The Demerara Distillers Limited (DDL) will have to raise the price of some of its rum products as local molasses shortages have seen the company having to import the product for most of the past three years.
Before four of the seven sugar estates were shuttered by the end of 2017, the Guyana Sugar Corporation (GuySuCo) supplied DDL with all of the product needed for making its prized rum and other products.
It was the company’s hope that the three remaining estates would still be able to meet its demand and even when this was not done in the first year, the company was optimistic that production would increase and the issue would be resolved.
But GuySuCo has never been able to meet the demand since then due to a number of problems it has encountered, including not getting the necessary funding from the sales of its assets to efficiently start up its revitalisation projects.
“It has been a couple years since we have not been getting the required quota. For the last three years we have not been able to meet our expected amounts and in our last annual report I had said that we were only getting 25% of our requirements and this year it looks like 30%,” DDL Chairman Komal Samaroo told Sunday Stabroek when contacted.
Samaroo said that the company has had to turn to importing molasses from other countries and is of the view that “unless GuySuCo gets up in the region of producing about 175,000 tonnes of sugar cane annually, they will not be able to meet our total requirements.”
When DDL began importing molasses from Nicaragua in 2018, Samaroo was optimistic it would only be temporary.
“There is this year a deficit which we are trying to fill. I believe that based on the plans of the local sugar company, we should be back to normal domestic supplies as we progress into the next year and subsequent years,” he had told this newspaper then. “At this time, I would say that this is purely an interim arrangement and as a result it would not have any significant effect on our overall cost structure at this point in time,” he added.
But the remaining three functional estates have not been able to achieve their targets as sugar production fell below 100,000 tonnes, even as the corporation acknowledged that there had been “major” mechanical failures at the Albion and Uitvlugt factories.
In DDL’s 2018 annual report, Samaroo had explained that the downsizing of the sugar industry had a negative impact on its operations and importation of molasses was necessary to meet the distillery’s production requirements, based on orders from longstanding customers. He noted that the molasses imports came with a high logistics cost.
Samaroo pointed out that DDL had explored the option of bidding for the Enmore sugar factory but did not pursue the option as “substantial costs associated with the requisite rehabilitation did not present a viable solution”.
The DDL Chairman said that the group continues to pursue every opening to improve international competitiveness and noted that a study undertaken by the West Indies Rum and Spirits Producers Association had shown that the regional rum industry faced significantly more red tape than its counterparts in the developed world.
And as the company analyses the effects on production and market prices, Samaroo said that they may even have to rationalise some markets.
“It does affect our cost. And while we have been managing, we can’t go on indefinitely so we may even have to rationalise some of our markets and production accordingly,” he said. “We are watching the situation and looking at some markets that may not be able to adjust or accept the price changes,” he added.
