The Bacardi limited


Bacardi Limited is one of the biggest Spirits company in the world, being the biggest family owned one,, managing a largely diversified portfolio, covering most price point's levels and core categories.

It operates in more than 110 markets, mainly through its own distiribution net, or via local joint-ventures, with approximately 5.000 employees, showing a very interesting ratio of 1 Million Euros of gross sales per employee.

Being one of the biggest in the world (3rd), it still has a great distance from the 1st (Diageo) and the 2nd (Pernod-Ricard), raising a critical mass challenge in order to protect future revenues.

Knowing that FY 2009 represented the year in which a steady gross sales growth was interrupted, my goal is to raise some paths for Bacardi in order to address its weaknesses, leverage its strengths, so that it will be able to seize the biggest business opportunities ahead.

I believe that Bacardi owns an un-leveraged strength that can catapult the company to a much near position to the Top2 players in the world.


PEST Analysis


  • There is a clear trend of increasing regulation concerning alcohol brands communication. It is not possible to use high traffic TV or Radio time spots. Near school locations tend to be out of access to develop activities.
  • Night activities neighborhoods increasingly tend to be under time limits or pressure, due to security, noise or political image issues (example: Red Light District in Amsterdam reduced number of Coffee-Shops and Prostitute windows licenses; Bairro Alto neighborhood in Lisbon saw its opening limit for Bars/Discos limited from 4am to 2am)
  • Specific alcohol taxing changes heavily throughout markets, however it still is a big source of revenues for government authorities, and dramatically changes the price positioning of brands since it usually is not proportional (related to alcoholic degree and type of drink). The taxes part for a typical branded low priced Vodka or Whisky usually account for at least 50% of final price, being the rest split between producer and distributors.
  • Full accessibility is not authorized (through dispensing machines for example), and its increasingly more regulated (chocolates, soft drinks are watching higher regulation on this issue)
  • Legal age: changes across the globe, but there is a clear trend on establishing 18 years old as the norm. Still there are 30 countries in the world with less than 18 or no limit for alcohol drinking. This group has been steadily shrinking (see exhibit 1).


  • Spirits business is valued in more than 18.000 million litters worldwide
  • Market has been slightly decreasing at a CAG -0,3% (00/05), and it's expected to grow onwards at 1% rate, until 2011
  • Asia, Latin America, North America, Africa and Middle East have been the most dynamic regions in consumption during the last 5 years. Western Europe has been very slightly positive and Eastern Europe negative. It is expected that this trend split among regions keeps.
  • Bacardi holds a rather strong position in North America and Western Europe, but it's clearly out of scope from Latin America and Eastern Europe large regions, as well as from dynamic Africa and Middle East.


  • Social responsibility concerning alcohol consumption is increasingly getting visible. Spirit companies like Bacardi invest today more in these kind of initiatives in order to clearly show to authorities that they protect and communicate responsible drinking. Besides the lobby/influence issue, among urban centers, social responsibility initiatives are turning more important as a brand decision factor (see exhibit 2)
  • Alcohol consumption moments are changing - youngsters are less brand-driven. However, adults seem to be increasingly brand driven. These social trend can lead to the creation of a bigger gap between premium and non-premium brands, jeopardizing the critical mass for mainstream (in-between) brands.
  • The need state tends to be than split among 2 big reasons: the Kick need (alcohol kick to feel integrated in your young social group), and the pleasure-social need (in which you drink to feel pleasure, relax and have fun).
  • Nevertheless, for both, easiness to drink is an increasing feature that is clearly related to specific brands growth during the last years. The sweet flavors, ready to drink mixtures, and the mix-ability are key to recruit youngsters that don't have the patience for complex drinking rituals.


In this industry, technology doesn't play a highly relevant role on the business. However, state of the art producing technology is increasingly important to develop quality products, which must have its organoletics under absolute control, in order to keep consumer satisfied and confident on product intrinsic characteristics.



There are several substitutes for spirits. The most important is spirits itself, since strong consumer trends lead to substitution among sub-categories over time (example: in Spain, during the last 10 years, the Whisky category lost almost 50% of the consumers that were largely transferred to the Brown Rum category).

Beer and Wine are the major competitors, followed by Water and Soft Drinks. However there is an essential complimentary role of soft drinks with spirits which is its mix-ability (see exhibit 3). Nevertheless, due to increasing alcohol control, some consumers are increasingly drinking soft-drinks during lunch and night. Beer industry is, in the end, the most dangerous substitute for spirits.

Competitive Rivalry

  • Night outlets have small space for spirits visibility and stock, so rivalry in the process of achieving an outlet loyalty is very high (mainly through local agreements, rebates, discounts, offers, etc)
  • This is especially true having in account that for mainstream and low priced products, there is little or no differentiation, which means that there is a low brand call in the spirits category (exception made for some premium brands). The regular consumer does not ask for a specific brand when drinking vodka, whisky, gin or rum.
  • This situation clearly leads to price wars and highly spread distribution capacity dependence.
  • The ability to own a local distribution company is competitive advantage versus others that don't. Nevertheless, is very common to watch distribution agreements between apparent competitors in certain markets (for example, Brown-Forman is distributed by Bacardi in Europe, but not in Spain, as well as most part of eastern Europe).

Power of Customers

  • Comparing to other industries like Household, Body Care, and general consumer goods categories, the power of customers for Spirits is relatively low, since the dependence on big international retailers is also lower than average. This means that the weight of independent and local wholesalers is usually high, reducing the dependence on big national chains.
  • Going one layer below (Restaurants, Hotels, Discos, Bars, Resto-Bars, Cafes, etc) the power is completely diluted
  • However, the commoditization of some categories have allowed the easy switching between brands

Power of Suppliers

  • It is very low - one can buy cane, malt, sugar, glass, labels and manufacturing machines from several suppliers.
  • here is however a reasonable variability of natural raw materials, depending on market quotations, which may not be immediately recovered because customers/markets do not accept several price movements within a short period of time.


Bacardi Limited.

Bacardi is privately owned, meaning that financial information for the company is disclosed in a very limited manner. However, as it produces only spirits (and wine), sales and profits can be said to directly derive from these businesses.

Gross sales in 2006 stagnated at just over US$4.5 billion after the previous year's 10% leap in sales. It could be in part explained by a mixed performance in terms of volumes, with RTDs[1], wine remaining static but spirits seeing good growth.

This category trend reinforced throughout the next years, specially the strong growth in spirits, turning possible Bacardi to achieve just over US$4.9 billion in 2007, US$5.5 billion in 2008, and finally US$5.3 billion in 2009. This fiscal year (FY'09) was responsible for the stop of a steady growth during the last 4 years.

The continued global role out of its Grey Goose vodka brand, as well as the Bombay Sapphire gin brand positive performance, seem to be the main factors for recent growth.

Overall finances seem healthy as the company's CEO said the company would have no problem funding a bid for Swedish company V&S, Vin & Sprit, valued at US$5-6 billion, 50% higher than its current gross sales, which was finally bought by Pernod-Ricard. Funds would probably come from a combination of cash reserves and bank loans.

Bacardi is headquartered in Hamilton, Bermuda and has a 16-member board of directors led by the original founder's great-great grandson, Facundo L. Bacardi.

Facundo Bacardí was born in Sitges, Catalonia, Spain in 1814 and emigrated to Cuba in 1830. During this period, rum not considered a refined drink, so Don Facundo began attempting to "tame" rum. He finally hit a perfect technique upon filtering the rum through charcoal (removing impurities) and aging it oak barrels ("mellowing" it).

Facundo and his brother José set up shop in a Santiago de Cuba distillery they bought in 1862, in which rafters lived fruit bats, which finally became the symbol of the rum and the company. After the independence war and the US occupation, "The Original Cuba Libre" and the Daiquiri were both born with Bacardi rum. It then started the company's international expansion by opening new bottling plants in Barcelona and New York City.

Some Bacardi family members initially supported the Cuban revolutionaries (including Fidel Castro). Family members, employees and facilities were put to use by the movement, and the company supported the revolution publicly with advertisements and parties. But their support turned to fierce opposition as the pro-Soviet Che Guevara wing of the movement began to dominate, and as Castro turned dictatorial.

The Bacardi family and company left Cuba after it became clear that Castro was serious about his pledges for nationalizing and banning all private property on the island as well as all bank accounts. However, the company moved the all important Bacardi international trademarks out of the country to the Bahamas prior to the revolution. The fact that it owned a plant in Puerto Rico to save in import taxes for rum being imported to the US, also helped the company survive after the communist government nationalized all Bacardi assets in the country.

Bacardi, despite having no production (and businesses) in Cuba today, have decided to re-emphasize their Cuban heritage in recent years, mainly due to commercial reasons: the main brand of rum in Cuba is called Havana Club, a formerly private company nationalized by the government. In 1998, under the distinctive bat logo, the phrase "company founded in Santiago de Cuba in 1862" was added. Bacardi continues to fight a war in the courts with the Cuban government of the rights to trademarks around the world.


Bacardi has made several acquisitions to diversify away from the Bacardi rum brand: in 1992 acquired Martini & Rossi, the famous Italian producer of Martini vermouth and sparkling wines; in 1998 acquired Dewar's scotch and Bombay Sapphire gin for $2 billion; in 2001 acquired the Cazadores tequila brand; in 2004 purchased Grey Goose, a French made vodka, from Sidney Frank for $2 billion; in 2006 purchased New Zealand vodka brand 42 Below. Other associated brands include the U.S. version of Havana Club, Drambuie Scotch whisky liqueur, Disaronno Amaretto, Eristoff vodka and B&B and Bénédictine liqueurs.


Bacardi's strategic objectives are difficult to define due to the private nature of the company. However it seems its main aim is to become one of the leading global spirits companies.

Despite having a number of wine brands (especially its Martini vermouth), the company does not seem to see this as a particularly core area and unlike similar international companies like Diageo, Pernod Ricard and Fortune Brands, Bacardi has not added to its wine portfolio since the turn of the century.

The company seems increasingly focused on vodka as a key growth driver for its spirits business. The last two major acquisitions by the company have been vodka brands, notably Grey Goose in 2004 and 42 Below in 2006. This was followed in March 2007 by the company expressing a written interest in V&S, the owner of Absolut (that finally was bought by Pernod-Ricard).

Despite having a relatively broad portfolio of spirits brands, the company does lack in certain categories, and should seriously expand further into other areas especially brown spirits, such as single malt Scotch whisky, Irish whiskey, bourbon/other US whiskey, cognac and liqueurs. Extending its brown spirits portfolio would also help it expand into rapidly expanding emerging markets such as China, India and Russia, where actually are the most dynamic markets and in which Bacardi has the lowest position.

To become a global company and not fall too far behind other global players the company needs to rapidly expand its distribution network into the more dynamic emerging markets, such as China and India. Yet to do this, as stated before, it will need to expand its brown spirits portfolio.


The aggressive acquisition strategy of Bacardi has clearly brought strong results in gross sales (just below 6% CAG), mainly supported by its already installed and spread distribution structures.

One can confirm also that Gross Profit has been growing at an almost double rate of Gross Sales' one (just over 11%), which should be related to good improvements in cost of goods (mainly driven by plant closings and production rationalization), and also the increasing weight of white spirits and premium brands in business, which have lower relative cost of goods, compared to vermouths and lower priced brands.

Operating profit has been registering very good progression (just over 16% CAG), which show a good control on fixed costs (structure, people), which permit the company to continue to fuel the growth redirecting funds to Advertising, Promotion, Selling structure and IT support.

Finally, the just over 27% CAGR on Net Profit shows that interest expenses and taxes are decreasing its relative weight in the operating profit, showing an superior ability to pay its debt, as well as an aggressive fiscal policy. [2]

Nevertheless, the downturn in 2009 figures (caused by the economic depression that we are still facing at this time) raises perhaps other challenges that were slightly covered by the previous good figures.

Looking specifically to 09 - 08 progression, although there is a good performance on adapting to the negative sales situation, both trade investments rates and COG's (see Gross Profit less negative variation of -1%), the same didn't happen when looking to Operating Profit, probably due to the choice of not stopping most of the advertising & promotion campaigns in order to accommodate the higher relative weight of infrastructure in business.

Once we know that Bacardi has a very decentralized operational organization (local OPCO's are full P&L responsible), it has, on the contrary, a very centralized Strategic Marketing department (with full responsibility for global brands campaigns, which account for 55% of total business). The natural question is that if this structure is the ideal one for next years, in order to fuel the growth?

Implementation of Strategy


Once there is very little information available about Bacardi Limited, instead of addressing the strategy implementation area by area (which is almost totally unknown), I will address the challenge starting with a global SWOT analysis.


  • Bacardi owns the world's leading rum brand - the company accounted for 18% of global sector volume sales in 2005. This has provided the company with a strong consumer base and a high level of recognition in the valuable North American and Western European markets.
  • Strong finances - plenty of resources to expand in which ever way it chooses.
  • Broad sector coverage - Bacardi has also expanded its portfolio in the direction of fast-growing spirits such as vodka, blended Scotch and tequila, in addition to moving towards premium products, which are capturing share in developed markets.
  • Strong distribution network - Bacardi has achieved global reach, with strong distribution networks in North America, Latin America and Western Europe. Bacardi has also established significant strategic alliances with other major alcoholic beverage producers (bigger example is Brown-Forman), which are extremely important as the company meets the challenges of a rapidly consolidating market.


  • Too much rum - despite recent acquisitions the company is still overly reliant on rum which accounted for just over 60% of the company's volume sales FY05, which is its only spirit with a truly global reach.
  • Broad coverage, but weaker depth - the company has a limited range of brands in each product area and is too reliant on key brands such as Bacardi in Rum, Grey Goose in vodka and Dewar's in whisky. There fore, product portfolio is still wanted - Bacardi still lacks a major presence in a number of sectors, such as: single malt whisky, cognac and liqueurs. The first two categories are relatively small but growing strongly, and due to their premium nature offer good margins, while liqueurs are expected to grow strongly especially in Western Europe and North America where the company is strongest.
  • oo reliant on North America and Western Europe - these two regions accounted for around 80% of the company's sales in FY05. This is not bad with spirits (performing strongly in both regions), yet RTDs show this is as a weakness as both regions have seen a sharp decline in volumes. Additionally, it still has a Weak distribution in dynamic growth markets (still a negligible presence in South Africa or China)


  • Dynamic rum - Bacardi's core sector is forecast to show strong growth over the 2006-2011 period (with volume sales up 15%), particularly in North and Latin America, Western Europe and Asia-Pacific. Demand is driven by rum's suitability for use with mixers and in cocktails and the growing popularity of flavored varieties.
  • Dynamic vodka - vodka is expected to see strong growth in Bacardi's two leading regions (North America and Western Europe). Bacardi seems well positioned to exploit this growth.
  • Booming blended Scotch - blended Scotch whisky is expected to grow strongly in many developing markets such as China but also in Latin America (+20.7 million litres, 2006-2011), where Dewar's is well placed and holds an established prestige.
  • Booming tequila in Mexico and the US - Bacardi substantially increased its presence in the fashionable tequila market when it acquired Tequila Cazadores. Global sales of tequila are predicted to grow by up to 30% over the next 5 years, especially driven by the US and Mexico.


  • Increased consolidation in global spirits industry - following Pernod Ricard's and Fortune Brand's acquisition of Allied Domecq, Bacardi has slipped one place in the US to third.As wll as in Europe, Bacardi's bargaining power has decreased compared to Pernod's after Allied Domecq acquisition.
  • Havana Club dispute - the company was involved in a number of court cases at the time of writing, including one with Pernod Ricard and the Cuban Government over the ownership of the Havana Club brand name, which has the potential to act as a significant drain on company resources. Besides this fact, if Bacardi loses the Havana Club trademark for US, Pernod may invest signigicant amount of resources to develop the brand and capture market share in this market.
  • Changes to taxation and legislation relating to alcohol - changing government policies such as in the advertising of spirits may well adversely affect spirits manufacturers, as governments in major markets become increasingly sensitive to the negative health impact of alcohol consumption and the rise in binge drinking amongst younger consumers.


Bacardi is a global company operating in 110 countries in three world regions (EMEA, Americas and Asia-Pacific), with about 5,000 employees. Corporate headquarters is in Hamilton, Bermuda, being that each of the regions has its own regional headquarters and bottling plants, as well as each market local operating companies.

Under the region headquarters, Bacardi business activities are organized around role & responsibilities silos, reporting to the Regional Vice-President: Marketing, Finance, Sales, Supply chain/Operations, IT and HR. However local markets General Directors (and its teams) report to the Regional Vice-President.

Product research and development is centralized in the U.S., in a non-disclosed department. However it is known that the same base products are sold worldwide, suffering sometimes regional customizations. Countries, Regions and markets are free to develop its own R&D, although with very scarce resources.


Bacardi owns a regional company for each of the 3 regions, which buys all products to the bottling plants, reselling them to the local operating companies. Manufacturing is organized by region - no additional information is disclosed.

Talent Management and Employee Development

Very recent HR initiatives include talent identification/retention. Each local market has its own performance planning process. No additional disclosed information.

Incentives and Rewards.

According to collected information, sales teams usually have 30% of its yearly gross salary based on commercial performance, and managers do have yearly targets. No disclosed information.

The Culture

In line with its local entrepreneurship spirit and almost full local autonomy, there isn't a unique Bacardi culture, but a mix of cultures, coming from the Cuban heritage from the American region, and an Italian heritage from Martini & Rossi acquired company in Western Europe region.

Corporate Governance and Control

Recent increase of executive teams at regional headquarter may indicate there is a project on corporate governance, that is totally different from the previous in which the only global structure was the Strategic Marketing one.


The conclusions have 2 main dimensions: the portfolio/market one, and the organizational/intrinsic one. Both are interconnected at a certain point.

Broad sector spread offers Bacardi potential

  • The company's leading position in global rum should be able to exploit the dynamic growth rate of 3% in global rum sales especially in the company's largest regions (Americas and Western Europe).
  • Following the acquisition in 2006 of the 42 Below vodka brand the company has a range of vodkas which it can use to exploit the strong growth in vodka predicted for North America and Western Europe.

Narrow geographic spread inhibits full potential

  • The company's current strength in three regions will limit its ability to exploit generic growth, but especially in blended Scotch whisky. Asia-Pacific, Latin America, Eastern Europe, Africa and the Middle East are predicted to grow a total of (52 + 26 + 7 + 18 million litres respectively over the next 5 years). Meanwhile Western Europe and North America will remain flat, thus fully exploit blended Scotch whisky's growth it will need to improve distribution in those dynamic regions.
  • The lack of presence in the emerging markets, will not allow it to exploit full growth potential in rum and vodka.
  • The focus on Western Europe and North America is very pronounced in RTDs, which leaves the company equally vulnerable, as both regions will suffer declines in sales of RTDs. The company needs to exploit the dynamic growth in other regions.

More attention needed on brown spirits

  • Bacardi could also do with expanding its range of brown spirits (notably in single malt Scotch whisky and cognac), because they would greatly enhance value sales and give the company greater strength when trying to develop its distribution network into emerging markets.
  • The company could also look to expand its portfolio into other whisky products notably Irish whiskey and bourbon whiskey, which are expected to grow.
  • The acquisition of Rémy Cointreau would give Bacardi leading brands in two of the three categories, notably the world's second biggest cognac, Rémy Martin, and the Cointreau liqueur brand. The French company has indicated that it is likely to be up for sale with its announcement of leaving the Maxxium distribution alliance. Additionally, family-owned William Grant & Sons and Edrington Group have strong single malt Scotch brands. Any acquisition would be reliant on the companies' owners wanting to sell.
  • The acquisition of Brown-Forman would fill Bacardi's liqueur and bourbon whiskey portfolio and it would also gain a vodka with good international presence.
  • The company should also look to expand its distribution network in dynamic markets such as in Asia-Pacific and Eastern Europe. The company should look to do this by creating joint ventures with local companies, especially in countries such as China where it has very limited local knowledge.

Core / Organizational recommendations

  • Create a Vision for the Bacardi company within 5 years, and clarify the transversal values needed to bring the "task" fulfilled, rolling out through regional structures the necessary local markets plans. This could be completed with the identification of core competencies to identify, follow and develop.
  • Develop a Top-Down activity in order to create common ground and objectives among markets should be taken place. This is key to put top managers around the world struggling for the same final goals, instead of executing whatever actions they might think are the best for its own business.
  • Develop a process through which the global strategic marketing department clarifies global brand positioning, without jeopardizing local market flexibility. This could be done revisiting the roles and responsibilities of local and global structures, as well as turning it nearer to consumer and shopper trends.
  • Besides looking to acquisitions, strong R&D developments should be undertaken. Under current brands, it may exist potential extensions, flavors or product developments in order to fulfill consumer trends and needs.


  • In order to exploit organic business opportunities (rum, vodka and tequila), it is key to develop and roll-out processes to secure that all managers and its teams share the same core objectives and values., as well as investing in R&D (innovation) for actual core brands.
  • Bacardi should develop its distribution coverage (fully owning or joint-venturing) especially aiming towards Asia-Pacific, Eastern Europe, Africa and Middle-East. However in most of these areas it is key to own a brown spirits portfolio and/or a single malt scotch whisky, which still is not a reality. Therefore, it is key to previously acquire strong brands in these categories, so that the distribution expansion delivers a highly positive return.


  1. Ready to drink (often known as RTD) is a term used to describe packaged beverages that are sold in a prepared form, ready for consumption. The term is typically used to contrast packaged forms of beverages that are also sold in forms that require preparation, for example iced tea (which can also be prepared using tea leaves and fruit juice) and Alcopops (which can be prepared by mixing alcoholic beverages with fruit juices or soft drinks)
  2. Collected and summarized information from Euromonitor and Bacardi Annual Reports
  3. Prof. David J. Hanson, Ph.D. - Sociology Department, State University of New York, Potsdam, NY 13676.
  4. Global Marketing Campaign and replication for Portuguese Market (call a Taxi)

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