Bacardi Limited: Strategic Overview and Brand Alliance Plan

Introduction

Bacardi Limited is a company with a remarkable history, and its present-day success marks it as one of the most prominent companies purveying spirituous beverages in a global market context. Over the course of its 150-year history, Bacardi has involved itself in the political affairs of its nation of origin, has taken an active role in global economic affairs, has achieved notoriety for the unique architecture of the buildings housing its various operations, and has established its brand image and product lines as highly recognizable and well-liked. Bacardi is a premier company both in the spirits industry and in broader scope as a global enterprise with considerable revenue, influence, and market penetration.

The research below is designed to produce a comprehensive overview and assessment of Bacardi with the intention of better understanding the strengths and weaknesses defining its outlook, the particulars of its operation that have helped it to succeed, and the opportunities that might carry the company forward. The discussion begins with a general overview and brief historical details, followed by a brief internal analysis concerning its organizational and industry-wide outlook. Finally, the discussion produces an assessment of Bacardi's strategic options and a recommendation for a path forward — one driven by the principle of brand alliance and grounded in the organic commercial relationship between Bacardi and Coca-Cola.

Bacardi Limited is most prominently recognized as a producer of rums. However, the umbrella corporation also offers a full array of middle-shelf spirits, many of which are highly popular within their respective categories. Its Bombay Sapphire gin, Grey Goose vodka, and Dewar's Blended Scotch whisky are big sellers in the United States, the United Kingdom, France, Spain, Mexico, Germany, Italy, and Russia (Bacardi & Company Ltd., 1). Founded in the city of Santiago de Cuba in 1862, the Cuban-based spirits company is among the biggest and most successful in the world. Its spiced rums are the most prolific sales performers in the rum category in markets such as the U.S. and U.K.

Company Overview and Mandate

According to Yahoo! Finance (2010), the company sells roughly 200 million bottles a year around the world. Today, its operations are based in the Bahamas, though its roots and cultural reputation are formed through its association with Cuba — an issue that draws considerable discussion in this research, denoting both the imperative to retain a desired brand image extending from its national origins and the international pressures predicated by its involvement with a politically isolated nation.

Additional areas of consideration include the considerable degree of acquisition and expansion that has marked recent years for Bacardi and the potential transition into a strategy of brand alliance with the Coca-Cola beverage company, with which it shares demographic interests.

Bacardi's mission is centered on its products, its corporate growth, and its corporate responsibility. According to its informational website, "at Bacardi we are committed to producing the best premium spirits in the world and delivering superior marketplace and financial results" (Bacardi & Company Ltd., 1). This denotes essential mission goals such as the assurance of quality and the maintenance of profitability.

Bacardi lists its core values as being defined by the general principles of corporate citizenship. This includes reference to the importance of environmental sustainability, the preservation of labor rights, the maintenance of safe and pleasant facilities, and an active role in the prevention of underage drinking and alcohol abuse.

Bacardi is a family-owned company. Its Chairman is Ruben Rodriguez, who became the first non-family member to hold the top office in the company's history. This distinction marks it as the largest privately owned spirits company in the world, meaning its primary stakeholders are the owners and senior personnel of the company — those with the greatest vested interest in its continuing success and the authority to make key decisions affecting that success.

Additionally, the roughly 6,000 individuals employed by Bacardi are key stakeholders who will be impacted by decisions made at many levels of the organization. Bacardi also identifies its various publics as key stakeholders, stating that "Bacardi is the markets we serve. Bacardi Limited, through its affiliates, has operations around the world, cemented by the enduring quality of our products and the reputation we have worked so hard to earn and maintain. We respond to the changing needs of individual markets in each one of those countries" (Bacardi & Company Ltd., 1).

Internal Analysis: Strengths and Weaknesses

Bacardi's weaknesses are few but are largely historical in nature. Its association with Cuba has frequently caused confrontations with the Cuban government and the international community. The inextricable link between Bacardi and Cuban history means the company — now based in the Bahamas following its political alienation under the regime of Fidel Castro — carries an ongoing public image burden. Robinson (2008) reports that during the Cuban Revolution, Bacardi participated on both sides of the conflict: first as a supporter of Castro's progressive aims and eventually as a harsh critic of his decision to partner with the Soviet Union. Bacardi "funded counter-revolutionary attacks on Cuba and donated generously to exile organizations that have opposed Castro for the past half-century. In addition, the company has gone to great lengths in recent years to lobby for a tightened U.S. embargo and to fight the French liquor company Pernod's effort to market Cuba's Havana Club rum, a legal duel with Castro that the Bacardis viewed as a crusade to defend another expropriated Cuban brand" (Robinson, 1).

This historical involvement in sensitive political matters has produced economic confrontations as well. Though Bacardi's dominance in the rum industry remains singular, its cultural and image-based association with Cuban history is increasingly being challenged by Havana Club, which holds a more politically amenable position. The conflict has also generated protracted legal battles with the Cuban state. Most prominently, Bacardi's active involvement in drafting legislation to intensify Cuba's global isolation took concrete form in the Helms-Burton Act of 1996, which was designed to penalize private companies for working in Cuba as a means of stimulating economic pressure and popular revolt. According to the Oracle Education Foundation (OEF), "the law has drawn international criticism for a provision allowing U.S. companies to sue foreign companies that work with the Cuban government. This is justified because the U.S. says they are using 'stolen' U.S. property. In order to be able to sue, you had to have lost $50,000 or more to the Revolution. In 1959, this was a very large amount of money, so the bill was mainly intended to benefit wealthy Americans. Lawyers for the Bacardi corporation wrote much of the law; the bill has come to be known as the 'Bacardi Law' by opponents" (OEF, 1). The degree of political tension and negative publicity generated by Bacardi's involvement in an act of economic sanctioning — one carrying significant human rights questions — should be seen as the primary weakness for a company otherwise defined by a high level of positive brand imaging.

With respect to its strengths, Bacardi's emphasis on the responsible marketing of its products reflects a clear position against underage drinking and reckless alcohol consumption. According to Bacardi's informational website, "encouraging responsible decision-making regarding drinking, or not drinking, is a strong business principle for Bacardi when promoting our premium quality brands. Around the world, we support, and are an integral part of, trade and social organizations that combat the problems of alcohol abuse and misuse" (Bacardi & Company Ltd., 1). This is an important role for Bacardi to serve in the communities where it operates, primarily because of its prominence and widespread influence. Bacardi's personnel consider its strong stance on preventing underage and irresponsible drinking to be a crucial element of positive corporate citizenship.

According to Yahoo! Finance (2010), "the company's portfolio consists of more than 200 brands and labels, including Bombay Sapphire Gin, Martini Vermouth, Dewar's Scotch Whisky, B&B and Benedictine liqueurs, and Grey Goose Vodka. Other types of spirits in its portfolio include tequila, vermouth, cognac, and sparkling wine. Serving more than 100 countries, the company operates 27 production sites around the world" (Yahoo! Finance, 1).

This accounts for the company's greatest strength: its enormity of scale. Though Bacardi has been in operation for well over a century, the growth potential at this scale has only really been realized in the last two decades, during which the company began adding well-established brand names to its portfolio and entering additional spirit categories where it is now highly competitive. The initiation of this new phase is placed at 1992, when, during an era of corporate consolidation and — with the end of the Cold War — the breaking down of barriers to international trade, Bacardi underwent a major restructuring. According to the Bacardi Fact Sheet, "Bacardi Limited was formed, unifying four of the five separate strategic operating units of the Company (Bacardi International Limited — Bermuda; Bacardi & Company Limited — Bahamas; Bacardi Corporation — Puerto Rico; and Bacardi Imports, Inc. — United States). The fifth operating unit (Bacardi y Compania S.A. de C.V. — Mexico) was incorporated into Bacardi Limited a few months later" (Neal & Federman, 2).

This corporate restructuring opened the pathway for bold market diversification through acquisition. In 1993, Bacardi made its first major outside acquisition, purchasing the Martini & Rossi brand name — a top earner in the vermouth category — which elevated it to among the top five largest premium spirits companies in the world (Neal & Federman, 2). In 1998, it acquired Bombay Sapphire gin, identified as the "top valued premium gin in the world," and Dewar's Scotch whisky, the "number-one selling blended Scotch whisky in the U.S." (Neal & Federman, 3). In 2002, Bacardi purchased Cazadores tequila, described as the "top premium tequila in the world" (Neal & Federman, 2). In 2004, it acquired Grey Goose vodka, called the "world-leader in super premium vodka" (Neal & Federman, 2). In 2008, it negotiated an agreement to take a major stake in the parent company of Patrón premium tequilas (Neal & Federman, 2).

This series of acquisitions is important for helping not just to broaden Bacardi's stake in the market but also for keeping the Bacardi rum line in significant production and presence. Bacardi's core rum line remains the top-selling rum in the world. The company's diversification extends into roughly 20 varieties of rum and into its marketing of mixed drinks such as the Cuba Libre and the Daiquiri, both credited as having been invented in Cuba using Bacardi rum.

The Cuba Libre — often identified as a Rum and Coke — is demonstrative of one of the strengths unique to Bacardi's outlook. Rao and Ruekert (1994) provide an important discussion on the opportunities created for marketing growth through brand alliance, identifying this as a further core strength for Bacardi: its capacity to join with other prominent brands in order to extend its reach and solidify its familiarity among broader buying populations.

The differentiators for Bacardi are primarily its features of size, prestige, and cultural distinction. As the largest seller of rum in the world, it possesses a meaningful advantage over its competitors. Additionally, its association with Cuban history and imagery has helped to bring it a reputation of authenticity.

The arenas in which Bacardi has achieved its success span the globe. With the United States and the Caribbean as its primary markets, it has since expanded into the U.K., France, Mexico, Spain, and others. Today, the company is also establishing a presence in India, China, and other emerging marketplaces.

Conclusion

Bacardi Limited is an extremely successful and highly visible brand, company name, and product line. Its history carries considerable prestige, and its more recent efforts demonstrate a clear orientation toward continued growth, expansion, and diversification. The analysis offered here proposes a supplemental strategy for continued growth that requires less capital than that which has driven its recent expansion. Particularly, the opportunity for brand alliance with Coca-Cola drives the central conclusion: a healthy and robust brand such as Bacardi stands to benefit significantly from a formalized pairing with another reputable and inherently associated brand. Given the organic nature of the existing Bacardi-Coca-Cola relationship, the strategic case for formalizing and amplifying this association is both compelling and timely.