping, trading and distribution. We are investing a lot of money upgrading our assets and our properties to really provide that service to a growing economy. Particularly one on the verge of getting into the oil and gas sector.
Matt Pietrek: What are you most proud of accomplishing in the five years since taking over from Yesu Persaud?
Komal Samaroo: Since becoming chairman, I’ve focused on a few things. First, I’ve rationalized the bulk rum business, including withdrawing from a significant part of the very-low priced commodity business. We’ve aligned our bulk rum business, first and foremost, into our brand. Second, into third party brands. And third, major brand owners who include our bulk rum in their brand. We are no longer in the spot commodity rum business.
Matt Pietrek: By that, you mean selling bulk room to firms like E&A Scheer?
Komal Samaroo: Exactly. Also, at one stage we were storing in places like Amsterdam. That sort of business is gone. We’ve gotten out of the lower end of the bulk rum business. We’ve put greater focus on our branded business, including clarifying and updating our brand message.
Finally, we’re on a program of diversifying the company. The reliance on only the rum sector for shareholder returns will be less over time. We are expanding our manufacturing base and entering into areas like trading, distribution and other types of business.