Bacardi has a distinguished history and record of achievement in the distilled spirits business. The family-owned company, whose roots go back 136 years, developed, and continues to dominate, the modern rum category. With sharp leadership, savvy marketing, a strong sales organization and a solid distributor network, Bacardi has consistently demonstrated its ability to adapt to new challenges, risk new initiatives and create successful new products. Perhaps Bacardi’s most notable accomplishment may be its ability to reinvent itself. In late 1992, the company acquired Martini & Rossi. Last year, Bacardi acquired Dewar’s and Bombay (as well as the marketing rights to DiSaronno Amaretto), vaulting in a single leap into the top tier of Scotch and gin marketers and positioning it as the fourth largest wine and spirits supplier in the world. Editor-at-Large Nicolas Furlotte recently spoke with Eduardo Sardiña about some of the most significant issues facing Bacardi in the U.S.
BEVERAGE DYNAMICS: Dewar’s, Bombay and Sapphire are all great brands. But great brands often need to evolve. What can we expect to see this year?
EDUARDO SARDIÑA: Fortunately, we have brands that were well handled. We are not going to make a heck of a lot of changes over the next few months other than things that are obvious that can be improved. In the area of Bombay, for example, the distribution in some states was spotty — you’ll find some inconsistency in terms of sizes. So you are going to see us move in that direction and plug the holes that are obvious. Other than that, in terms of positioning the brands, until we understand them better, it would be arrogant, on our part, to say we can do it better overnight.
BEVERAGE DYNAMICS: Part of your thinking on the acquisition was buying into the existing brand franchises and building upon that. You obviously believe in the basic propositions of these brands.
EDUARDO SARDIÑA: No question. Both brands have excellent followings. Dewar’s is a very strong brand in the U.S. that has a great following. If you look at Bombay, that has to be one of the healthiest and most exciting brands in the liquor industry right now. And this is something we’re inheriting; we didn’t create this. We want to make sure we keep up the momentum. We will need to evolve it. We just need to make sure that we evolve it the right way.
BEVERAGE DYNAMICS: Sapphire is extremely hot and has a much stronger and higher image than Bombay. Do you think Sapphire transcends the gin category?
EDUARDO SARDIÑA: Sapphire is very unique. Sapphire has set the Martini standard which is something that gin lost to vodka many years ago. Sapphire has brought back the Martini. And Sapphire owns that category. Bombay is a gin. Sapphire is a premium white spirit. They’re both gin — I know that — but Sapphire competes in the arena of premium white spirits and Bombay competes against Beefeater and other gins. They’re two different brands — we bought two brands, really. One is at a lower proof, and one is at a higher proof, and the botanical ingredients are different.
BEVERAGE DYNAMICS: The growth trend for Sapphire is clear as are the dynamics for Bombay. With Dewar’s you’ve got a brand whose sales volume is below its peak and the Scotch category itself has been in a long decline. What’s going to change?
EDUARDO SARDIÑA: In the last few years, the rate of decline for brown goods has slowed down. I don’t know when that trend is going to stabilize but I do think you’ll see some brands, such as Jack Daniel’s, and some brands within the Scotch segment do well. Just like Sapphire’s doing great though the gin category is declining. The key is, and our goal is, how do we make Dewar’s relevant? Not just to the Scotch consumer. How do you make Dewar’s relevant, period?
BEVERAGE DYNAMICS: Let’s talk about Bacardi as a company. Going back, Bacardi really marked a turning point with the acquisition of Martini & Rossi at the end of 1992.
EDUARDO SARDIÑA: When we bought Martini, we bought a whole company. When we bought Dewar’s and Bombay we bought two brands. In that respect, it’s a less complicated acquisition. We did buy four distilleries and some people came with those distilleries. But in the case of Martini, we bought a whole bunch of companies and property, and I don’t know how many thousands of people. It was a totally different situation.
BEVERAGE DYNAMICS: What do these most recent acquisitions, — Dewar’s and Bombay — say about Bacardi and the company’s future?
EDUARDO SARDIÑA: Bacardi has been in the liquor business for 136 years. The Bacardi family is very proud of their heritage. They take tremendous pride in it, and they don’t want to sell. They want to remain in the liquor industry. One of the things we realized is that we needed to evolve the company and expand it. Rum alone is not the answer. The opportunity for Martini came. It made a lot of sense strategically not just because it’s another big brand but also it gave us a big entry into Europe and eastern Europe which we needed. We were strong in Germany and the UK and Spain but not in the rest of Europe and Martini gave us that. Martini also gave us an entry into the southern part of Latin America. In Argentina, Brazil, Uruguay and Chile, Martini was much bigger than we were, and they brought us something we didn’t have.
BEVERAGE DYNAMICS: And what do Dewar’s and Bombay bring?
EDUARDO SARDIÑA: Someone told me that Bacardi was a great little company. They didn’t mean it in a bad way, they meant that Bacardi was a one-legged stool. And he was absolutely right. When we bought Martini and then added Bacardi Breezers and B&B and Benedictine and Bacardi Limón, we definitely added a second leg. But try to balance a stool with just two legs — it’s tough. Dewar’s and Bombay is the third leg. Stools that have four, five or 22 legs are going to stand. It’s difficult to get them to stand with just two legs but they can stand with more than two legs — they usually have four.
BEVERAGE DYNAMICS: Are you looking for the fourth leg?
EDUARDO SARDIÑA: We’re not actively looking right now. Right now we need to assimilate Dewar’s and Bombay into our portfolio and into our culture and make sure we understand them going forward. Down the line, in two to three years, there will be opportunities. I don’t know where, but there will be.
BEVERAGE DYNAMICS: Looking down the line, do you have some strategic criteria and seek out something that fits those parameters or is it a more opportunistic endeavor?
EDUARDO SARDIÑA: It’s a combination of the two. You want to look at a category or a sector of a category that’s interesting. And I’m saying you look outside of rum. I don’t think you’re going to see us moving into wine areas. In the future, basically any category that we’re not in, we will look at brands within that category. It’s more of a brand game than a category game. You look at a category and then within that category, it’s which brands. A winner in a losing category, that’s fine.
BEVERAGE DYNAMICS: Many supplier companies, even though they might say every brand is a priority, thave a couple of big brands that are the real priorities and a dozen lesser brands. That’s not really the case at Bacardi — you have an array of true priority brands.
EDUARDO SARDIÑA: We don’t have much excess baggage. There used to be a time when we were in the wine business that we did have a lot of excess baggage. It was crazy, and we hated it. So we got out of the wine business.
What we have right now: with Martini & Rossi we have Asti and Vermouth, both strong and doing well. Breezers are at 3 million cases, doing fine and gaining share. Bacardi [the top-sellling spirit in the U.S.] and Limón, which we treat separately and which will do 725,000 cases. And then Dewar’s and Bombay. So we don’t have that many brands in the stable but the ones we have are all winners.
BEVERAGE DYNAMICS: Do you anticipate any real, sustained growth in total distilled spirits in the future?
EDUARDO SARDIÑA: I think the next 15 years are going to be much better than the last 15 years.
BEVERAGE DYNAMICS: Where do you see the growth coming from?
EDUARDO SARDIÑA: It’s already happening. The rum category is doing well. The vodka category is basically flat but some brands are doing extremely well. Certain gins are doing well. Tequila is doing great as a category. Cordials are doing pretty well overall. And I hope you are going to see some growth in the brown goods — bourbons and Scotches. Canadians and American whiskies I think will continue to decline. But bourbons and Scotches are going to benefit; you’re going to see growth.
BEVERAGE DYNAMICS: Growth as a result of what? What will drive it?
EDUARDO SARDIÑA: I think today’s consumer is totally different. The new generation says, wait a minute, it’s OK to have a drink or two. As long as I do it in moderation, it’s OK. And if I’ve consumed too much alcohol, of course I shouldn’t drive. But they are enjoying the moderate consumption of alcohol, and I don’t think they’re ashamed of it. That will bring us out of the doldrums and bring us growth. It’s not going to be growth like Microsoft, but it’s going to be slow, steady growth.
BEVERAGE DYNAMICS: What are your top priorities for this year?
EDUARDO SARDIÑA: For the company, the number one priority is the full integration of Dewar’s and Bombay and getting to understand these brands and their consumers. The integration takes a while — in some markets you’ll have two distributors selling for a while because of the existing inventory — but it will work itself out. Number two, our Bacardi business has been pretty healthy the last couple of years and has shown some growth. With Bacardi being the core brand of this company, we need to always continue rejuvenating Bacardi and keeping it relevant — that’s key to our future. Bacardi Limón is a major priority for our company. We’d like to sell a million cases in the year 2000. We’re moving in the right direction and increasing by 20% to 30% a year. I also want to make sure it develops properly in Puerto Rico and Canada. Martini & Rossi is doing quite well, both Asti and Vermouth, and we want to keep that going.
BEVERAGE DYNAMICS: What about new products?
EDUARDO SARDIÑA: At this point in time, I’m not ready to tell you much about what we are doing. We will have at least one new product that we will introduce. We’ve probably got two that I’m pretty sure are winners. If not, I’ll bat .500 for sure.
BEVERAGE DYNAMICS: What about Exclusiv?
EDUARDO SARDIÑA: I cannot tell you whether that is going to make it or not because it is still being tested. I definitely think there is an opportunity for a superpremium white rum. But it’s too early to tell.
BEVERAGE DYNAMICS: Do you think añejo and other superpremium aged rums will catch on with consumers in much the same way single malt Scotch has?
EDUARDO SARDIÑA: Right now we’re in the process of introducing Bacardi 8, which is an eight-year-old rum. It’s a brown spirits type look. You can call it a sipping rum or you can mix it if you want to. A 750 ml would be somewhere north of $20. Duty-free, you’ll probably see it around $23. It’s not going to sell 100,000 cases in year one. This is the type of product that you build slowly: it’s on-premise, and it’s labor-intensive. Yes, I do see an opportunity in the superpremium area just like it has happened in vodka, gin, tequila, bourbons and Scotches. I can’t believe that rum is the only category that would not have a superpremium that is successful. *
(11.8 MILLION CASES)
(14 MILLION CASES)
NOTE: Bacardi acquired Dewar’s Scotch and Bombay Gin, as well as the marketing rights to DiSaronno Amaretto, in 1998. These acquisitions, and continued growth in existing brands, increased the company’s total 9-liter sales volume by more than 19% to more than 14 million cases in 1998 from just less than 11.8 million cases in 1997. Percentages may not add due to rounding. “Bacardi” includes Limón and the entire Bacardi line. “Bombay” includes Original and Sapphire.
Source: Adams Handbook Advance 1999