KALAHEO, Kaua'i — After nine years of development and up to $5 million invested, a Kaua'i company is making rum from locally grown sugar cane.

As of last week, Koloa Rum sells by the bottle in a company store on the Kilohana Plantation grounds and by the drink at more than a dozen Kaua'i bars.

The liquor is debuting just as Kaua'i's last sugar plantation is harvesting its last crop. And the irony of that is not lost on Koloa Rum President and CEO Greg Schredder.

Schredder has always seen rum as a way to add value to Kaua'i's traditional crop "and maybe save a few sugar jobs," he said.

Gay & Robinson announced last week it will process its last crop of cane in October, ending 117 years in the sugar business. The company's exit from sugar leaves Hawaiian Commercial and Sugar Co. on Maui as the state's only sugar grower.

Koloa Rum has an agreement to buy enough of Gay & Robinson's sugar to produce rum for several years, Schredder said. And the company is working feverishly on its options — to either grow its own sugar or employ another entity on Kaua'i to be its supplier.

"We've known this was coming for a number of years," Schredder said of G&R's exit from sugar.

Schredder said he still believes his products will succeed because "we're different, we're unique, we're Hawaiian."

Koloa Rum is named after the Kaua'i town that had the Hawaiian Islands' first sugar plantation in 1835. But it's being made in nearby Kalaheo, home since 1931 to Hawaiian Kukui brand jams and jellies.

Koloa Rum bought and renovated the building used by the Hawaiian Fruit Specialties company, maker of Hawaiian Kukui products. The new company streamlined Hawaiian Kukui's offerings to its eight most popular tropical jelly and syrup products; added rum cocktail mixer syrups; and installed the rum-making equipment

Current equipment can produce 60,000 cases of rum a year and could be expanded, said general manager Bob Gunter. "But I'll be happy to sell that in our first year," he said.

About 15 employees work at the Kalaheo plant, which in the span of a few weeks can transform water, sugar or molasses and yeast into blended 80-proof rum in a variety of flavors.

The same workers will continue to make Hawaiian Kukui fruit products there. Any needed heat for the processes comes from a diesel sugar boiler relocated from the former Ka'u sugar plantation on the Big Island.

"I would hope that through our efforts, we could begin to develop a mature distilled spirits industry in Hawai'i," Gunter said.

Pointing to the economic impact of tequila manufacturing in Mexico and wineries in California, Gunter said he envisions distilled spirits "becoming a meaningful contributor to Hawai'i's overall economy."

Schredder said he plans to "keep it boutique" and hopes to develop a name for Koloa Rum with on-island sales. His business plan on the company's Web site projects that, if successful, the company could attract a major liquor distributor as a buyer in the future.

For now, Kaua'i bars serving the new libation include Duke's, The Beachhouse, Gaylord's, the Sheraton, Brennecke's, Po'ipu Beach Broiler, Scotty's Barbecue and Joe's on the Green.

"It's not the cheapest rum, but it's a local rum and they are proud of it," Schredder said.

Light and gold rums are available at $28 to $29 a bottle at the company's retail store, where it also sells rum cakes, bartending equipment and company logo shirts and hats. Dark and spiced flavors are coming soon, and an aged rum is supposed to be available in 2011.

O'ahu and the Big Island have a few beer breweries, Maui and the Big Island each have a winery, and Maui has five licensed manufacturers of distilled liquors. Until now, Kaua'i had no commercially produced alcoholic beverages.