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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

When Manuel Jorge Cutillas, the chief executive officer of Bacardi Ltd., the world's fifth-largest spirits company, decided on whom he would recommend to succeed him, the choice initially left the Bacardi family shaken, not stirred.

"When I announced sitting right in this room that, in consultation with members of the board and other shareholders, I was ready to make a proposal for my successor," Cutillas recalls in the boardroom of the company's Mies van der Rohe-designed Bermuda headquarters, "and when I said that that person was Chip, not only the people that were here, but members of the family, their first reaction was shock."

Cutillas, 64, had decided that the best person to lead Bacardi into the future was George B. "Chip" Reid. The shock to the Bacardi family came not because they thought Reid, 48, was unqualified, but because this would be the first time that the company was to be headed by someone other than a member of the Bacardi family.

Traditionally, Cutillas says, "the leader of the business has always been a family member. This is the first time that we depart from the tradition, or custom, of 134 years and it is a sign of the times."

It's also a sign of recognition by the Bacardi clan that after many battles trying to reconcile family and business interests, the two are best kept separate, to a point. The extended Bacardi family, descendants of Don Facundo Bacardi y Maso, the inventor of rum as we know it today, still owns more than 95 percent of the shares in the privately held company.

"It took two days for the people [the family] to call me to analyze the situation and to agree wholeheartedly that this was an excellent decision," Cutillas says of the delayed reaction to his January announcement recommending Reid. In March, the board unanimously approved the recommendation. In April, Reid became the new executive vice president of Bacardi Ltd.; he will take over for Cutillas next March. Cutillas will retain his chairmanship of the board, but after 42 years of working seven days a week, he says he will take more time for fishing and traveling with his wife.

George Reid ("My friends call me Jorge," he jokes) is a corporate finance lawyer, trained at Yale and Harvard, who, while working full-time at the Washington law firm of Covington and Burling, also spent seven years as deputy general counsel to the Republican National Committee under President Ronald Reagan. Reid first came into contact with Bacardi while representing Hiram Walker, the Canadian spirits firm, in its investment in Bacardi in 1977. While a partner at Covington and Burling, Reid advised Bacardi on how to consolidate the five companies in its empire into a single holding company, essentially designing the company's current structure. By extension, Cutillas says, Reid also helped bring together an increasingly contentious family that argued about the direction of any one of the five companies and of the Bacardi empire as a whole.

"I think that the family is very pragmatic," Reid says, sitting next to Cutillas and smoking a Macanudo Prince Philip. "It took a look at the changed world, the enterprises, one enterprise now, which has demands now, increasingly sophisticated financial demands. They simply determined that I was the right person for the company circumstances today and were, I think, sophisticated and pragmatic enough to put the best interests of the business ahead of perhaps an emotional desire to continue a tradition, even if that particular tradition wasn't the best for the business today."

If anything has defined the success of Bacardi, it is the company's agility in moving with the times, and the times that define the rum business today present a challenge. In 1995, Bacardi rum--Bacardi Light, Dark, 151, Black Reserve and Anejo--represented the number one selling distilled spirits brand in the United States, as calculated by Impact Databank. Impact International's list of the Top 100 Premium Spirit Brands Worldwide also ranked Bacardi rum as number one in the world. (Impact and Impact International are alcoholic beverage industry trade journals owned by M. Shanken Communications, parent company of Cigar Aficionado.) Last year, Bacardi sold 6,155,000 nine-liter cases of rum in the United States and a total of 19.2 million worldwide. Yet these figures represent a 1.5 percent drop in U.S. sales from 1994, and a 5.5 percent dip worldwide.

In 1992, as part of a strategy to navigate market realities, the five companies--Bacardi International in Bermuda, Bacardi Imports in Miami, Bacardi Corp. in Puerto Rico, Bacardi & Company Ltd. in the Bahamas and Bacardi Mexico--were brought under central command. Many associates and industry experts had advised Cutillas against even trying to reunite the companies, which had originally been set up with tax burdens in mind, because of the difficulty in sorting out the tax laws of the various countries involved. Cutillas thought it could and should be done. Reid designed the plan and executed it without incurring tax liabilities.


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