Bundaberg Rum originated because the local sugar mills had a problem with what to do with the waste molasses after the sugar was extracted (it was heavy, difficult to transport and the costs of converting it to stock feed were rarely worth the effort). Sugar men first began to think of the profits that could be made from distilling. The vital meeting was held at the Royal Hotel on 1 August 1885, W M C Hickson served as the chairman, and other notables in attendance included all the big sugar mill owners of that time, W G Farquhar, F L Nott, S McDougall, T Penny, S H Bravo and A H Young, all to become the first directors of the Company. They started with a capital of ₤5,000.
The Bundaberg Distilling Company began its operations in 1888.
Bundaberg rum was first produced in 1889, production ceased from 1907 to 1914 and from 1936 to 1939 after fires, the second of which caused rum from the factory to spill into the nearby Burnett River.
H T Christsen Pty Ltd operated their own Bundaberg Rum bottling plant in Bourbong Street, Bundaberg at the rear of their large grocery and hardware business in the centre of town. The spirit was sold at UP and OP strength from their business. Spokesperson for the original family, Mr Rod Patch, recalls the origins of the shape of the current "Bundy Bottle". It originated from the Bushells Coffee Chicory bottle that Bundaberg folks sold to his grandfather at the firm for one penny a bottle, after which they were washed and filled with the famous spirit. The shape remains the same but the capacity has been increased to the current 700ml. Patch's great grandfather, Hans Truval Christsen, a Danish immigrant from Copenhagen and his son Frederick Christsen had an employment policy of employing staff from the Salvation Army faith in the rum bottling process as they were less likely to be tempted to sample the spirit. The Christsen family supported settlement farming families through hard times and these good deeds were acknowledged with the naming of Christsen Park at Bargara Beach.
In 1961, the company introduced the polar bear as its unusual choice of mascot, to imply that the rum could ward off the coldest chill.
In 2000, the Bundaberg Rum company and distillery were sold to British company Diageo.