Bacardi and the Long Fight for Cuba

by Gjelten, Tom

  Cuban manufacturing was generally in a disastrous state, but rum production was a definite bright spot, and that was likely to be true whether Cuba remained socialist or evolved into a democratic, market-oriented state. One effect of foreign investment in the rum industry was to introduce principles of capitalism where they had previously been absent. Pernod Ricard’s partnership with Corporación CubaRon exposed Cuban managers and executives to the importance of brands, marketing strategy, competitive pricing, intellectual property, and other concepts from the Western commercial world.

  CubaRon was one of the first state-owned firms in Cuba to be integrated into the perfeccionamiento empresarial (enterprise improvement) program, set up by the Cuban government in 1998 to prepare Cuban enterprises for the challenge of competing in the market economy as separate firms, rather than as units within a government ministry. The program was intended to introduce state enterprises to such unfamiliar practices as cost accounting, budgeting, managerial decision making, and customer service. Most Cuban firms failed to satisfy the minimum criteria to complete the program, but CubaRon executives embraced it, inspired perhaps by contact with their Pernod Ricard counterparts.

  The Cubans’ exposure to capitalism gave them reasons to question their own economic system. They learned, for example, that in a market economy, enterprise managers who perform well are rewarded with good salaries. Not so in Cuba. Pernod Ricard compensated the Cuban state in hard currency for the services of its Cuban employees, but the Cubans received only a tiny fraction of that pay, with the government keeping the remainder. Under the circumstances, the Havana Club joint venture with Pernod Ricard produced a paradox in Fidel Castro’s Cuba: The more money it made for Cuba, the more it undermined socialist ideology and fed the demand for economic reforms.

  Speaking privately with their French colleagues, the Cuban professionals who worked for Havana Club International regularly hinted that they were looking forward to the post-Castro era in Cuba, in anticipation of the economic and political changes they expected it to bring. To be sure, some of them were members of the Cuban Communist Party, because the Cuban authorities selected the people who were allowed to work for joint ventures and chose only those considered politically reliable. The experience of the ex-socialist countries of the Soviet bloc, however, showed how common it was for well-connected Communist technocrats to become eager capitalists overnight when the firms they managed were about to be privatized.

  The state-owned CubaRon side of the joint rum venture was clearly a prime candidate for capitalist transformation. By 2008, Havana Club sales had reached 2.6 million cases, with a growth rate still in the top ranks of the spirits industry. As part of the company’s strategy to achieve annual sales of five million cases by 2013, the joint venture had inaugurated a new distillery, this one for the production of the premium dark rums that were popular in European markets. Havana Club was genuinely El Ron de Cuba, and it would not be easily dislodged.

  During her visit to Santiago de Cuba in April 2002, Amelia Comas Bacardi took her husband Robert to see all the old Bacardi haunts, a tour that revealed how the city had changed after forty years and how it had simply aged. In addition to the Museo Bacardi and the Santa Ifigenia cemetery, they stopped by the former Bacardi administrative offices on Aguilera Street (formerly Marina Baja), the ancient brick building where the young Emilio Bacardi once passed his workdays writing stories on the backs of blank ledger sheets. The Bacardi bat logo was still visible on the concrete pillars at the curbside, but the ceramic tiles that spelled out B-A-C-A-R-D-I in the sidewalk had been ripped out. The building now housed a men’s stocking factory, though for lack of materials and equipment problems it was rarely operating.

  The old bottling facility and rum factory on Matadero Street was in better shape, operated by Corporación CubaRon and producing rum under the “Ron Santiago de Cuba” label. From the outside, the factory looked the same as it had in 1960, though the little grassy courtyard where the Bacardis’ coconut palm once grew had been enclosed and incorporated into the building itself. Tourists had formerly been allowed to step inside, but the factory in recent years had been closed to all outsiders. The rum-aging warehouse, next door to the factory, was also off limits. Had Amelia and Robert been able to go inside, they would have seen thousands of oak barrels stacked from floor to ceiling, each barrel marked with a number to identify the age and batch, just as in the old days. The side of the warehouse facing the street was colorfully painted with Santiago scenes and a city motto, in bright red letters: Santiago de Cuba: Rebelde Ayer, Hospitalaria Hoy, Heróica Siempre (Rebellious Yesterday, Welcoming Today, Heroic Forever). The street traffic was light. Every few minutes a horse-drawn taxi carriage came clopping by, full of passengers who had paid a few pennies for a ride into town.

  Villa Elvira, the luxurious country home where Emilio Bacardi had lived out his days with his wife Elvira Cape, had been turned into a school for children with disabilities. No effort had been made to maintain the sculpture garden that once graced the property, and statues made by Emilio and Elvira’s daughter Mimín lay broken and covered by weeds. The house where Amelia’s uncle, Daniel Bacardi, had once lived with his family was now the Russian consulate. The mansion Pepín Bosch had inherited from his father in the fashionable suburb of Vista Alegre had become the provincial headquarters of the Young Pioneers, the Communist youth group in Cuba. A Soviet-era MiG fighter jet sat on a pedestal in the front yard. Amelia also showed Robert the two-story house on Plaza Marte that had once belonged to her grandfather and where she had lived as a young girl in Santiago. It was now a budget hotel.

  The two waitresses in the hotel dining room were dressed like aging flight attendants on a Soviet airliner, in navy blue polyester skirts with matching vests, light blue blouses, and red scarves around their necks. The women were perfectly pleasant, but having spent their entire adult lives in a socialist system where there was no reward for extra effort, they showed little interest in their work. One sat at a table, writing a letter. The other stood behind the cash register, sewing a button on a flowered blouse, singing softly to herself. No quiero flores. No quiero estampas. Lo que quiero es la Virgen de la Caridad. It was a traditional Cuban son tune, sung in praise of the patron saint of Cuba. She was still singing sweetly when she eventually sauntered over to attend to her customers. Her manner was so gentle that it was impossible to be perturbed by her inattentive service. In Cuba, visitors learn to be patient.

  Amelia asked questions of the Cubans she met, though she was always polite. She carried herself with a quiet dignity, dressing conservatively and keeping her judgments to herself. Among her last memories of the island was a long, miserable night spent outside the U.S. embassy in Havana, waiting in line with her sisters for a visa. Pro-Castro Cubans had been sent to jeer at those who wanted to leave the island. It would have been natural for Amelia, back in Cuba for the first time since that awful experience, to feel some residual anger toward the Cubans who had said nothing when she and her family were publicly denounced, who had not spoken up against Castro when they had a chance, who had opted to stay on the island and make their peace with him. But she felt only sympathy.

  In Santiago, Amelia tracked down the one relative still living there, a second cousin once removed named Marta María Cabrera, from a non-Bacardi branch of her family. Marta María’s grandmother was a first cousin to Amelia’s mother and had taken care of Amelia when she got sick with whooping cough as a child. Her grandfather had been a prosperous Santiago lawyer, but unlike the Bacardis and many other Cuban professionals, he had decided to remain in Cuba after the revolution. Over the coming years, his family’s living standards had plummeted, and he had died a poor man. By the time Amelia returned to Cuba, her Bacardi wealth was unimaginable to her Santiago relatives.

  On the morning after Amelia and Robert arrived, Marta María visited them in their room at the Hotel Casagranda on Santiago’s main square. Though her own house was full of antique mahogany furniture, much
of it left to her family by departing relatives, Marta María had never set foot inside a tourist hotel in Cuba, and she was overwhelmed by what she saw. “Oh my God, look at this beautiful bedspread,” she said, running her hands lovingly across it. “And these towels they give you! And all these little soaps and shampoo bottles!” Amelia, somewhat embarrassed by her cousin’s reaction to what was a quite ordinary hotel room by international standards, invited Marta María to join her and Robert for breakfast on the top floor of the hotel. “Oh, can I?” she pleaded.

  At the breakfast buffet, Marta María was once again awestruck by what was available to visiting foreign tourists: fresh pineapple, mangoes, bananas, papaya, and grapefruit; pastries, eggs made to order, with bacon and ham. “I’ve never seen anything like this!” Marta María said, her eyes tearing. All her life, like other Cubans, she had seen eggs and meat as luxuries, scarcely rationed and affordable only on special occasions. Fresh fruit was rarely to be found, and pastries were unheard of. When Amelia and Robert met Marta María the following morning, they brought with them a bundle of sweet rolls from the buffet wrapped up in napkins for Marta María to take home to her son. They never made it. Over the next few hours, while accompanying Amelia and Robert around town, Marta María ate the pastries one by one. When she realized none were left, she began weeping. “I can’t believe what I’ve done,” she told Amelia. “But you don’t understand what it is not to have these things.”

  Amelia and her husband returned to the United States thinking there was much they had not fully understood about Cuba. After meeting many ordinary Cubans, they were inclined to challenge facile assumptions back home about how Cubans really felt or what policies the United States should favor. Amelia’s husband, Robert O’Brien, concluded on the basis of his observations on the island that the U.S. trade embargo was working to Castro’s advantage by providing an excuse for his economic policy failures, though he was not yet prepared to advocate its suspension. Back in the United States, he began following Cuba issues much more closely and joined the board of the Center for a Free Cuba, an anti-Castro organization partly supported by Bacardi family money.

  For her part, Amelia told friends and relatives that Cubans could not be characterized simply as active Castro supporters or as dissidents; there were too many in between. “If you’re going to live there, you have to mold yourself to the regime,” she said. She realized that former family friends in Santiago and Havana had helped themselves to the art, furniture, silver, and other treasures her parents and relatives had left behind, but that thought no longer upset her. “Some people say they’re going to go back to Cuba to claim what they had there,” she said. “Not me. These people who might be in your old house, you think maybe they’re with the regime. I don’t know if they are or not. But they’re suffering. Look at the conditions under which they live.”

  For more than a hundred and fifty years, the Bacardi name had been associated with “the Cuban cause,” but that idea had been redefined so often that its meaning was no longer clear. After Fidel Castro turned Cuba into a totalitarian Communist state, the Bacardis stood for liberating the nation from his rule, but even that aim had lost urgency. Though Fidel remained a tyrant, he became progressively less relevant. The rhetoric of revolution and struggle was hollow. It did not matter what Fidel Castro or Ricardo Alarcón said about the Bacardis; many Cubans paid no heed. On the other hand, this did not mean that the old rum family could expect to come back to Cuba and pick up where they had left off in 1960. Too much had changed. Many Cubans had adjusted to the system, enthusiastically or not. An enterprise like Havana Club, established on a combination of old and new power bases, seemed relatively secure.

  A separate question was how much Bacardi had changed. Its long commitment to Cuba distinguished the company from its peers. Few, if any, firms have maintained a political identity as Bacardi has with its Cuba connection, either publicly or privately. The depth of the Bacardi attachment to Cuba could be taken as a measure of the company’s uniqueness, and it might reveal how wholly owned family firms, even very big ones, remain a category unto themselves.

  Since its 1862 founding, the company has been led by a Bacardi son or son-in-law throughout its history, except for the 2000-2005 period, when the directors went outside the family and chose Rubén Rodríguez as their new board chairman. When Rodríguez retired, the board turned back to the family, selecting Don Facundo’s thirty-eight-year-old great-great-grandson, who also happened to be named Facundo Bacardi. The young Facundo was the seventh family member to chair the company since its establishment, though he was the first in the branch descending from Facundo Bacardi Moreau, the founder’s second son. Young Facundo had inherited one of the largest blocks of Bacardi stock in the family, and his stockholdings gave him considerable clout within the company. Despite his relatively young age, he had been playing a prominent role on the Bacardi board for ten years already by the time he was named chairman.

  Facundo’s youth did mean that his connection to Cuba was a bit weak. He was born in Chicago, had never set foot in Cuba, and, in his own words, had an “American mind frame” that occasionally clashed with the “Cuban Bacardi” views of other family members. When he became chairman, however, Facundo noted that his predecessors had all felt a responsibility “to move both the family and the company forward in a way that preserved its Cuban heritage.” He was taking over the company just as political change in Cuba appeared imminent, and he knew that as the Bacardi corporate leader he was expected to follow through on the family’s long-standing plan to play a role in post-Castro Cuba. “The historical significance of my chairmanship is to be the one to reestablish the Bacardi company in its homeland,” he said shortly after being chosen. “I feel a great obligation to devote every effort in leading the family, and the company, back to its birthplace and to help the people of Cuba in every way possible.” No one named Facundo Bacardi could say any less.

  But what exactly did it mean? There would be no family company to lead back to Cuba if Bacardi Limited did not survive as an independent firm. As chairman, Facundo needed to focus more on competitive business pressures than on the political situation in Cuba. For more than a decade, the global spirits industry had been in a period of feverish consolidation, propelled by significant economies of scale in the liquor business. In an effort to keep up with its rivals, Bacardi had bought Martini & Rossi vermouth in 1992, Dewar’s whiskey and Bombay Sapphire gin in 1998, and Cazadores tequila in 2002. Those acquisitions nevertheless still left Bacardi trailing Diageo, the spirits industry giant, and in 2004 the company purchased Grey Goose vodka for more than two billion dollars. Archrival Pernod Ricard surged far ahead the following year, however, by acquiring all of Allied Domecq, a British firm whose brands included Beefeater gin, Kahlúa liqueur, and Perrier-Jouët champagne. By the time Facundo Bacardi became chairman, Bacardi Limited was struggling to maintain third place among the big spirits companies. Most of the available brands had already been acquired, and the few remaining buying opportunities were hotly contested. In the spring of 2007, when the Swedish government announced plans to sell its own Absolut vodka brand, Bacardi and Pernod Ricard jostled to be first in line to buy it. At the same time, Bacardi committed itself to the development of new markets, as the company had done successfully under the leadership of Enrique Schueg a century earlier. In 2006 the company moved its Asia headquarters from Hong Kong to Shanghai in order to be closer to the emerging Chinese market. A year later, the company announced plans to invest four million dollars promoting its brands in India.

  It was not easy to say precisely where Cuba fit among all the concerns on the complex Bacardi agenda, in part because it was hard to separate commercial considerations from political and emotional ones. Bacardi advertising experts had long been prepared to exploit the new interest in Cuba by underscoring the company’s own Cuban heritage, even while Bacardi lobbyists were urging the U.S. government to maintain an uncompromising line in dealing with the Castro regime. One n
otable ad appeared in Cigar Aficionado magazine in June 1999, a special issue titled “Cuba: Is It Time to End the Embargo?” The magazine that month included a travel guide for Americans who wanted to visit the island, along with reports on the best cigars and rums produced on the island and which hotels and resorts offered the best accommodations. At the time, the Bacardi political position was that U.S. travel to Cuba should still be restricted, but the company’s marketing team concluded that if Cigar Aficionado was going to highlight Cuba’s rum tradition, Bacardi needed to be represented. The company placed a two-page color ad near the front of the magazine, featuring a picture of three vintage Bacardi bottles from the days when the rum was still bottled in Santiago de Cuba, alongside a Cuban cigar burning in an ashtray. The caption read, “When the Great Cuban Cigars Were Born, They Were Enjoyed with the World’s Great Rum.”

  As long as Fidel Castro still ruled the island, however, there was some sensitivity around the issue of how heavily the company should promote its Cuba connection. In some countries, Bacardi rum advertising and bottle labels included the statement Established Cuba 1862, but internal company guidelines called for the word “Cuba” to be dropped in those countries “where a Cuban heritage statement is not allowed, desired or relevant.” The bigger questions, of course, were whether the company should return to Cuba, how soon, and under what conditions. The Bacardi name was still associated with rum in Cuba, and some company executives were eager to produce a young white rum on the island, oriented primarily to the domestic market. Another issue was whether the company should make much of an effort to reclaim any properties in Cuba, including the distillery, bottling plant, and aging warehouse in Santiago. The consensus among company executives was that it would be better to build a new operation from scratch. They had caught a glimpse of the inside of a Havana Club bottling plant in a BBC documentary film and concluded from what they saw that it was badly out of date. If the old Bacardi facility in Santiago was in similar condition, there would be little reason to redevelop it.