[Marxism] Bacardi's Cuban Rumble Spills Into U.S. (WSJ)

Walter Lippmann walterlx at earthlink.net
Thu Aug 17 04:17:13 MDT 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.

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.

Write to Vanessa O'Connell at vanessa.oconnell at wsj.com





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