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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)

That battle was by no means the most difficult Bacardi ever fought, nor the most painful decision Bacardi ever made, to protect its trademark. In another indication of the prescience of the company's leaders throughout its history, Jose M. "Pepin" Bosch made a move that was provoked by revolution and that provided the company the platform to become what it is today.

Juan Prado, then the sales manager for Bacardi in Havana, witnessed the drama. In March 1957, a group of students from the Directorio Revolucionario stormed the palace of Cuban dictator Fulgencio Batista. Prado had gone up to the top of the Edificio Bacardi on Avenida Belgica after he heard the shooting. The students were routed and Batista emerged safe. Many in Cuban business society went, as Peter Foster writes, "to 'congratulate' Batista on his survival" after union leaders had done so. But Pepin Bosch, then president of Bacardi, would not, despite Batista's having sent a senator with a letter asking Bosch to offer his congratulations.

"The senator asked if Bosch would be willing to express his 'goodwill' toward Batista in an interview with one of the journalistic hacks Batista kept on the government payroll," Foster writes. "Again Bosch refused, saying that anybody who had seized power deserved to have to watch his back. In that case, he was told by the senator, the government 'could not guarantee his safety.' Bosch told the senator he had no fear; they wouldn't dare to kill him." But Bosch, whom Foster interviewed extensively before Bosch died in 1994, was concerned that Batista might seek to make life, and business, unpleasant. Batista might even expropriate the company. Bosch transferred the trademarks to the Bahamas, where they are registered to this day. It was a move that would prove tremendously valuable in enabling the Bacardi family and business to survive the ultimate enemy.

Manuel Jorge Cutillas will never forget Oct. 14, 1960. "I woke up by my alarm radio listening to a list of names.... Compania Ron Bacardi, S.A., was on it, but I didn't know why because I hadn't heard the beginning of the news," he recounts. Cutillas was then a chemical engineer for the company and a lecturer at the university in Santiago. "I immediately suspected that what we were afraid of had happened. It was the famous decree of October 14 in which all the Cuban properties were confiscated by the government."

Juan Prado was also present when Fidel Castro, the man whom Batista fled in 1959, ordered that Bacardi be "nationalized." "I guess two or three years after becoming sales manager, Castro came. I was one of the last of the inner circle that left," says Prado, who is a member of the corporate Bacardi family. "In Havana I was number two at the sales branch. So, I went through the whole process of confiscation and I left."

He tells the story as if it happened last week rather than 36 years ago. "They came in. They were soldiers. For some reason or other they were marines. The previous day or that morning somebody called me and said, 'The confiscation decree is out and you are going tomorrow, or that day,' " Prado recalls, sitting in the conference room in Bacardi's Miami building, overlooking Biscayne Bay. "Castro had been confiscating individual companies like a bank here or another company there, but never really took a Cuban company, and that day he did. He took like, I think there were 384 companies or something like that, and my family also fell in that one. My father was in the food wholesale business and they were on the same list, so we all went in the same group. And the way it happened is that they just showed up, a couple of guys from the navy and a few milicianos [militiamen] and so on and a copy of a decree that if you saw it you wouldn't believe it, misspelled and it was mimeographed and it was a one-page thing and the open space is what they filled in with [the words] Ron Bacardi and such-and-such an address."

Prado, who retired from the company in 1994 after 42 years of service, is smiling as he tells the rest of the story. "It was funny. It was something of a joke," he says. "Somehow when you're in trouble like this some things come to your mind; you don't know what to do. I don't know why I said, 'Gimme a receipt.' I said, 'This guy, [my boss] may think that I took the money from the bank or something.' " No receipt was given.

Just a year or two earlier, after Castro triumphed, the atmosphere had been far different. "Everybody was happy," Cutillas recalls. "The war [was] over. Peace [was] back in Cuba." But the mood soon darkened. "At dawn, I started hearing gunshots again," he says. Cutillas' own house outside of Santiago had been shot up during the war and he and his family were staying at his mother's house in town. "I said, 'Jesus Christ, I thought this was over. What's happening?' And the next day [I found out] 28 [of Batista's] guys had been executed that night on San Juan Hill. That was the day I convinced myself that the Revolution was not going to be good for Cuba."

Cutillas fled Cuba, but not with ease. After the confiscation of the company, he tried to get an exit permit. "My exit permit was denied," he says. "Then they took my passport away when I went to Havana to ask for permission to leave the country, so then I left by other means. I left in a boat with about 15 or 20 others. I arrived in Miami six days later. Terrible sailing," he recalls with a laugh.

"El Coco," the towering palm tree that had been planted in Santiago at the company's founding, had survived earthquakes and hurricanes and 98 years. The corporate literature immortalizes El Coco as "a symbol of the organic connection of Bacardi to the soil of its homeland," and reports that, "In the year that the Bacardi family members were uprooted from their Cuban homeland, the palm, as if in protest, withered and died." (Last year, a young palm tree was planted outside the Miami headquarters of Bacardi-Martini USA--a unit of Bacardi-Martini North America--as a symbolic replacement.)

Prado thinks that getting kicked out of Cuba is responsible for Bacardi's success as a multinational corporation. "Some people say that Castro is the best thing that happened to Bacardi," he says, clearly not fully convinced of the concept. "There is something there. Because we were kicked out and our backs put against a wall and we were hungry; what were we going to do?"

What they did was reinvent the company. Prado was sent by Pepin Bosch to drum up business overseas with instructions to tell Bacardi's buyers that they would have to make a choice: Castro or Bacardi. Anyone doing business with Communist Cuba would not be welcome at Bacardi. Prado, giggling, recalls a particular encounter with a Dutch client who "was more anti-Communist than we were." The man stayed with Bacardi. During one visit to Australia, Prado gave a speech to a group of buyers in which he emphasized the Bacardi family's role in the company. After the talk, one of the buyers, until that moment unaware that there was a Bacardi family, enthusiastically approached Prado and said, 'I want to meet Ron.'

"I said, 'Ron? Ron who?' And this fellow said, 'Ron Bacardi,' " recalls Prado, who delights in the retelling. The Aussie thought that the family was headed by someone named "Ron," not recognizing ron as the Spanish word for rum that appears on the bottle.

The whole experience of leaving Cuba, Prado believes, made the company less parochial and broadened the its view of potential world markets beyond the United States and Latin America.

Ironically, the appointment of someone who is neither a family member nor of Cuban descent to head the company comes as Bacardi is reemphasizing its Cuban heritage after so many years of letting it stay in the background, almost unnoticed.

"We're proud of our Cuban heritage," says Reid. Bacardi will soon emphasize that pride with an ad campaign in trade publications that associates its rum with the land that holds the reputation for producing the world's finest cigars. And yes, the two-page ad contains the word 'Cuba'--several times, in fact. "When the great Cuban cigars were born," the ad reads, "they were enjoyed with Cuba's great rum. Bacardi. Founded in Cuba, 1862." In addition, three historical Bacardi rum bottles are shown, all with Santiago de Cuba listed on the label.

If anyone thought that Bacardi was a Puerto Rican rum company, an easy mistake given the fact that "Puerto Rican Rum" appears on most labels, they will soon be reeducated by another association: La Gloria Cubana coronas with a Bacardi bat on the band and a superpremium dark rum, Casa Bacardi, that Bacardi has aged for eight years. This rum is distilled in Nassau, and Bacardi is aiming to penetrate a niche heavily populated by cigar lovers who might drink Cognac with their premium smokes.

"Cigars are so much a part of our culture," says Cuban-born Alfredo Piedra, Bacardi-Martini USA's marketing director, as he sits in his Miami office, drinking Cuban coffee and smoking a robusto. Piedra is enthusiastic about the tie-in with cigars. "We're most happy to see cigars coming back. I've been here 18 years and cigars have always been a part of this corporation and Cuban culture and Bacardi rum."

Alfredo Piedra grew up in Miami and went to college at American University in Washington, D.C. While there, Piedra took a class in marketing during which he was introduced to the company for which he would go to work in 1978. "My professor used Bacardi as an example of the ideal multinational corporation," Piedra recalls. "So here I am, a Cuban immigrant in Washington, D.C., having a professor profess to us what a great global corporation this Bacardi is. They're originally from Cuba and so on and so forth. And I'm in awe. I am Cuban and I was proud to see a successful, globally successful, Cuban corporation."

Eduardo Sardiña, the president of Bacardi-Martini North America and chief executive officer of Bacardi-Martini USA, says of the association of Bacardi with Cuba: "We have always been very proud of our roots and of being Cuban, but not very proud of Mr. Castro. We've gone hot and cold on this issue." Right now, Bacardi is hot on the Cuba association. "First of all, I think the opportunity is there. Cigars are involved; the spotlight is on Cuba," Sardiña adds. He has been with the company 23 years, and is the son-in-law of the Bacardi empire's former patriarch, Eddy Nielsen. "There's clearly an opportunity among cigar smokers for a dark, superpremium rum," Sardiña says. "Whether it's dark or light, there is no superpremium rum. Every other spirit has a superpremium category."

This category is another expansion of Bacardi's menu. In 1995, the company introduced Bacardi Limón, a light, citrus-flavored 70 proof rum that appeals to the clear-spirits crowd. "The overwhelming amount of our volume, well over 50 percent of our volume, is from clear-spirit, primarily vodka, drinkers," Piedra says. "They are good consumers of clear spirits in that they drink something other than Bacardi as their primary category: vodka, gin or tequila. However, they all drink Bacardi. So when they're not drinking their vodka and juices, gin and tonics, or margaritas, they drink Bacardi."

Bacardi Limón, which has had the most successful launch ever of any new spirit (according to Impact and the Distilled Spirits Council of the United States), selling more than 350,000 cases in its first year, represents an effort to have those consumers who prefer the semisweet drinks, 66 percent of the market, drink Bacardi.

Introducing flavored rums is something the Bacardi of five or 10 years ago would not have considered, because such products were not traditional. Thinking at the company has changed. "Change is not only great," offers Piedra, "but essential." In another attempt to reach into a different part of the rum market, Bacardi introduced Bacardi Spice this spring. "Spiced [rum] is 10 percent of the rum category," Piedra says, adding that because the company has invested $21 million in promoting the two new brands, "we probably won't make money on these brands for the next five to 10 years."

Such are the advantages of working for a privately held company. An investment can be made for the long term. This is particularly important because the distilled spirits market in the United States has been down for a number of years. Piedra believes that the trend might continue, but that in 2000 it will start to reverse because of demographic realities and more favorable attitudes toward alcoholic beverage consumption.

"We think the business will bounce back," Piedra told Impact International this year, although "in the next four to five years, we will continue to see modest decreases." After that, Piedra, predicts "many years of at least modest growth."

Not everyone in the distilled spirits business agrees, but Bacardi is betting that it can persuade the first-time drinker to consume its products. This is a global pursuit, and as evidence of that and the further consolidation and centralization of the company, Bacardi will set up a global marketing office in New York, which will be operational next January. The company's leaders believe it will give Bacardi an advantage in an increasingly competitive world market. Look for more acquisitions, more brands, new packaging and a greater association with Cuba and cigars.

Despite its public "hot and cold" attitude toward the island, no one at Bacardi forgets that the company is Cuban. And no one forgets that the company had $76 million in assets confiscated by Fidel Castro. Castro even tried to appropriate the Bacardi trademark, but the company has doggedly and successfully defended and retained it. Bacardi anticipates another trademark fight, should it ever begin doing business in Cuba again, involving Hatuey beer, which Bacardi began brewing in Cuba in 1926 and is again marketing in the United States.

"If the United States recognizes Cuba," theorizes Sardiña, "then Bacardi would seriously consider returning, assuming the business conditions are favorable. If Fidel is not there, it's a no-brainer. It's an emotional issue. It's personal and it's trust." But if Castro remained in power, he adds, odds are Bacardi would stay away. "They got burned once and they could get burned again. The same players are there."

Cutillas, who lives in the Bahamas, will not buy Cuban cigars and is happy to point out that the quality of Cuban cigars suffers greatly from inconsistency. That's what happens under Communism, he says. Cutillas has been involved in efforts to hasten the demise of the Castro regime, serving as a trustee of the Cuban-American National Foundation and as the first president of the U.S.-Cuba Business Council, of which the Bacardi company is a member. Three years ago, when the Castro government was trying to attract foreign investment in Cuban properties, Cutillas sent a letter to most of the distilled spirits companies worldwide warning them away from trying to use the old Bacardi distilleries or Hatuey breweries and trademarks in Cuba.

"Since Bacardi has reason to believe that its properties are among those being offered by the Castro regime to prospective purchasers, Bacardi is sending this letter to you and others in the industry," Cutillas' missive said, explaining the position that the properties had been illegally taken from the company and that Bacardi would do what it could to recover its assets. Further on, the 1993 letter advised: "Thus, if any person or entity thinks it possible to acquire confiscated properties at fire-sale prices and make a short-term profit on his investment, even if he expects to lose the properties when Castro falls, he may be unpleasantly surprised by the outcome of such a gamble."

A similar argument is made in the controversial Helms-Burton law enacted this year by the U.S. Congress, and supported by the Cuban-American National Foundation and the U.S.-Cuba Business Council, that allows those who owned property in Cuba prior to Castro's takeover to take legal action in U.S. courts against companies from third countries using their properties. The point was made again on March 15 of this year in Bermuda's newspaper, The Royal Gazette. The paper ran a full-page advertisement, "submitted by Ana Maria Cutillas," the wife of Manuel Jorge's brother, Eduardo, who is Bacardi Ltd.'s chief financial officer. Placed in response to Cuba's downing of "two unarmed civilian planes," the text read: "Investments in Cuba by foreigners will be as safe as the Cuban Government wants. As laws, rules and regulations can be changed overnight and without due process of law. Also the Cuban exile community holds the position that the original owners retain legal right to all illegally seized properties. Foreigners who invest in Cuba or traffic in stolen property outside of Cuba including trademarks should understand that they stand to lose their investments and subject themselves to legal proceedings." Under the headline, The Real Side of Cuba: Your Paradise. Their Hell, is a photo of a Cuban family behind bars looking out at a happy father and two children playing with a beach ball in the surf. Under the photo, readers are urged, "End the Suffering. Don't Visit Cuba."

The larger purpose of all these efforts is to rid Cuba of Castro. Manuel Cutillas is outwardly optimistic about that possibility and practical precondition for the company's return to its home. "We would love one day to be back in there," he says. "You know, I believe that perhaps I will even see that."

What is abundantly clear from talking to anyone at Bacardi is that employees take great pride in working for a company that cares about quality and treats its employees like a family. In a move to increase an already high degree of loyalty, the company is for the first time adding what is essentially a stock option plan for senior executives. That is part of the company's value system.

Part of the company's reality is that Bacardi family matters have sometimes made conducting Bacardi's business somewhat difficult. In 1990, concerns by a group of family members--known as the dissidents--that the company was becoming too diversified and that it might be sold were resolved. Cutillas credits Reid and Reid credits Cutillas with smoothing things over. The divestiture of non-core holdings and the adoption of a philosophy to diversify only within the spirits business reassured the dissidents. And the purchase of Martini & Rossi in 1992 and the restructuring of the company over the past four years have helped the family get along ever since. For the most part, anyway.

On occasion, there is still some discord that bubbles up and into the press. That was the case this spring when Bacardi family laundry was aired in The New York Times. One of the great-great-granddaughters of Don Facundo, along with her second husband, is claiming in a lawsuit that her mother and Cutillas have joined other family members to deny the great-great-granddaughter her fair share of her grandmother's estate. The whole matter is, as the Cubans say, enredado (entangled). It is also, Cutillas asserts, something that has nothing to do with the Bacardi company, explaining that he is involved because he is a trustee of a trust in which the money in question resides.


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