Puerto Rico getting new rum distillery

The former pharmaceutical complex.

CIDRA, Puerto Rico -- Commonwealth officials are hoping the opening of a new rum distillery in this central island town will help offset the economic blow created by the shift of Captain Morgan rum to neighboring St. Croix.

The Club Caribe LLC distillery is scheduled to open in early 2012 with projected output of 2 million gallons of rum its first year as part of a 20-year deal, according to Alberto Rivra, the senior vice president.

The local company is affiliated with, a Puerto Rican company that distributes Coca-Cola products in the U.S. territory.

Club Caribe expects to employ 25 people and invest $10 million in machinery and equipment when it moves into the former Glaxo Smith Kline pharmaceutical factory.

"We're going to have a significant production of rum on a global level," said Jose Perez-Riera, Puerto Rico's economic development secretary.

Puerto Rico's rum industry employs about 4,500 workers and generates $400 million annually, more than 70% of which comes from Bacardi.

The U.S. territory is expected to lose $140 million next year as a result of the lucrative production of Captain Morgan rum moving to the neighboring U.S. Virgin Islands.

The new distillery eventually will produce up to 10 million gallons of rum, both to sell in bulk and as private labels including Club Caribe, a white rum; Black Roberts, a spiced rum; and Carlos Rum, a gold rum, Rivera said. The company will target the U.S. mainland market.

The anticipated production of 2 million gallons eventually will generate $20 million in revenue for the island, said Jorge Junquera, deputy executive director of the Puerto Industrial Development Company, a state corporation that promotes business on the island.

Diageo PLC's Captain Morgan distillery that opened late last year was created in exchange for a portion of the Amrican Virgin Islands' excise-tax revenue, estimated at $2.7 billion over 30 years. It is expected to generate more than $100 million a year in revenue for the next 30 years.

"We are losing a mountain of money with Diageo's departure," Junquera said, referring to Diageo terminating its rum production contract in Puerto Rico.

All but 25 cents of the $13.50 in federal excise taxes levied on per proof gallon of rum produced in Puerto Rico and the Virgin Islands goes back to the local governments to spend on infrastructure and public services.

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