Bacardi and the Long Fight for Cuba

by Gjelten, Tom

  As expected, the trademark dispute escalated quickly into a legal confrontation. Bacardi company lawyers found the Cuban authorities attempting to export rum under the “Bacardi” label to at least five countries, and each time they took them to court. When Bacardi executives learned that a shipment of “Bacardi” rum from Cuba had arrived in the Dutch Antillean colony of Aruba, they alerted the local customs authorities, advising them that the manufacturer did not have a legal right to export rum under that name. The local courts agreed, and the entire rum shipment was thrown overboard. The Bacardi lawyers sued the Cuban government for trademark infringement even in Israel, where the costs of litigation far exceeded the value of the commerce. The final and most decisive court battle was in the United Kingdom, where it was the agents for the Cuban government who actually initiated the litigation, demanding that the rights to the Bacardi trademark be transferred to the nationalized company in Santiago. The case ended with the Cuban government agreeing to withdraw the suit and stop using the trademark, in exchange for the Bacardi company agreeing to pay all its own court costs, which were substantial.

  It was only with the settlement of the British case in March 1968 that the Bacardi trademark was finally secure. Bacardi executives later said they had never been entirely confident that courts around the world would recognize their proprietary rights to the trademark. Intangible assets cannot be confiscated as easily as distilleries, but if the Cuban government had explicitly decreed in October 1960 that it was claiming the Bacardi trademarks, courts in some countries might have looked more favorably on the Cuban position. Enrique Oltuski, a vice minister of industry under Fidel Castro during the period when the trademark battles were being fought, said years later that his government had simply been out-lawyered by the Bacardi company. “That was a product of our inexperience,” he said in a 2004 interview. “We were all very young, and in those first years we were entirely caught up in all the problems we had. We just didn’t think to register the Bacardi trademark, so we lost it. We had the factory that produced the real Bacardi rum, but we couldn’t keep the name.” Part of their problem was their Marxist preconceptions; in the Marxist view, it’s the “physical means of production,” not the intangible assets, that accounts for the value of an enterprise.

  Pepín Bosch took personal pleasure in his victory over Fidel Castro’s regime in the trademark battle, and he spoke of it often in the years that followed. On at least one front, he and his company had taken on the double-crossing dictator and beat him. With its trademarks protected, the company would survive confiscation. Thanks to the business vision of Enrique Schueg, who had decided that the firm’s future lay in international expansion, and to the skill with which his son-in-law Pepín Bosch had turned that vision into reality, Bacardi in 1960 was in a position to prosper even without its operations in Cuba. In August the company inaugurated a second distillery in Mexico. The two operations plus the plant in Puerto Rico were by that point producing three times as much rum as was the original plant in Santiago, so the company’s overall capacity remained largely intact in spite of the nationalization. Moreover, Bacardi had in Pepín Bosch a classic enterprise leader—one who moved boldly, managed risk, and responded creatively to business setbacks.

  The company’s move to Brazil was a good illustration. Bosch saw as early as 1952 that with the country’s abundant sugar crop, it would be a good place to make rum. In the coming years, he visited often to determine the best location for a distillery and to assess the potential Bacardi market. Believing that Brazilians would appreciate a quality rum as well as their beloved cachaça spirit, Bosch convinced his Bacardi stockholders to approve the investment. The site he chose for a new distillery was Recife, at Brazil’s easternmost tip, a city where tax breaks for industrial development were available. Juan Grau, the engineer who had directed new Bacardi distillery projects in Mexico, Santiago, and Puerto Rico, was dispatched to oversee design and construction of the facility.

  Grau arrived in Recife with his wife and children in February 1960. The company’s future in Cuba was uncertain at the time, but Bosch insisted that Grau move full speed ahead regardless. Eight months later, Grau heard that all the Bacardi assets in Cuba had been seized by the government, and he called his boss to offer his sympathy. “Oh, it was to be expected,” Bosch said.

  “So what should we do here?” Grau wondered.

  “What, are you having some technical problems or something?” Bosch asked.

  “No,” Grau said, “but how can we go ahead here, considering all you’ve lost in Cuba?”

  “Look, Juan,” Bosch said, “that’s my problem. I’ll worry about the money. You worry about getting that distillery finished.”

  In fact, there was reason to be concerned about Bacardi’s financial condition in the aftermath of the Cuba confiscation. Beyond the loss of the rum facilities, equipment, and aging reserves, Bacardi had lost its Hatuey beer business, the company’s most important source of financing. Because beer did not need to be aged or transported long distances, the breweries generated immediate cash income, and that revenue helped underwrite the company’s expansion. The confiscation of the old distillery on Matadero Street in Santiago was an emotional blow to the Bacardis, but from a financial perspective the loss of the beer operation was far more painful. In order to move ahead with his expansion plans in Brazil and beyond, Pepín Bosch had to turn to his banker, George S. Moore, the chairman of National City Bank (later named Citibank) and an acquaintance from Bosch’s own days at the bank thirty years earlier. Bosch had gone to National City for help in financing the second Mexico expansion, but at that time he had assets in Cuba to offer as collateral. Now Bosch needed more money, and he had lost a chunk of his collateral. Moore extended Bosch credit regardless. In the early 1960s, relationships still mattered in banking, and Moore trusted Bosch as a businessman.

  The Brazil move, however, was appearing increasingly risky. Almost from the beginning, it was plagued with problems. Bosch thought he had an agreement with the local government for the waste molasses slops to be piped into a nearby river, but the authorities objected when they realized how much discharge would be produced. Grau had to arrange for the slops to be taken on a barge and dumped at sea. (Later he persuaded the authorities that the slops, all organic, could be sluiced into the nearby sugarcane fields as fertilizer.) The distillery was built and put into production in record time, but then a second, more serious, problem emerged: The rum wasn’t selling. Bosch had chosen the Recife site for its proximity to the sugar-producing areas and in order to take advantage of the tax breaks Bacardi was offered there, but the rum would have to be sold in the more heavily populated south, near São Paulo and Rio de Ja neiro. Realizing he was facing a marketing challenge, Pepín Bosch called for Juan Prado, who had just finished his swing through Europe. Prado spent two years in Brazil, but even he—considered by his colleagues to be the best liquor salesman in the world—was unable to build a strong Bacardi rum market in the country. The Brazilians’ preference for beer and cachaça and the relatively remote location of the Recife distillery, two thousand miles from Rio over unimproved roads, presented overwhelming odds.

  But Pepín Bosch was a smart businessman. Realizing there would never be enough Bacardi rum sold in Brazil to justify the investment there, he decided to use the Recife facility to supply rum for other markets. The quality of the rum produced there was technically as good as that from any other Bacardi factory. Leasing stainless steel tankers, Bosch shipped the rum to other distribution points and bottling plants in an arrangement that proved profitable. Yet again, he had produced success from a potential business failure.

  The Bacardis’ devotion to their history was symbolized over the years by their attention to the skinny coconut palm that stood alone in front of the main factory in Santiago. Don Facundo’s fourteen-year-old son Facundo Jr. planted it the day the distillery opened in 1862 or shortly thereafter, and in the following decades el coco became a hallowed and untouchable sy
mbol of the family enterprise. Each time the building was renovated, enlarged, or rebuilt, the construction had to take place around the palm, so that by the 1950s the spindly tree, leaning hard to the right, appeared to be in a cage, trapped behind a modern facade and a huge BACARDI sign. A bronze plaque mounted on the side of the building next to the coconut palm read:Ever since the foundation of Bacardi in the year of 1862, the factory has existed in this same place, though the building has twice been reconstructed. The coconut palm planted here when the enterprise was founded has been jealously guarded through all these times.

  The coconut palm died, however, right around the time Fidel Castro’s regime took the factory away from the Bacardi family. The coco legend was that the rum company would survive as long as the palm lived, or so it was claimed in subsequent Bacardi publicity. “In the year that the Bacardi family members were uprooted from their Cuban homeland,” the company claimed, “the palm, as if in protest, withered and died.” Santiagueros less invested in Bacardi lore say the palm was well on its way to dying before Fidel came to power and that the notion of its survival being linked to the survival of the family company was mostly concocted after the tree had already died. In any case, the story made for a nice symbolic narrative, and it certainly fit the reality: that Fidel Castro was responsible for effectively ending Bacardi life in Cuba.

  February 4, 1962, was the one hundredth birthday of the Bacardi business. Past anniversaries had been celebrated with fireworks, charity events, and the company’s renowned sailing regatta. But the centennial passed almost without notice. Family members were scattered across several continents, some of them with little to their name, and they had little prospect of returning to Cuba any time soon.

  The new priority was to survive and show Fidel Castro that the company still existed as a vibrant private enterprise. The goal was met through the defense of the trademark and a reorganization of the corporate structure. The reconstituted Compañía Ron Bacardi, S.A., transplanted from Santiago to New York, moved again to Nassau, where it became Bacardi & Company, Ltd. As the successor to the original firm, it held the Bacardi trademarks and provided strategic guidance for the other Bacardi companies. Pepín Bosch was chairman. Daniel Bacardi, having recovered from the humiliation of Castro’s betrayal, returned from Spain to serve as president.

  The loss of their properties in Cuba prompted Bosch and his shareholders to expand even more aggressively. In September 1961, a month before the first bottle of Bacardi rum came off the production line in Brazil and just a year after the inauguration of the new distillery in Tultitlán, Mexico, the company announced its intention to build a four-million-dollar distillery and bottling plant in the Bahamas. Rum produced there could be exported to British Commonwealth nations on the same tax-free basis that Puerto Rico provided with respect to the U.S. market. Its opening in January 1965 meant that Bacardi rum was being distilled in five plants in four countries. Just four years after the expropriation of his company and his personal assets in Cuba, Pepín Bosch was commuting between homes in Mexico, Brazil, and Miami and presiding over a growing and prosperous company. The time had come to gloat. “Fidel Castro took away $70 million from us, and we don’t even feel it,” Bosch told a reporter.

  Another distillery opened thereafter in Canada, followed a few years later by new facilities in Martinique, Panama, and Spain. With so many Bacardi distilleries, thousands of miles apart, the challenge was quality control. Uniformity of taste had always been a hallmark of Bacardi rum manufacturing. The company took great pride in being able to guarantee that a bottle of white Bacardi rum opened in Germany or Brazil would be indistinguishable from one opened in New York or Mexico City. Consumers liked knowing what they were going to get. Gone, however, were the days when Daniel Bacardi would check the rum by splashing some on his hands and sniffing his palms. Technical evaluation was now favored, led by the analytical methods developed by Juan Grau. He had determined, for example, that what made Bacardi rum in Mexico different from the Puerto Rican or Cuban versions was the high sulfite content of Mexican molasses. Grau then developed a procedure for purifying the molasses before the fermentation began and thereby neutralizing the offending flavor. His methodology was explained in a technical manual used in every Bacardi production facility around the world. Chemical engineers at each location monitored the production to make sure the rum met the company’s technical standards. A quality-control laboratory was established at Bacardi & Company in Nassau, and each month every Bacardi distillery sent rum samples to be analyzed by the laboratory technicians and rum experts.

  From the early 1960s to the late 1970s, Bacardi reported the greatest growth spurt in the history of any liquor company. The company sold 1.7 million twelve-bottle rum cases worldwide in 1960, the year its Cuban operations were nationalized. By 1976, annual global sales had surpassed ten million cases, for an average yearly increase during that time of 12.5 percent. Juan Prado, reflecting on the company’s development in the years after Cuba, suggested that the confiscation of its Cuban properties actually gave Bacardi a boost. “A lot of people think Bacardi should thank Castro for what he did,” he said, “because we never would have achieved what we did if we had stayed in Cuba.” The big change, Prado argues, was that the loss of its Cuban operations pushed Bacardi out of the beer business and forced it to focus all its efforts on rum. Outside Cuba, Hatuey beer was virtually unknown and would have faced competition far beyond anything Bacardi rum had to deal with. Moreover, the high costs involved in brewery construction and freight made an investment in a new beer business prohibitively expensive. Without its Hatuey subsidiaries, the Bacardi company had no choice but to expand its rum production internationally if it was to survive. It expanded, and it prospered.

  Exile meant a division of Bacardi history into “before” and “after” periods. As a private business in the heroic city of Santiago, owned entirely by a Cuban family closely associated with the city’s revolutionary heritage, Bacardi Rum was the quintessentially Cuban company. That changed when the family and the senior management and technical personnel took the company and the Bacardi name abroad—to the Bahamas, Miami, Bermuda, Puerto Rico, Mexico, Brazil, and beyond. The transition from small, locally oriented Cuban firm to global corporation, already under way in 1960, was dramatically accelerated. In the 1970s, marketing research in Puerto Rico suggested that the lingering image of Bacardi rum as a Cuban product was actually hindering sales, apparently because the Cuban exiles who had settled there had a reputation among the local population for arrogant and elitist attitudes. In response, the company revised its marketing in order to associate Bacardi more with Puerto Rican traditions, even sponsoring an annual arts-and-crafts fair at its distillery site outside San Juan, to showcase Puerto Rican artisans.

  The experience of exile, however, did not end the Bacardi-Cuba connection so much as it made it more private. On the inside, Bacardi remained Cuban. The company continued to be entirely family owned, and the Bacardis themselves remained keenly aware of their Cuban heritage, as did the Bacardi employees who left Cuba with the family and stayed with the company. In exile, the Bacardis’ ties to the company and to each other as an extended family became a way of holding on to their Cuban identity. Manuel Jorge Cutillas, the company engineer and great-grandson of Emilio Bacardi, saw the significance of the bond years later when he became chairman of the Bacardi board of directors. “Because of Bacardi, we as a family were not as negatively affected by exile as many Cuban families were,” he said. “We had Bacardi, it became our country. We were able to keep a little piece of Cuba within ourselves.”

  The Bacardis’ personal dependence on the business during the early exile years, for their income as well as their identity, reinforced the company’s familial character even as it was becoming more international in its orientation and operation. In 1963, Bosch shifted the headquarters of Bacardi Imports, the U.S. company, from New York to Miami. The move coincided with the arrival of hundreds of thousands of Cubans in south
Florida and gave Bacardi a U.S. home in the heart of the Cuban-American community. Though Bacardi Imports was but one of several Bacardi companies, its location in Miami allowed it to serve as the hub of the Bacardi diaspora. Family members were scattered in many countries, but more settled in Miami than anywhere else. The city had always been a business and commercial center for Latin America as a whole, and the influx of a new Cuban population made it all the more so.

  For his new Miami offices, Bosch commissioned the design of a flashy new eight-story tower. Two sides of the resulting building were covered by blue and white ceramic tiles that formed floral images, designed by a Brazilian artist from Recife named Francisco Brennand. Each of the twenty-eight thousand six-inch-square tiles was hand-painted in Brennand’s studio before being fired and glazed. The office building itself was erected on four columns with an open plaza below, so that it appeared to float in midair. The tower took up only a small fraction of the Biscayne Boulevard site, leaving most of the land for gardens. The color, vitality, and playfulness of the Bacardi building evoked a whimsical and carefree Latin spirit.

  Bacardi’s public image, however, was another matter. In spite of its own heritage and its location in the U.S. city with the second-largest Cuban population outside Havana, there was no mention of Cuba in any company marketing. Beginning in the 1960s, the main advertising theme was Bacardi’s “mixability.” It went with soda. An especially long-running ad campaign featured the Bacardi bat logo or another Bacardi symbol alongside various soft drink brands, with the caption “Bacardi. The Mixable One.” One ad showed a wooden Bacardi crate filled with Coke, 7UP, Pepsi, Fresca, Schweppes Tonic, Canada Dry Ginger Ale, and Squirt, along with two bottles of Bacardi, and was titled simply, “A Bacardi party to go.”