Bacardi-Martini U.S.A., Inc.

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Bacardi-Martini U.S.A., Inc.

founded: 1936

Contact Information:

headquarters: 2100 biscayne blvd.
miami, fl 33137-5028 phone: (305)573-8511 fax: (305)573-7507 url: http://www.bacardi.com

OVERVIEW

Bacardi-Martini U.S.A. is a privately held producer and marketer of spirits worldwide, including rum, whisky, beer, brandy, cognac, gin, port, tequila, vodka, and wine. After losing its Cuban assets and operations in 1960, the company moved its headquarters to Puerto Rico and has since spread its wings to span the globe. As U.S. alcohol consumption declines, the company is betting on product diversification and stepped up sales abroad. Its recent acquisition of Martini & Rossi has made it one of the five largest spirit-producing companies in the world, with $350 million in annual sales. Bacardi-Martini U.S.A. is one of the largest Hispanic-owned businesses in the United States.

COMPANY FINANCES

Bacardi-Martini U.S.A., Inc. earned $598 million in revenues in 1996 as compared to $595 million in 1995. In 1995, parent company Bacardi Ltd.'s total sales were $2.5 billion, with annual profits of $250 million. In 1994 the company's sales dropped to $570 million from 1993's $578 million, which was also down from 1992's total revenue of $580 million.

HISTORY

In 1862 don Facundo Bacardi opened his first distillery in Santiago, Cuba. The building was reportedly full of bats, which explains the company's current emblem. By 1876, the distiller became known internationally when its Bacardi Rum won a medal of recognition at the Centennial Exhibition in Philadelphia. In 1910, Bacardi extended its bottling operations to Barcelona, Spain. The company later established its two largest distilleries in Mexico and Puerto Rico in 1931 and 1936, respectively. Marking its first physical presence in the U.S. market, Bacardi opened an office in New York City. Bacardi Imports, the predecessor to Bacardi-Martini U.S.A., was formed in 1944.

The revolutionary forces of Fidel Castro and Che Guevara overthrew the dictatorship of Fulgencio Batista in 1959, and the island soon created its own Caribbean brand of locally stilled Communism. In 1960 Bacardi was forced to become a Cuban exile company. Also in 1960, the new Cuban government confiscated Bacardi's assets and operations, then valued at more than $76 million. The exiled company soon opened facilities in south Florida, Puerto Rico, and the Bahamas.

By 1978 Bacardi Rum became the top-selling brand of distilled spirits in the United States. Sales that year exceeded more than 7 million cases. With 14 million cases sold worldwide in 1979, Bacardi Rum surpassed Smirnoff Vodka to become the best-selling spirit brand on the planet. In 1992, the company unified its five strategic operating units by forming Bacardi Limited, which then became incorporated and headquartered in Bermuda. The following year it acquired the sparkling wine producer Martini & Rossi. In 1995 Bacardi Imports was officially renamed Bacardi-Martini U.S.A., Inc. Bacardi Limited's board of directors chose George "Chip" Reid, Jr. to lead the company as its president and CEO in 1996; he officially took office in 1997.

STRATEGY

Since its establishment, Bacardi has become a global presence with facilities around the world. In a move that allows the company to minimize import duties and their consequent effect on competitiveness, the family-controlled distiller produces its rum in multiple locations. Bacardi soon sought broader options in spirits distribution with a special eye on Europe. A series of joint ventures with Martini & Rossi set the company's strategy on the path of synergy. Bacardi acquired the family-owned Martini & Rossi in 1993. In the late 1990s the new company benefitted from Martini & Rossi's strong standing in the European market, complimented by Bacardi's strong presence in the Americas—particularly in the United States and Mexican markets.

CEO Reid designed an aggressive plan for guiding Bacardi Limited to its goal of "becoming the largest spirits producer in the world." His plan focuses on three areas: continue Bacardi Limited's success in developing new products; capitalize on emerging markets; and develop strategic alliances. Reid's primary goal during the late 1990s was to boost Bacardi Limited's sales by 20 percent to $3 billion by the year 2000. Contributing to this goal was the company's 1998 acquisition of two more premium liquor brands; Bacardi Ltd. bought the Dewar's Scotch whisky and Bombay gin brands from Diageo PLC for $1.9 billion.

In 1997, Bacardi-Martini U.S.A. restructured its marketing department, with improved focus on core Bacardi brands. The changes were announced following the promotion of former marketing controller Stella David to marketing director in September 1997.

FAST FACTS: About Bacardi-Martini U.S.A., Inc.

Ownership: Bacardi Limited is a privately held company.

Officers: George "Chip" Reid, Jr., Pres. & CEO, Bacardi Limited; Eduardo Sardina, Pres. & CEO, Bacardi-Martini U.S.A.

Employees: 600

Principal Subsidiary Companies: Bacardi-Martini U.S.A., Inc. is a wholly owned subsidiary of Bacardi Limited.

Chief Competitors: As a marketer of distilled spirits, wine, and beer, Bacardi-Martini's primary competitors include: Anheuser-Busch; Allied Domecq; Diageo; Gallo; Heineken; Pernod Ricard; Seagram; and Southern Wine & Spirits.

INFLUENCES

As a result of the increasing recognition of alcohol as a harmful drug and the risks associated with driving, U.S. consumers were drinking less alcohol. From 1986 to 1996, alcohol consumption dropped from 67 to 55 percent among the adult population. As far as distilled spirits were concerned, brown goods such as whiskey and cognac declined in popularity more than white goods such as vodka, tequila, gin, and rum. Sales of specialty beers and wine eclipsed distilled spirits consumption as a whole. However, when American consumers did drink distilled spirits, they opted for premium varieties. With this drop in domestic consumption, U.S.-based wine and distilled spirits companies increased exports or broadened their sales base, often venturing into non-alcohol related products. Thanks to some improved economies abroad, U.S.-based distillers were able to augment exports by 18 percent in 1994.

CURRENT TRENDS

Fearing a decline in wine consumption in the United States, the Wine Market Council planned an advertising campaign aimed at younger consumers. Until 1996, distillers had a self-imposed ban on broadcast advertising; however, Seagram's decided to break with that ban. Bacardi has already launched an aggressive European print campaign. If the Seagram's decision serves as a precedent, Bacardi and other distillers could consider a move toward broadcast advertising.

In a search for additional tax revenues, forces within the U.S. government have proposed increasing the federal excise tax on distilled spirits. While this move would have little impact on Bacardi's foreign operations, its U.S. sales would be affected. The American distilled spirits industry claims higher taxes would put a bigger dent in already declining domestic sales and actually backfire, yielding fewer tax dollars.

PRODUCTS

For most consumers, Bacardi is synonymous with one product: its best-selling Bacardi Rum, arguably the world's most valuable spirits brand name. With the addition of Martin & Rossi products, however, it can also boast some additional top sellers, namely Martini brand Vermouth and Martini brand Asti sparkling wine. In the 1990s, Bacardi extended its product line, and its Bacardi Breezer refreshers were particularly successful. These products added to the multi-product culture already existent at at Martini & Rossi, whose Italian sparkling wines have been around for close to a century. In the 1980s, Martini & Rossi had already augmented its product line with the acquisition of several private brands of cognac and liqueurs. Eristoff brand vodka and William Lawson's scotch whiskey were among that long list of company products.

CHRONOLOGY: Key Dates for Bacardi-Martini U.S.A., Inc.

1862:: Don Facundo Bacardi opens his first distillery in Santiago, Cuba
1876:: Bacardi Rum wins a medal of recognition at the Centennial Expedition in Philadelphia, Pennsylvania
1888:: Queen Maria of Spain grants permission for Bacardi to display the royal coat of arms on their label when he cures Prince Alfonso's illness by administering Bacardi Rum
1910:: Bacardi opens bottling operations in Barcelona, Spain
1926:: Bacardi diversifies into beer
1931:: Opens a huge distillery in Mexico
1936:: Opens a large distillery in Puerto Rico
1944:: Bacardi Imports is formed
1958:: Bacardi moves from Cuba to Nassau, The Bahamas
1960:: Loses Cuban assets and operations and becomes a Cuban exile company
1978:: Bacardi Rum becomes top-selling brand of distilled spirits in the United States
1992:: Forms Bacardi Limited
1993:: Acquires Martini & Rossi
1994:: Establishes The Bacardi Foundation
1995:: Company is renamed from Bacardi Imports to Bacardi-Martini U.S.A.
1996:: George Reid, Jr. is voted in as president and CEO
1998:: Introduces Martini Vermouth in Brazil

Bacardi Limited's portfolio includes a full range of products such as rum, vermouth, Scotch whiskey, cognac, brandy, gin, tequila, vodka, port, wine, and beer. The Barcardi product line became varied and impressive, especially after its 1993 merger with Martini & Rossi. In 1997 trademarks or registered trademarks of Bacardi & Company Limited and affiliates included (among others): B&B, Bacardi 151, Bacardi Black (outside the United States), Bacardi Breezers, Bacardi Gold, Bacardi Light, Bacardi Limon, Bacardi Solera, Bacardi Spice, Benedictine, Camino Real, Caribbean Classics, Castillo A Ejo, Charles Volner, China Martini, Gaston De La Grange, Glen Deveron, Gran Reserva Especial, Grande Auguri, Eristoff, Estelar Suave, Exshaw, Hatuey By Bacardi, Martini, Martini & Rossi Asti Spumante, Montelera Riserva, Nassau Royale, Natasha, Noilly Prat, Pastis Casanis, Pastis Duval, Ron Bacardi A Ejo, Russian Prince, St. Raphael, Vergel, Veuve Amiot, Viejo Vergel, William Lawson's Finest Blend, and William Lawson's Scottish Gold.

CORPORATE CITIZENSHIP

In its role as a corporate citizen, Bacardi shows an inclination toward environmental issues. Founded in 1994, The Bacardi Foundation collaborates with environmental, government, and civic groups to promote the protection of the world's coastal waters and beaches. The Foundation helps academic marine scientists studying sensitive coastal areas and educates the public of the environmental importance of these areas. With its flagship "Clean Water Weekends" program, the Foundation works with The Nature Conservancy, Clean Florida Keys, and the Florida Keys National Marine Sanctuary to help volunteer boaters, beach enthusiasts, and divers clean up the waters, beaches, and reefs of the Florida Keys.

As for its political activities, Bacardi's image may not be as clean. According to the report "Squeeze Play: The United States, Cuba, and the Helms-Burton Act," Bacardi was involved in a larger scheme to trade money for political favors. Between 1981 and 1996, the right-wing Cuban American National Foundation poured $3.2 million into the U.S. political system in exchange for three major policies: the 1980's creation of Radio Marti, a taxpayer-financed program that broadcasts to Cuba; the elimination of trade with Cuba by subsidiaries of U.S. companies; and passage of the Helms-Burton law, which bars U.S. entry to executives of foreign firms who work with the expropriated properties of current U.S. citizens. Bacardi's Cuban properties were confiscated without compensation by the revolutionary government of Fidel Castro; congressional aides intimately involved in designing the Helms-Burton law depended heavily on lobbyists and lawyers with ties to Bacardi.

THE BACARDI BAT

When don Facundo Bacardi opened his first distillery in Cuba, it was occupied by a family of bats, which not only delighted him, but prompted his wife, dona Amalia Lucia Victoria, to suggest that he put a "bat" label on every bottle of Bacardi rum.

Although most people would be horrified to discover that they shared their home with bats, Don Facundo Bacardi saw the bat as a sign of success. According to Cuban tradition, the bat brings good fortune, health, and family unity to any home they occupy.

Moreover, both don Facundo and dona Amalia Lucia Victoria were Spanish immigrants to Cuba, and the Spanish have their own beliefs about the bat. Spanish lore has it that in 1238, King James I of Aragon was preparing for battle when a bat perched on his helmet. James believed that the bat was watching over his troops, and the next day he won the battle. The king then included the bat in the coat of arms of Valencia, a nearby province of don Facundo's native home in Spain, and the bat was immortalized as a symbol of watchfulness and family harmony in Spain.

As Bacardi's company grew, so did the stories of his bats. Word of the bats in his distillery spread throughout Cuba, and the Cubans dubbed Bacardi's liquor as "el ron del murcielago," the rum of the bat, and declared that the rum contained good fortune and magical powers because of the prophetic bat.

GLOBAL PRESENCE

While incorporated and headquartered in Bermuda, Bacardi Limited runs manufacturing and bottling facilities in North, Central, and South America; the Caribbean; and Europe. Its two primary rum producing facilities are located in Puerto Rico and Mexico. Bacardi products are marketed around the world. Bacardi-Martini U.S.A. was also promoting Bacardi products abroad by marketing Hatuey Cuban beer more widely and by redesigning the labels for Martini Vermouth bottles before launching them in Brazil in March of 1998.

SOURCES OF INFORMATION

Bibliography

bacardi corp. profile, 12 september 1996.

bacardi corporate information, 1996. available at http://www.bacardi.com.

"bacardi-martini u.s.a., inc." hoover's online, 6 july 1998. available at http://www.hoovers.com.

clairvoyant, kethia. "cash from miami group helped shape u.s. cuba policy, report says." cox news service, 1997. available at http://www.latinolink.com/news/news97/0123ncub.htm.

dortch, shannon. "grain and grape futures (demographics of alcohol consumption)." american demographics, january 1997.

heuslin, william. "food, drink & tobacco: with domestic markets maturing, the smart food, drink and tobacco companies are heading overseas." forbes annual report on american industry, 13 january 1997.