DDL’s Komal Samaroo: On the Record

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.

Samaroo also sits on the Board of Directors of National
Rums of Jamaica, the consortium that owns the Clarendon and Long
Pond
distilleries and the Monymusk brand.

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.


Matt Pietrek: Rums from countries like Jamaica and Martinique are known for their distinctive flavor profile. For you, what are the defining
characteristics of Guyana rums?

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?

Komal
Samaroo:
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?

Komal
Samaroo:
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?

Komal
Samaroo:
In
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.

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