The Rum Dynasty: Bacardi
Bacardi Breaks with Tradition To Keep the Company and the Family Together
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.
"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.
After determining that his newly invented sipping rum might prove profitable, Don Facundo and his three sons bought the small distillery in Santiago for 3,500 pesos from the man whose rum they had previously sold. To commemorate the founding, the family planted a small coconut palm, El Coco, in front of the distillery. There, legend has it, Don Facundo found a family of fruit bats living in the rafters. Don Facundo's wife, Amalia Lucia Victoria Moreau, suggested the bats, a Cuban symbol of good luck, would make an easily identified trademark in an era when many people could not read. So the bats stayed in the rafters and went on the Bacardi label.
The new rum went on to win international awards and in 1888, two years after Don Facundo's death, Bacardi was appointed purveyor to Spain's royal house. That relationship took an auspicious marketing turn when, four years later, the court's doctors used Bacardi rum to cure the future king, Alfonso XIII, of the grippe. Bacardi began to advertise that it produced "the rum that saved His Majesty's life." As Peter Foster writes in Family Spirits, his compelling history of the Bacardi family and company, the Bacardis, as proud sons of Catalonia, opposed the rule of the Spanish Bourbons, yet still adopted the slogan, "Bacardi...El Rey de los Rones: El Ron de los Reyes." ("Bacardi...The King of Rums: The Rum of Kings.")
Future potentially ruinous world events, even as they roiled the Bacardis as patriotic Cubans, provided the Bacardi company with similar marketing opportunities. In 1895, the revered Cuban poet and revolutionary José Martí landed a boat just east of Santiago, beginning what Americans have come to know as the Spanish-American War, and what Cubans regarded as a war of independence. Martí was soon killed in battle. Manuel Jorge Cutillas' great-grandfather, Emilio Bacardi Moreau, who had taken the reins of the company, was a disciple of Martí and took great risks during the fight for independence, resulting in his living in exile with his family, first on the isle of Chafarinas and then in Jamaica. The impact of his absence and of an economy wrecked by war nearly devastated the Bacardi company.
The Americans were brought into the war in 1898 by the explosion of the battleship Maine in Havana's harbor and the jingoistic journalism of William Randolph Hearst. The disparate legends created by the war included the charge up San Juan Hill by Teddy Roosevelt's Rough Riders and the invention of two rum drinks: the daiquiri and the rum-and-Coke.
The daiquiri is named for a Cuban copper-mining town east of Santiago where American troops had landed during the war. The story goes that in 1898 an American mining engineer, Jennings Cox, was hot and thirsty. To remedy the two conditions, Cox is reputed (in the Bacardi corporate literature) to have "devised a marvelous new cocktail based on BACARDI Rum and lime juice." Of course, rum mixed with lime had been around for about a century before that, starting with British sailors--limeys--who came up with the mix. Reportedly, Cox's innovation was to pour the rum and lime over ice. The story was commemorated in a 1963 Bacardi ad that shows a rugged American miner holding a tall daiquiri under which appear the words, "The original daiquiri was made with Bacardi (The best still are!)" Notably, in those early Cuba embargo days, Cuba is not mentioned anywhere in the ad.
The rum-and-Coke, according to cocktail lore and a 1966 Bacardi ad extolling the virtues of the libation, rose from another serendipitous collaboration between Cubans and Americans. The ad ran in Life magazine in 1966, and features three men, two of whom are in U.S. military uniforms. They are sitting around a table with a Coke bottle (in a style that didn't exist at the turn of the century) and one of the soldiers is pouring from a bottle of Bacardi. "So that's how 'Rum & Coke' was invented!" reads the caption. Filling out the page is an affidavit telling what is purportedly the true story of the invention.
"FAUSTO RODRIGUEZ, being duly sworn," the document read, "deposes and says: In 1899 I was employed as a messenger in the office of the U.S. Army Signal Corps. I became friendly with a Mr. [the name is blacked out], who worked in the office of the Chief Signal Officer. One afternoon, in August, 1900, I went with him to the [name blacked out] Bar, and he drank Bacardi rum and Coca-Cola. I just drank Coca-Cola, being only 14 years old. On that occasion, there was a group of soldiers at the bar, and one of them asked Mr. [name blacked out] what he was drinking. He told them it was Bacardi and Coca-Cola and suggested they try it, which they did. The soldiers liked it. They ordered another round and toasted Mr. [name blacked out] as the inventor of a great drink. The drink has remained popular to the present time."
The affidavit is notarized: "Sworn to before me this 24th day of October, 1965."
The coincidence is that this ad, which also fails to mention Cuba, appeared just after Coca-Cola launched its 1965 "Things go better with Coke" campaign and after Bacardi had made a deal with Coke to advertise jointly. The truly remarkable coincidence is that Fausto Rodriguez, irrespective of whether he worked for the U.S. Army Signal Corps, did once work for Bacardi's New York office as head of publicity. So well known was Rodriguez in the industry that he was tagged "Mr. Bacardi." Regardless of what really happened in the old American Bar on Havana's Calle Neptune, the many different versions of the tale, reported in Family Spirits, always end with the bartender serving the drink to U.S. servicemen and toasting, "Por Cuba libre!", giving the drink its true name, the Cuba Libre.
Just as the Spanish-American War had hurt the Bacardi company and family, so did the Volstead Act, though to a lesser degree. Passed in 1920 by the U.S. Congress and overriding President Woodrow Wilson's veto, the measure made Prohibition the law. Four years earlier, Bacardi had set up a bottling plant in Manhattan. As Foster reports, "When the Eighteenth Amendment appeared on the horizon, the company found itself in danger of being left holding 60,000 cases of rum. Enrique Schueg [who had become the head of Bacardi, having entered the family through his marriage to Don Facundo's daughter, Amilia Bacardi Moreau] came up with an ingenious way of disposing of this stock. He sold 60,000 shares in the company, then wound the company up and distributed its assets--one case of rum per share--to grateful and thirsty shareholders."
While hurt by Prohibition, Bacardi had an advantage over the more popular Scotch whiskies of the day, because the company was based in Cuba, 90 miles from U.S. shores. Cuba became a watering hole for many vacationers and gave fame to bars like Sloppy Joe's and El Floridita. The daiquiri was king.
Among the popular tourist attractions in Santiago was the Museo Emilio Bacardi Moreau, which was inaugurated in 1928; curiously, it had little on display to indicate any relationship to rum. The man after whom the museum was named had died in 1922, but he had contributed so much to the city of Santiago, of which he was once mayor, and to Cuba, whose war of independence he had actively supported and in whose senate he later served, that he and the Bacardi family in general were considered Santiago's "first citizens."
Today, the museum has been preserved by the Castro government, most likely because of its testaments to Cuba's earlier revolutionary history and its heros, and its pre-Columbian and Spanish colonial heritage. The museum is also a tribute to Emilio Bacardi Moreau as a man of letters and the arts, a novelist who also wrote about Cuba's history. His best-known work is the posthumously published 10-volume Cronicas de Santiago de Cuba (Chronicles of Santiago de Cuba).
For those in the United States who want to get a sense of the accomplishments of Don Emilio--which include taking the first Egyptian mummies to Cuba--and of other Bacardis throughout history, the place to go is the company's building in Miami, itself noteworthy for its architecture. On the ground floor, in what used to house an art gallery, is the Bacardi museum en el exilio. Jose "Tito" Argamasilla Bacardi, a great-grandson of Don Emilio, led the way in putting together the exhibit, which holds the only photograph of Don Facundo Bacardi y Maso known to exist. The display is a labor of love and the work of family and friends who were asked to look for relics of the family's and company's history. There is even a collection of vintage Cuban cigar bands, including a Romeo y Julieta that cross-promotes Bacardi.
The museum in Miami also exhibits the company's old ads, including one that commemorates a 1936 decision by the appellate division of the New York Supreme Court that a Bacardi cocktail (Bacardi Light, lime juice, sugar and grenadine) wasn't a Bacardi cocktail unless it was made with Bacardi rum. Bacardi lawyers had called dozens of bartenders to testify in the case, bringing them in from all over the world. They supported the company's argument, Foster writes, "by stating that no self-respecting barman would serve anything else in a Bacardi cocktail."
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.
No matter what Cutillas or the company asserts, the spotlight on this family feud is unwelcome and helps to explain why Bacardi has traditionally been publicity-shy. "I think it's natural that normally, you know, they don't want their family affairs to be mixed up with the business affairs," Cutillas says. "Therefore, the tendency is to do less [rather] than more in publicizing the company itself." That is changing now as interest in the company grows.
"We also have a fine corporation," says Reid. "We have a fine story to tell. It's consistent with the image of our products."
None of the travails experienced by Bacardi have left Manuel Jorge Cutillas any less convinced about the wisdom of having worked through them to preserve the family company.
"Once we lose this company, you know, we will have lost our heritage, our sense of being a family. In moments of crisis, that feeling always prevails," Cutillas says. "We exist today as a family because we have a great company that is doing it for us. It's not the other way around, and I think that is embedded in the minds of everyone."
Don Facundo, no doubt, would drink to that.
Alejandro Benes is a journalist in Washington, D.C.
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