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Barbados in the Rum Global Value Chain

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Barbados in the Rum Global Value Chain Barbados in the Rum Global Value Chain FINAL DRAFT FOR REVIEW August 2017 Prepared by Danny Hamrick and Karina Fernandez-Stark Contributing researcher: Vivian Couto Duke Global Value Chain Center, Duke University Global Value Chains Center This research was prepared by the Duke University Global Value Chain Center (Duke GVCC) on behalf of the Organization of American States (OAS). This study is part of the establishment of Small Business Development Centers in the Caribbean. The report is based on both primary and secondary information sources. In addition to interviews with firms operating in the sector and supporting institutions, the report draws on secondary research and information sources. The project report is available at www.gvcc.duke.edu. Acknowledgements Duke GVCC would like to thank all of the interviewees, who gave generously of their time and expertise, as well as Renee Penco of the Organization of American States (OAS) for her extensive support. The Duke University Global Value Chain Center undertakes client-sponsored research that addresses economic and social development issues for governments, foundations and international organizations. We do this principally by utilizing the global value chain (GVC) framework, created by Founding Director Gary Gereffi, and supplemented by other analytical tools. As a university- based research center, we address clients’ real world questions with transparency and rigor. www.gvcc.duke.edu Duke University Global Value Chain Center © August 2017 ii Barbados in the Rum Global Value Chain Executive Summary ................................................................................................................................................. vi 1. Introduction ...................................................................................................................................................... 1 2. The Rum Global Value Chain ........................................................................................................................ 2 2.1. Global Rum Industry .............................................................................................................................. 2 2.2. The Rum Global Value Chain .............................................................................................................. 5 2.3. Global Trade in the Rum GVC ......................................................................................................... 10 2.3.1. Global Supply ............................................................................................................................... 10 2.3.2. Global Demand ........................................................................................................................... 12 2.4. Lead Firms and Governance ............................................................................................................. 13 3. Barbados in the Rum Global Value Chain ............................................................................................... 15 3.1. Introduction .......................................................................................................................................... 15 3.2. Barbados’ Current Participation in the Rum GVC ...................................................................... 16 3.2.1. Industry Organization ................................................................................................................ 18 3.3. Upgrading and Industry Evolution in Barbados Rum GVC ........................................................ 20 3.4. Industry Institutionalization ............................................................................................................... 23 3.5. Advantages and Constraints .............................................................................................................. 25 3.5.1. Advantages ................................................................................................................................... 25 3.5.2. Constraints ................................................................................................................................... 26 4. Lessons for Barbados Upgrading from Global Experiences ................................................................ 27 4.1. Case Studies .......................................................................................................................................... 29 4.1.1. Guatemala .................................................................................................................................... 30 4.1.2. Dominican Republic ................................................................................................................... 32 4.2. Lessons Learned for Barbados ......................................................................................................... 35 5. Recommended Upgrading Trajectories for Barbados .......................................................................... 35 6. Appendix ......................................................................................................................................................... 37 7. References ...................................................................................................................................................... 39 Tables Table 1. Leading Distilled Spirits MNCs Active in Rum GVC ..................................................................... 14 Table 2. Top Rum Brands by Sales Volume, 2015 ......................................................................................... 15 Table 3. Lead Rum Manufactures in Barbados ................................................................................................ 20 Table 4. Key Stakeholders in the Rum GVC ................................................................................................... 24 Table 5. SWOT of Barbados Rum Industry ..................................................................................................... 25 Table 6. Selected Upgrading Strategies in the Rum GVC ............................................................................. 27 Figures Figure 1. The Rum Global Value Chain ............................................................................................................... 5 Figure 2. Top Ten Rum Exporters by Value, 2006-2015 (US$, million) ................................................... 11 Figure 3. Top Molasses Exporters by Value (US$, million), 2006-2015 .................................................... 12 Figure 4. Top Rum Importers by Value (US$, million), 2006-2015 ............................................................ 13 Figure 5. Barbados in the Rum Global Value Chain ....................................................................................... 17 Figure 6. Rum Per Unit Prices (US$/kg), 2006-2015 ..................................................................................... 22 Figure 7. Top 10 Caribbean Rum Exporters by Value, Unit Price (US$) and Exports (US$ millions), 2015 ................................................................................................................................................................. 29 Figure 8. Guatemala’s Rum Exports by Value and Unit Price, US$ (2006 – 2015) ................................ 30 Figure 9. Dominican Republic’s Rum Exports by Value and Unit Price, 2006-2015 .............................. 33 iii Boxes Box 1.The Rise of Bacardi Premium Rums ......................................................................................................... 3 Box 2. Sugar Subsidies in Producing Nations ..................................................................................................... 4 Box 3. Ready to Drink Cocktails and Rum Innovations .................................................................................. 7 Box 4. Bulk Rum and E&A Scheer ........................................................................................................................ 8 Box 5. Sub-types of Geographic Indications ....................................................................................................... 9 Box 6. The Inter-Sugar Partnership ................................................................................................................... 19 Box 7. The Caribbean Rum Sector Program ................................................................................................... 21 Box 8. Chain Upgrading into Tourism: Saint Nicholas Abbey ..................................................................... 23 iv Acronyms ABV Alcohol by Volume ACR Marque Authentic Caribbean Rum Marque ADOPRON Dominican Association of Rum Producers BAMC Barbados Agriculture Management Corporation BCIC Barbados Cane Industry Corporation BSIL Barbados Sugar Industries Limited BSTA Barbados Society of Technologists in Agriculture CARICOM Caribbean Community and Common Market CBERA Caribbean Basin Economic Recovery Act EU European Union FAO Food and Agriculture Organization of the United Nations GI Geographic Indication GVC Global Value Chain GVCC Duke University Global Value Chain Center ILG Liquor Industry of Guatemala (Industrias Licoreras de Guatemala) ISO International Organization for Standardization ISP Inter-Sugar Partnership M&A Mergers and acquisitions MNC Multinational Corporation ONAPI National Office of Industrial Property of Dominican Republic PDO Protected Denomination
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