Ian Williams: Bacardi’s Muddled Fight for “Cuba Libre”
September 19th, 2008 Posted in Books, Cuba | World Policy Journal
The Bacardi family elicits strong feelings across the world. Its propensity for mythmaking, its aggressive commercial competitiveness, its long history of lobbying in Washington, its family obsession with Cuba, and its understandable grudge against Fidel Castro’s regime are all guaranteed to produce friction.
Tom Gjelten has had unprecedented cooperation from both the family and from Cuban officials in writing his book, Bacardi and the Long Fight for Cuba: the Biography of a Cause (Viking , 2008). Neither Castro supporters nor the Bacardi family have exactly trumpeted the financial, political, and logistical backing given by the family to Castro and the rebels. Both sides obviously regret the episode. Ironically, however, now that Raul Castro has succeeded his older brother, both sides are linked to the family business, since Raul married the daughter of a Bacardi executive family in a lavish Bacardi-hosted ceremony attended by Fidel, the original big brother.
Gjelten leaves nothing unrecorded in his objective, warts and all, history of an unusual company, illustrating Cuban history without the canonizations by leftist apologists for Fidel and the demonizations by conservative Cuban exiles and their friends.
He correctly questions some of the company’s mythmaking by copywriters, for example the “Cuba Libre” (rum and Coke), whose Bacardi origins were later dubiously certified by the Bacardi sales manager in New York. However, he is a little too accepting of the family tale, and indeed the Cuban view, of its innovation in rum-making. In fact, for centuries, the Spanish colonies were forbidden from making rum—not, as Gjelten suggests, to protect public morals, but to protect the brandy industry back home.
What Bacardi did was replicate the processes long used by the Jamaicans and other Anglo-Caribbeans, who had long before discovered how important aging in oak barrels was to make the product smooth and palatable. Bacardi made a lighter version of rum, filtered to take out much of the color and, in the opinion of many rum connoisseurs, much of the taste as well. But as part of its innovative marketing, the family was strong on quality control, ensuring that the brand, even if bland, was consistent.
In fact, the real innovation of the Bacardi family was its sedulous protection and cultivation of the brand name and trademarks. It was in many other ways a corporate innovator, despite being, as Gjelten says, “a closed, dynastic enterprise in an interconnected global economy.”
There is some irony in that the company has defied the capitalist consensus and does not trade on the stock markets that epitomize the modern economic age. It is still family owned, with shares being divided between the descendants of its founders and now led by a sixth-generation family member defying the old saw of family business, from muck to brass—and back again in three generations.
It became an early multinational, with plants in Puerto Rico and Mexico and its own distribution company in the United States. It was one of the first offshore corporations, taking its headquarters first to the Bahamas and then to Bermuda. (That was to avert confiscation by Fulgencia Batista, with whom the company had a long and hostile relationship, but it proved prescient when Castro repaid their support with confiscation in 1960.)
Indeed, even its off-shoring was free of the stigma of tax evasion. Bacardi was an exemplary corporate citizen: when Batista fled with the contents of the Treasury, Juan Pepin Bosch, who then headed the company, immediately took a check for $450,000 to the new revolutionary officials, in advance payment of the years’ estimated taxes.
Bacardi was also a model employer, and Gjelten’s narrative reminds us of something that Cuban dissidents have stressed in conversation. Cuba had an existing social-democratic, welfare-state tradition which included strong labor protections and which made it one of the most literate societies in the Spanish-speaking Americas.
The company had supported such reformism, to the extent that even its communist-led union had differentiated it from the general run of capitalists. It had a distinguished patriotic record, with members supporting the war against the Spanish, and attempting to build indigenous industry.
It is to the credit of the family, and its head Juan Pepin Bosch, who initially accompanied Castro on a delegation to the United States, that he was repelled by the firing squads that the rebels were so fond of. The progressive 1940 constitution had banned the death penalty. But Castro’s disavowal of the formality of elections, and his penchant for executions and imprisonment of former comrades like Huber Matos, did indeed give cause for opposition.
It was Bosch who a year later thwarted the effect of Castro’s confiscations by putting the crucial trademark certifications in the mail to New York. He realized that the value of the brand far exceeded the physical plant and the huge stockpile of rum left behind in Cuba, and astutely suspected that the crude Marxism of the rebels would not see the value in a brand.
In exile, the family picked up on old contacts. They had already started lobbying in the United States way back in 1901. They had secured a tariff preference for Cuban rums and lobbied and litigated their way past Puerto Rican opposition to build their biggest distillery in the territory, which secured tariff-free entry to the U.S. market. As an added bonus, under federal law, excise duties on Puerto Rican rum were returned to the commonwealth government, which used them to finance a big sales promotion for the “Rums of Puerto Rico.” The biggest, of course, being Bacardi.
That is one of the reasons why, for many years, Bacardi obscured its product’s Cuban origins. Yet the family still nurtured the cause. As Gjelten says: “Born of a love for Cuba and pride in their own role in its history, their patriotism was narrowed and made more spiteful as a consequence of exile.” Indeed, Pepin Bosch at one point bought a surplus bomber, intending to take out a Cuban power station. Later, as Gjelten recounts, the challenge of Pernod Ricard marketing Havana Club brought together two strands of the family lore—their ruthless competitiveness, and their desire for revenge on Castro.
Other Caribbean rum producers, including those in Puerto Rico, nurtured unkind thoughts about the company because Bacardi’s size and aggressiveness had kept them out of the U.S. market, but a combination of Havana Club’s exponential success and the familial grudge brought about an obsessive and expensive campaign—and a sudden revival of emphasis on the Bacardi brand’s Cuban origins.
The Cuban family that had owned the Havana Club brand name had not renewed their registration, which had lapsed, and the Cuban government re-registered it legally. Bacardi bought the family’s claims and litigated in the United States. It compensated for the weakness of its claim by buying political influence in Washington—just the sort of behavior they had complained about in Cuba under Batista—where legislators smuggled in clauses that retrospectively changed the law.
Jose Marti, the hero they shared with Castro, had written that the U.S. House of Representatives “is chosen by such corrupt methods that every election is falsified by the use of vast sums of money.” By then, Bacardi was pumping millions of dollars into the same sewer.
In the end, they succeeded in provoking a trade war with Europe at the World Trade Organization, to no commercial advantage whatsoever and provoking opposition from other major companies who did not want to see international trademark law impaled in the course of Bacardi’s Quixotic obsessions. In their process, the family’s association with some of the most reactionary Cuban exiles, and their support for maintaining the punitive embargo, compromised their historically progressive reputation.
Even though he wisely eschews any prophesy, Gjelten hints that even with a possible change of government in Cuba, the Bacardi family’s recent exercise of its grudges has rendered dubious any triumphant corporate return to a country where for a century nationalist opposition to the United States has substituted for ideology.
Ian Williams is the author of Rum: A Social & Sociable History (Nation Books, 2005).