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The Rum Dynasty: Bacardi

Bacardi Breaks with Tradition To Keep the Company and the Family Together
Alejandro Benes
From the Print Edition:
Demi Moore, Autumn 96

(continued from page 1)

"We could not afford to continue as five separate entities, each sort of doing their own little thing," Cutillas says. "What we did, in a nutshell, was to create this Bacardi Ltd. holding company in Bermuda, and then Bacardi Ltd. acquired shares from the shareholders of the five independent companies in exchange for shares [in the new company]. So, in the end, we ended up with the same group of owners owning shares of a holding company which in turn owned the five independent companies, but now the central sort of guidance, direction, is from the top."

The five reconstituted regional companies--Bacardi-Martini of North America, Latin America, Asia-Pacific and Europe, and Bacardi International--are controlled by the board. Board meetings could be considered the modern-day equivalent of the original Bacardi family sitting around the dinner table in Santiago de Cuba discussing the business of the original Compania Ron Bacardi, S.A. Family members, the shareholders, hold 15 of the 17 board seats, and 40 of them work in what longtime employees like to call the Bacardi corporate family.

There are now between 300 and 400 shareholders, according to Cutillas. They are hard to track, because the shares are owned by different trusts and individuals throughout the world. How many shares each family shareholder holds is a result of the original formula Don Facundo used in passing the company on to his children. His three sons and his only daughter each received 25 percent of the company. The Bacardis, now into their seventh generation, hold a pro-rated percentage of shares in the new company based on the percentage of shares they held in the five independent companies. Cutillas, a direct descendant of Don Facundo's eldest son, Emilio Bacardi Moreau, is reluctant to place a value on the shares, or the company.

"Well, there is no real value, I mean, no sort of value that we like to say, 'This company is worth so much,' because the shares don't have a value as far as the marketplace is concerned," Cutillas says earnestly.

"We don't calculate its value," Reid chimes in. "It's not traded. One of the nicest things about being a private company is you don't have to worry about the day-to-day vagaries of the stock market. Bacardi actually has no reason to, and therefore doesn't, come up with any value on the shares," Reid says, adding with a laugh, "We like to say it's very valuable."

The New York Times recently reported that Bacardi holdings are worth $2.2 billion. That figure is certainly too low. "Our revenue last year was $2.5 billion," says Cutillas, smiling and puffing on a custom La Gloria Cubana corona with a cigar band carrying the Bacardi bat logo. The Bacardi trademark has been designated by London's Financial World magazine as one of the world's 10 most valuable; it is the only one from a spirits company among that list, which includes McDonald's, Marlboro, Kodak and Coca-Cola. The Bacardi rum trademark--principally identified by the bat and wave devices prominent in the company's ads and on its labels--and the more than three dozen other trademarks now owned by the company have what Cutillas calls a "high value," but one that is difficult to calculate because the company is not for sale.

"It's the statistics that really sort of describe our value," says Reid. "Bacardi rum is the number one selling brand of distilled spirits in the world, not just of rum, but all distilled spirits. About 20 million [cases]. Way higher than number two. Martini and Rossi [which Bacardi acquired for $1.8 billion in 1992] is the second most prolific brand, heavily in Europe. So we have two great brands. We are the largest privately owned spirits company, fifth overall, but the four that are larger [Guinness-United Distillers, Seagrams, IDV and Allied-Domecq] are part of mammoth public companies. So, we are big enough to compete vigorously," Reid says, beginning to smile, "but nimble enough to be able to respond very quickly to targets of opportunity." The message is clear: Bacardi is looking to grow.

Bacardi now produces rum under the same formula in seven countries and sells its wide range of products in 170. In many respects, world events have precipitated the company's growth to this point. The original Compania Ron Bacardi, S.A., was founded in Santiago de Cuba in 1862 by Don Facundo Bacardi y Maso. Seeking opportunities in the New World, Don Facundo, as he is reverently known, left Catalonia, Spain, for Cuba in 1839 with two of his brothers. In Santiago, Don Facundo became a wine merchant and also sold the rum of a local producer. That, and being in Cuba, close to all that sugar cane, made experimenting with making rum a natural step.

Molasses, a by-product of refining sugar, would be diluted with water and fermented with yeast. The alcohol was then distilled.Don Facundo tested every step of the rum-making process, but it was his addition of filtering the rum through charcoal to remove impurities that proved revolutionary. By applying the methods of winemaking, such as aging in oak barrels and blending, Don Facundo came up with a light rum that was unlike any distilled spirit the world had previously tasted.

The modern version of this process can be seen while taking the tour at Bacardi's distillery in Puerto Rico, established in 1936 to avoid tariffs on rum shipped to the United States. The land on which the distillery stands is an old mangrove swamp across San Juan Bay from the El Morro Fort. The view from the terrace makes it appear that the fort on one side and the distillery on the other are protecting San Juan from invaders.


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