August 17, 2006

 
 

Bacardi's Cuban Rumble Spills Into U.S.

Spirits Maker Releases Its Version
Of Havana Club Rum
And Battles Pernod's Bottles
By VANESSA O'CONNELL
August 17, 2006; Page B2

 

Drinkers all over the world are big on Havana Club, a century-old rum brand with an enticing Cuban history and a dark, rich taste flavored by barrel-aged Cuban sugarcane molasses.

Now, after an absence of nearly five decades, Havana Club has gone on sale in the U.S., priced at $20 a bottle. But rum aficionados shouldn't get too excited. This isn't the famous Cuban rum once sold in the Stork Club in New York: Instead it is a version made in Puerto Rico by Bacardi Ltd.

Bacardi's challenge to the storied Havana Club name is the latest twist in a political and legal saga that stretches back 50 years, to the days of Fidel Castro's takeover of Cuba, pitting the Castro regime against the family that owns Bacardi. Caught up in the battle is the French liquor giant Pernod Ricard SA, which sells Havana Club in 80 countries through its joint venture with the Cuban government.

At stake is future control of the world rum market. While Bacardi Rum outsells Havana Club by nearly 10 to 1, sales of the Cuban brand have been increasing rapidly in recent years even as Bacardi has struggled to reverse sliding sales.

In the near term, Bacardi's position in the U.S. is safe. Not only does the longstanding trade embargo block import of Cuba-owned products, but Cuba this month lost the right to the Havana Club trademark in the U.S.

Bacardi has fought long and hard to protect its business. In 1959, when Fidel Castro took control of Cuba, his new government seized the rum distilleries owned by both Bacardi and Havana Club. The Bacardi family fled the island and moved production to their Puerto Rico plant, eventually building Bacardi into a global rum giant. Havana Club's family owners, the Arechabala family, weren't so lucky. While they escaped, they only had one plant -- in Cuba -- and had to abandon the business. In 1973 the family let their U.S. trademark on Havana Club expire.

Cuba continued producing the rum, initially for the domestic market and the Soviet bloc. After expiration of the family's trademark, a Cuban state export company registered the Havana Club brand with the U.S. Patent and Trademark Office, and eventually, dozens of other countries. In 1993, it got more aggressive, making a deal with Pernod to sell the rum throughout the world. The deal has paid off: In the year to June 30, Havana Club's world-wide sales hit 2.4 million cases -- compared with tens of thousands in 1993. Bacardi, in comparison, sold about 20.1 million cases of rum last year, about the same amount as in 1993.

About half of Bacardi's sales are in the U.S. Bacardi, worried that the death of Fidel Castro could some day end the embargo, has pulled out all the stops to keep Cuba's Havana Club out of the market. Despite the expiration of the Arechabala's trademark, Bacardi struck a deal with the family for rights to the brand and in 1995 began selling a Bahamas-made rum with the Havana Club label in the U.S. marketplace. It pulled the product after Pernod sued, triggering a decade of courtroom battles over the trademark ownership that are still going on.

Bacardi also went to Washington, lobbying successfully for passage of a law -- dubbed the "Bacardi Bill" -- which blocks renewal of trademarks for brands whose ownership was confiscated by the Castro regime. On Aug. 3, about seven years after the bill became law, it paid dividends for Bacardi when Cuba's U.S. registration of the Havana Club brand expired. Shortly before, the U.S. Treasury's Office of Foreign Assets Control had denied a Cuban government agency the license needed to renew the trademark. Francisco de la Vega, a spokesman for Pernod Ricard in Paris, blamed the "Bacardi Bill" for the trademark lapse.

Days after the trademark expired, Bacardi began shipping its new Havana Club bottles to stores. "Developed in Cuba circa 1930," its sleek bottles note, with a barely visible Bacardi imprint under the brand logo. Bacardi executives say the company had been planning the launch for at least three years, and say they are basing the new rum on original Arechabala family recipes. In contrast to Cuba's Havana Club, with its amber tint, red-and-black label and Cuban-government stamp, Bacardi's Havana Club is clear, like water. Bacardi says its trademark application is pending.

Croton-on-Hudson, N.Y., spirits consultant Gary Regan says the Bacardi Havana Club "has a wonderful sharp quality" and "holds its own with the best of the best white rums out there," such as Appleton White and Rhum Barbancourt. Earlier this month, Mr. Regan shared his bottle, provided by Bacardi in advance of its launch, with a group of eight bartenders from prominent bars, mainly in New York. They tasted the rum blind and learned this week it was Bacardi's Havana Club, as part of a gambit to prime the market and boost the chances of post-launch buzz.

[Rum Graphic]

Mr. Regan says he hasn't tasted the Cuban Havana Club, but says he would like to see it sold in the U.S., too. Generally, Cuban rums tend to be less sweet and drier than Puerto Rican rums, say spirits experts such as F. Paul Pacult, editor of the Spirits Journal.

Bacardi's Havana Club is "not as rounded as the Cuban Havana Club, but it's not too far off," says Sam Ross, a bartender at Milk and Honey in Manhattan, who has tasted both. Bacardi's version "tasted lovely, definitely silky smooth, rich and chocolaty and caramel-y," he says. Although Bacardi's version lacked the seven years' aging that benefits the Cuban Havana Club rum, he adds, "I think that will definitely satisfy the thirst for Havana Club here in the U.S., where we can't have it."

Marketers agree that a Cuban-made Havana Club -- should its sale ever be allowed in the U.S. -- would catch on. "I think it would be very, very popular in the U.S.," says Brian Sudano, a managing director at Beverage Marketing Corp., a New York consulting group.

Mr. de la Vega says Pernod Ricard filed a new lawsuit against Bacardi this week on the grounds that Bacardi is misleading consumers and that the Havana Club name can't be used for any rum that isn't Cuban. It also plans to appeal the decision by the U.S. trademark office that blocked the renewal of its registration of the brand.

Others warn Cuba might retaliate by ignoring the trademark protection it has afforded to U.S. brands. "Given this action by Bacardi, the temptation by the Cubans would be to say, if you don't respect the trademark agreement then we won't either," says Wayne Smith, head of the Cuba program for the Center for International Policy in Washington.

Some liquor executives hope Bacardi's Havana Club will give a lift to the U.S. rum market, which has been expanding about 5% or 6% a year. Skyy Spirits LLC, which markets a Dominican Republic-made rum as "made in the tradition of Cuba," says it might ramp up the Cuba-related themes in its marketing.