Bacardi and the Long Fight for Cuba

by Gjelten, Tom

  The concept was bold. Throughout Bacardi history, the company’s Cuban character had been key to its identity. The Bacardis had sold their rum as “the one that made Cuba famous,” and in the chapter they had prepared ten years earlier for El libro de Cuba, they had boasted that their rum was “totally linked to this land.” Rums made outside Cuba would never be as good as theirs, they wrote, “because they don’t have available the best raw materials in existence, which are precisely the syrups of Cuban sugarcane.” Now the company was challenging its own argument by moving to produce rum outside the Cuban homeland. The new Bacardi marketing strategy was to emphasize the rum’s uniqueness and to highlight the “secret formula” behind its manufacture, not its Cuban origins, as the basis for its appeal. Other firms made rum, but only the Bacardi Rum Company made “Bacardi,” a distilled spirit whose taste and character put it in a category all its own. Consumers associated “rum” with the Caribbean, but “Bacardi” could be made anywhere, as long as it bore the family name and was distilled and blended according to Don Facundo’s formula. The reimaging would make business history. Makers of premium Scotch whiskey never considered manufacturing their products outside Scotland, and it was unthinkable for Rémy Martin or Courvoisier to produce cognac outside France.

  Half the battle was already won. A 1935 article in the New York Times cited “Bacardi” as an example of a proper noun that had entered the English language as a generic term, much as “Kleenex” and “Band-Aid” did later. With such a strong brand identity and clear differentiation from its competitors, it shouldn’t matter where the rum was actually manufactured. To benefit from that advantage, however, the company had to be able to defend its proprietary rights to the Bacardi name. Within two years of Repeal, Bacardi distributors found that New York bartenders weren’t always using Bacardi rum when they prepared a “Bacardi cocktail” (basically a daiquiri). At the direction of Pepín Bosch, by then a vice president of the Bacardi’s U.S. subsidiary, company lawyers sued the Barbizon Plaza Hotel in Manhattan, alleging that its barmen were misrepresenting drinks as Bacardi cocktails when they were not actually made with Bacardi rum. Enrique Schueg himself came to testify, and the company called barmen who agreed that a genuine Bacardi cocktail had to be made with Bacardi rum. (Other bartenders, called by the defendants, said they saw no reason not to use any rum available in mixing a Bacardi cocktail.) After a defeat in the lower court, the company won on appeal, and New York bartenders were enjoined from using non-Bacardi rum when filling an order for “Bacardi” cocktails. The company considered the case so important that it ran an ad campaign advising drinkers of the court’s finding: “It isn’t a Bacardi Cocktail unless it’s made with Bacardi!”

  As the trademark case moved through the courts, Pepín Bosch was surveying possible U.S. sites for a Bacardi factory. Soon after arriving in the United States, he rejected his father-in-law’s idea of basing an operation in Pennsylvania, given the state’s high liquor taxes. Bosch briefly considered Louisiana and Florida, but he soon decided the best place to set up a distillery was in the U.S. territory of Puerto Rico. The eastern Caribbean island had a rum-making tradition as old as Cuba’s, and some of Bacardi’s fiercest competitors were Puerto Rican, as sales representative M. I. Estrada had learned years earlier when he traveled the island on horseback. Because the island was considered part of the United States for trade purposes, Puerto Rican rum was not subject to any import duty. The island produced sugar in abundance, and low prevailing wages kept labor costs down. Bosch visited Puerto Rico in February 1936 and assured the territorial officials that tax revenues from a Bacardi operation could easily bring the island treasury a million dollars a year. Within weeks, the Bacardi Corporation of America—Bacardi’s U.S. subsidiary—was given a license by the Puerto Rican territorial authorities to establish a rum-making facility on the island, and Bacardi technicians were soon setting up a distillery in an abandoned factory in Old San Juan.

  Pepín Bosch had not given enough attention to the political mood in Puerto Rico, however. Many Puerto Ricans in 1936 were angered by the extent to which the U.S. government still ruled their island, and they were sensitive to the idea of any “foreign” company setting up operations in their territory. Like Cuba, Puerto Rico had been ruled by Spain until the 1898 war, after which the United States took over. Unlike the Cubans, however, the Puerto Ricans were not able to win their independence, and the island effectively became a U.S. colony, with even less autonomy than it had enjoyed under Spanish rule. It had a legislature, but the resident U.S. governor could—and often did—veto the laws it passed. Puerto Rican representatives repeatedly petitioned the U.S. Congress for more self-rule, but were rebuffed year after year. By the mid- 1930s, a minority group on the island was promoting violent revolution as the only way to achieve independence. In February 1936, the same month Pepín Bosch came to scout industrial sites, the island’s U.S. police chief was assassinated by two Puerto Rican militants.

  Members of Congress in Washington promptly drew up legislation to thwart further Puerto Rican moves toward independence, threatening an immediate cutoff of all economic aid, an imposition of tariffs on Puerto Rican products, and a withdrawal of U.S. citizenship offers if independence proposals were advanced. The U.S. proposal, however, only had the effect of further fueling the independence movement in Puerto Rico, so that by the time the Bacardis were ready to begin operations there, the island was in a state of nationalist uproar. Puerto Rican rum companies joined forces with proindependence Puerto Rican legislators to draft a law that would ban the production of any rum under a trademark not in use on the island as of February 1, 1936. The provision, aimed squarely at Bacardi, was passed with an explanation that its purpose was to protect the island’s native rum industry “from all competition by foreign capital.”

  Bacardi lawyers immediately challenged the Puerto Rican law on constitutional grounds, saying the Puerto Rican government had no right to tell the Cuban company it could not use its trademark. At the same time, Pepín Bosch launched a publicity campaign aimed at showing Puerto Ricans what Bacardi could contribute to the island. Most Puerto Rican factories at the time were paying male workers about two dollars a day, and women often earned only half that amount. Bosch promised that Bacardi could double those wages. “I shall consider my life a failure,” he told the local press, “if Puerto Rico does not come to feel proud that Bacardi has been established on this island.” He pointed out that Bacardi was committed to sending ten thousand cases a month to the United States from its Puerto Rico facility, more than any local company could deliver. He also claimed there were thirty-six U.S. states anxious to accommodate the company and pocket its tax payments if Puerto Rico declined. In the end, Bacardi lawyers managed to get a temporary injunction against the enforcement of the trademark ban, and in January 1937 the company was able to initiate production in Puerto Rico. The case went all the way to the U.S. Supreme Court, however, before the anti-Bacardi law was finally overturned and the legality of the company’s Puerto Rico operation officially established.

  On February 4, 1937, the Bacardi Rum Company celebrated the seventy-fifth anniversary of its founding in Santiago de Cuba, with parties and fireworks. The tin-roofed, dirt-floored distillery on Matadero Street where Don Facundo began his business in February 1862 had evolved over the years into a multimillion-dollar facility employing 1,200 workers, though the entrance was still marked by the spindly coconut palm planted by fourteen-year-old Facundo Jr. shortly after the distillery opened.

  By tradition, the Bacardi daughters personally delivered cash contributions each February 4 to needy institutions around Santiago in commemoration of the company’s founding. For the seventy-fifth anniversary, the recipients included the local poorhouse, the old people’s home, a children’s hospital, a clothing distribution center, an institute for the blind, the Masonic lodge, kindergartens, secondary schools, and a horticultural center, among many other institutions. In addition, the company made cash gifts to indep
endence war veterans who were confined to local hospitals. The contributions cost the Bacardis only a few thousand dollars, but by recognizing the work of local institutions the company managed to highlight its image as a socially conscious corporate citizen in the humanitarian tradition of Emilio Bacardi.

  Pepín Bosch knew the Bacardis’ progressive record was one of the company’s selling points in Cuba, and it was a reputation he wanted to see established as well for the new Bacardi operation in Puerto Rico. To commemorate the company’s seventy-fifth anniversary, Bosch took out full-page ads in all Puerto Rican newspapers summarizing the principles that guided Bacardi wherever it operated. The company promised “to elevate the moral level” of the spirits industry in Puerto Rico, barring pictures of women in its advertising so that no one could accuse it of using sex to sell liquor. Bacardi also said that, to avoid encouraging youth liquor consumption, it would not air radio commercials during daytime, and it resolved to keep good relations with its Puerto Rican workers, striving always for their “social betterment.”

  But this was the 1930s, a time when corporate promises to be good to workers were greeted everywhere with skepticism. The gap between the rich and the poor widened during the Depression years, and from San Juan to Detroit, London, and Santiago de Cuba, union militancy increased sharply along with the appeal of socialism and the influence of Communist political parties. The Bacardi corporation faced the same worker pressures as did other capitalist enterprises, its progressive reputation notwithstanding. Years passed before Bacardi was entirely welcome in Puerto Rico, and in Cuba the company was repeatedly torn between its urges to be a competitive private business and a generous employer at the same time.

  Cuba’s behind-the-scenes strongman and political manipulator, Fulgencio Batista made a tactical decision during this period to ally with the Cuban Communist Party and allow it to regain control of the trade union movement. The Confederación de Trabajadores de Cuba (CTC), the Confederation of Workers of Cuba, a new central labor federation linked to the Communist Party, became so favored by the Ministry of Labor that it basically functioned as a government union. Emboldened by their powers, labor groups across Cuba made new demands on employers, and the internationally famous Bacardi Rum Company was an irresistible target. For the owners, it was a no-win situation, because the Bacardi union now saw labor-management conflict as a natural and unavoidable fact of industrial life. Even a minor grievance could lead to a major confrontation. This happened, for example, when the company decided in 1939 to start packaging rums in cardboard boxes rather than in wooden cases, a switch that brought the dismissal of “more than 200 workers,” according to the union.

  The company quickly responded to the union claim, saying that the only people affected by the change were the ten full-time and six temporary workers who had been assembling the wooden crates and that all had been reassigned to other jobs on the basis of seniority. The management said customers preferred the cardboard boxes because they were light and easy to handle, and it pointed out that competing manufacturers had made the same change without union opposition. The issue was soon dropped, but the labor-management tensions continued. Union leaders labeled the Bacardi bosses “semi-imperialist” and “anti-Cuban.” That last charge struck a nerve, and frustrated Bacardi executives complained to the Labor Ministry that the company deserved more respect, “not only because of the patriotic accomplishments of its founders but also because of its record of freely and generously pioneering the very social reforms now in favor across the nation.” Their objections went unheeded.

  Part of the Bacardis’ problem was that they were challenging a government with relatively broad popular support. In 1940 Fulgencio Batista decided to step out of uniform and run for president himself, as a civilian. A constituent assembly had just drafted a new constitution for Cuba, replacing the 1901 document that was written during the U.S. occupation and included the hated Platt Amendment provision. The new document mandated a single four-year presidential term and introduced civil liberty guarantees and extensive social welfare provisions. It would be recalled by Cubans for generations to come as a model of progressive political thought. Many of the previously legislated labor rights were made permanent, with workers being entitled to paid vacations, fair wages, and union representation. Though few Cubans considered him a genuine democrat, Batista managed to associate himself with the reforms, and in an election widely seen as the freest Cuba had ever held, he defeated his old rival Ramón Grau San Martín, the candidate of the Auténtico party.

  The Bacardi labor troubles returned in April 1943, when several hundred distillery and brewery workers staged an impromptu sit-down strike to back up their demand for an unscheduled wage increase. The company management claimed the strike violated both the union contract and existing labor legislation and appealed to the government, but the Labor Ministry refused to order a halt to the job action, and Batista personally ordered Bacardi to meet the union demands. Tensions rose sharply when an appeals court sided with the company management and suspended Batista’s presidential decree. The Communist-controlled CTC leadership, by then directing the Bacardi union, immediately fired off a letter to Batista warning that his acceptance of the appeals court ruling would “legalize the Fascist resistance of the [Bacardi] company.” In a major escalation of the dispute, the labor federation called on Batista to show his support for the Bacardi union “through the seizure of the company.”

  Batista may have seen the Bacardis as political enemies, due to their known sympathy for his auténtico opponents. He may have wanted to shore up relations with his Communist allies in the union movement, or perhaps he genuinely believed the Bacardi workers were being treated unjustly. For whatever reason, he went along with the CTC request and in October 1943 sent government agents to Santiago, escorted by provincial and national police troops, to take over the Bacardi distillery. Management officials were ordered to step aside. The Cuban Supreme Court ordered an end to the seizure just one day later, but the damage had already been done. With his “intervention” in the Bacardi business, Fulgencio Batista had alarmed the entire business community in Cuba and earned the Bacardis’ lasting enmity. They would never trust him again.

  The adverse reaction from the business community undoubtedly bothered Batista. Though he depended on the Communists politically, it was an alliance of convenience, made easier by the Allies’ wartime pact with the Soviet Union, and he did not want to associate so closely with the Communists as to jeopardize his relationship with the United States. Within a year, Batista was moderating his antiemployer stance. At the same time, some Bacardi executives and family members began to wonder whether the company had been a bit intransigent in dealing with its union workforce. The company’s legal position had been strong, but that did not address the merits of the wage increase demand. Some Bacardi workers, in fact, were paid less than workers in comparable jobs at other companies, in part because the Bacardi union had moderated wage demands in years when the company was struggling. The events leading to the government’s seizure of the factory were an embarrassment for a company that had always been considered a pillar of the community and a generous employer. That reputation was central to the Bacardi identity, and it would now have to be renewed.

  Whether by coincidence or not, the labor troubles at Bacardi came at a time when the company’s leadership was in transition. The estimable Enrique Schueg turned eighty-one in 1943, having already outlived his wife, Amalia Bacardi Moreau, by fourteen years. Always the debonair Frenchman, Schueg was still an honored guest at Santiago parties, banquets, and receptions, regaling friends and strangers alike with his ageless charm and wit. A dinner held in his honor at Santiago’s Rancho Club in January 1944 attracted 1,200 guests, a number never seen in eastern Cuba for such an occasion. By then, however, Don Enrique was paying less heed to the day-to-day operations of his company than he had in the past. With the outbreak of World War II, his attention had turned back to his beloved French homeland, now under
Nazi occupation, and he organized a solidarity committee in Cuba to support the French Resistance. He was in the final years of his life. As president and managing director of the company, Schueg was unchallenged, but who would succeed him?

  A major concern was the state of labor-management relations. The point man in all union dealings during this time was José Espín, who served as the company’s chief accountant and as Enrique Schueg’s executive assistant (owing largely to the fact that he was fluent in French). Not being a family member, even by marriage, Espín had virtually no chance of ascending to the top executive post in the company, but he still had leadership ambitions. As Bacardi sons and sons-in-law positioned themselves to succeed Enrique Schueg as chief executive, Espín aligned himself with Luis J. Bacardi Gaillard, the company’s deputy managing director and the surviving son of Facundo Bacardi Moreau. Luis controlled 30 percent of the company stock as the representative of his family branch on the company board, so he was a significant force, especially when allied with Schueg’s top assistant. Among the Bacardi sons, he seemed a logical choice to succeed Enrique Schueg. But Luis and Espín had both been singled out by union leaders as difficult to deal with, and they were held partly responsible for the deterioration of labor relations. Within the family, moreover, Luis was seen as a bit reserved and lacking in dynamism and entrepreneurial vision. By the early 1940s, his prospects were fading.