Dec. 16, 2007 — In the wake of a recent announcement by the government of Sweden that it plans to sell Vin and Sprit, (V&S) Cruzan Rum's parent company, Gov. John deJongh Jr. has indicated to Swedish Prime Minister Fredrik Reinfeldt that the territory is keenly interested in the sale — though not necessarily buying the company itself.
In a letter to the prime minister, DeJongh noted that the V.I. government recently entered into a marketing agreement with V&S to promote Cruzan Rum in the U.S. and has a big stake in the company's success.
"I wish to affirm the interest of the (government of the Virgin Islands) in exploring the possibility of acquiring Cruzan," deJongh wrote, "in the event that (Sweden) determines to proceed with a sale or other disposition of V&S."
DeJongh told the Source Saturday the intent was not so much to pursue purchasing the distillery as to ensure the Virgin Islands have a say in what happens.
"We wanted to communicate that we don't want anything to happen to Cruzan Rum," deJongh said. "The impact of Cruzan Rum is too important for us not to have a seat at the table."
The St. Croix distillery is a small component of V&S. Rum made up three percent of the company's sales last year. They also own Absolut Vodka, which comprised 62 percent of their sales in 2006, according to the company's most recent report to stockholders.
But revenues from the distillery are a major source of revenue locally. In an interview with the Source earlier this year, distillery vice president and CFO Marvin Pickering said the company sold nearly 7.5 million gallons of rum last year. The federal government currently collects $13.50 in excise taxes on each proof gallon of Cruzan Rum sold throughout the mainland. Of that amount, $13.25 is remitted to the V.I. government.
"Perhaps $88 or $89 million will be remitted to the territory this year," Pickering said.
That's a significant portion of the government's total revenues of around $1 billion annually. And those proceeds also back about $600 million in government bonds.
Cruzan Rum sales have been increasing and there is nothing to suggest a sale of the parent company would hurt that. Should a competing rum company, such as Bacardi, purchase V&S, Cruzan Rum could suffer. And if the company were to cut production or shut down, it would have a sharp impact on government revenues.
But if the past is a predictor of what to expect, there is little cause for alarm. When V&S purchased Cruzan Rum less than two years ago, in September of 2005, there were no negative effects and the sale was barely a blip in the news. (See: "Sale of Cruzan Rum Finalized.")
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