Havana Club: The Fighting Spirit of CubaThis analysis focuses on therevitalized war between the rum brands Havana Club (Cuban) and Havana Club(Bacardi/Puerto Rican) in the wake of the possible lifting of the US tradeembargo on Cuba and the effects this is likely to have on the Cuban economy interms of new revenues and employment creation. I chose this topic on theengaging war between the original Havana club vs Bacardi because since theCuban revolution in 1959, Havana club and Bacardi have been rivals, specificallythe Bacardi’s and Arechabalas. The rivalry has changed the landscape in the rummarket with Bacardi being the top rum seller in the U.S. and Havana Club beingthe top five best-selling rum in the world with excluding the United Statesbecause of the trade embargo and not having any distilleries in the U.S.
As astudent being half Puerto Rican and sharing bottles of Bacardi with my pastfamily generations, I was also interested in this topic because I believe thisongoing war between Havana Club and Bacardi has affected the way tourists canget a hold of Havana club in the U.S. considering its not sold there and withthe rum being one of the top sellers.
Also, I see self-employment being affectedby the war between the two rum companies in terms of how Cubans can be able tosell Havana clubs and make profit for themselves. Concisely, the renewed saleof Havana Club in the United States has the potential to boost tourism, raiseCuba’s foreign revenue, and create new employment opportunities for thousandsof jobless Cubans thus address the slowdown that characterizes the country’seconomy. History and Production betweenHavana club and BacardiThehistory of the Havana and Bacardi as discussed in this section is onecharacterized with unending deep rivalry and controversies. The section seeksto look into the origin of the current state affairs for the two brands andwhat possible implications this has on the current business situation.
TheHavana Club brand was created in 1934 by the Arechabala S.A Company and sold inCuba and United States. For years before the Fidel Castro’s revolution in 1959,the two-family companies were fierce rivals in the Cuban rum market. The Bacardifamily with the Bacardi and the Arechabalas with the Havana Club were in 1960both forced into exile (Alfonsi n.p).However,this disruption did not end the rivalry which has continued to this date.
Thereafter, Havana Club was nationalized by Castro’s government in 1960, producedin Cuba, and exported across the world apart from the US following the tradeembargo. Likewise, Bacardi was equally produced from Bermuda and became globalexcept that unlike its competitor, it also dominated the US market. TheArechabala family left to settle in Spain and U.S and abandoned the rumbusiness which thus the Cuban government was free to continue using the brandname.
Thus, in 1994 Bacardi acquired a recipe from the Arechabala family and begunto produce rum under the Havana Club name in Puerto Rico. Production was thenexpanded to some states in the US and later national wide (Montgomery n.p). Thisshort history not only explains into origin of the current rivalry but alsosheds some light into the current standing of each of the two rival sides. Itis clear that the Cuban Havana being a global leader stands an excellent chanceof penetrating and making a footprint in the US market thus bring the historicrivalry to the doorstep of the Bacardi Company but this time not only in termsof the legal battles but in terms of its competition for market share. This islikely to largely change the rum market in the US and production and employmentfor employees of both companies. Pernod Ricard and Bacardi TrademarkConflictThissection indulges into the trade conflict between the two firms.
The two competitorshave since engaged in a trademark litigation and battles in Spain, the US, andWTO (World Trade Organization). Following the nationalization of their company,the Arechabala family allowed the registration of the US trademark for HavanaClub to lapse in 1973. The Cuban government took advantage of the lapse toregister the trade mark in 1976 in the US and assigned to Pernod Ricard in 1993(Alfonsi n.p). However, the production of Havana Club by Bacardi afteracquiring the remaining rights from the Arechabala family attracted litigationby Pernod Ricard. The first three holdings of the litigation were successful, However;intense lobbying by Bacardi resulted in the passing of the Bacardi Act in 1998protecting trademarks to expropriated Cuban companies thus eliminating PernodRicard’s standing (Montgomery n.p).
A second line of litigation focused on thealleged deceptive nature of Havana use and lasted 3 years since 2009. Bacardicarried the day. In Spain, the ownership of the trade mark by Pernod Ricard hasbeen upheld three times. Following freshened relations between the US and Cuba,the trademark was in January 2016 awarded to the Cuban government, a moveanticipated to revitalize the rivalry between Bacardi and the Cuban government.This year, Bacardi has appealed the decision and Florida Parliament requestedPresident Donald Trump to reverse the earlier decision (Field 3). Whatexactly does the trade conflicts mean for the two companies and more so for theCuban government.
If the decision to grant the Cuban government the brand nameis upheld by the Trump administration, then it opens a new door for the Cubanbrand to expand its market into the US. This is particularly an unexploredterritory by Havana Club and holds considerable potential to boost trade andrevenue for the Cuban government and create new employment opportunities forthe Cuban people. The sales and Marketing of Havanaclub and BacardiDespiteusing similar brand names, the two firms seem to be using very similarmarketing strategies as illustrated in this section. While Bacardi’s Havana takes the largestshare of rum in the US and capitalizes heavily on Cuban themes such as ‘The Rumof Cuba’ in its marketing and happens to be the most favorite item brought backby tourists returning from Cuba.
Pernod Ricard Havana takes the largest worldrum market share. Following the defeat by Bacardi through litigation in 2012,Pernod Ricard went ahead and to register the name “Harvanista” to be used in marketingthe product in the US as the rum from Puerto Rico. On the other hand, Bacardiplans to expand the sale of their version of Havana throughout the US (Field 3).Clearly, there is a need for the two firms to exercise differentiationespecially in marketing to avoid further conflicts and steer away possiblebusiness. Effects of the rivalry betweenHavana club and Bacardi and the Lifting of the Embargo on TourismManypeople across the world enjoy the uniquely blended Cuban Havana Club.
Indeed,President Obama’s announcement of the possible lifting of the restrictions bythe US on travel and trade with Cuba was received with high enthusiasm by rumdrinkers and leisure travelers. Cuba’s close proximity to the US made it a favoriteholiday destination among wealthy Americans. Rum, horse racing and golfing, andgambling were some of the major attractions. Indeed, the Cabaret Quarterly, atourism magazine described Havana as “the mistress of pleasure and opulentgoddess of delights”. Havana is likened to the current day Las Vegas.
Beforethe revolution, Fulgencio Batista had great plans to develop Havana walkway bythe water with casinos to attract even more tourists (Montgomery n.p). Thesedescriptions illustrate the amount of the potential that exists for Cuba. Thecontinued legal battles between the two rum firms only acts to hurt the alreadybruised tourism sector between the two countries. As such, lifting of theembargo will make the consumers happier and economies better.
There will be freemovement of people and products across the two countries thus boosting tourismand trade. Ways in which the rivalry betweenHavana club and Bacardi affects self-employment for CubansCubahas been described as the liquor legend. This section seeks to discuss the possibleeffects of the rivalry and lifting of the embargo on self-employment in Cuba. Thecountry’s major partner in foreign trade before the revolution, the US, playeda major role in this standing. However, the embargo changed all this andaffected Cuba’s economy significantly (Gordon 476). This situation could changein the near future.
However, the rivalry between Havana Club and Bacardi threatensthe potential gains that could come out of the lifting of the embargo. Thisimplies that if Bacardi wins the legal battles to retain the Havana Club tradename, Cuba would be forced to use a different name to market its Havana Club.This would also affect the popularity of Cuba’s liquor in the US andconsequently cause a decline in the anticipated rise in job opportunities inthe industry. How selling the original Havanaclub in the U.
S. can help Cuba with its debtsEverybusiness requires a conducive business environment if it is to thrive. This isno different for the case between the US and Cuba if the embargo is to belifted as illustrated in this section. Business environment implies theeconomic, political, legal, social, and cultural issues that define theoperations of the private firms within a country’s economic space. The liftingof the embargo would allow free movement of products across the two countries.It is also going to impact the political and legal spaces in Cuba. Currently, Cuba’spublic debt is at a staggering 34.
6 percent of the GDP. The US, on the otherhand, happens to be the 40 percent consumers of the world’s rum, a massivemarket for any serious company (Usborne n.p). However, in order for the sale ofHavana to make an impact in Cuba’s economy, it is necessary for the prevailingeconomic systems in the country in terms of the manner in which production,exchange, and distribution of products and services is organized and to bereviewed.
This requires significant changes in the country’s legal system andpolicy change. Cuba upholds a macroeconomic management of the major industriesand corporations including Havana. There are, however, some notable changes andshifts towards democracy in the largely socialist state. For instance,self-employment has been authorized in more occupations. A study undertaken byInternational Trade Commission found out that the trade between Cuba and US ifthe sanctions were not initiated would stands at about $1billion (Francis n.p). This can be taken as thecurrent trade potential between the two countries if the embargo is lifted.
Rumsale forms the bulk of this estimate and as it would be effective to point outthat the sale of Havana Club in US would help significantly in the repayment ofdebts by Cuba. Ina nutshell, the rivalry between Pernod Ricard’s Havana Club and Bacardi’sHavana Club runs down history to the current day. It is a war of control anddominance with each of the sides seeking to dominate over the other. Theanticipated lifting of the trade embargo on Cuba by the US has largely shiftedcards in the favor of Pernod Ricard; the side that was recently seen as thelosing side. This has in turn reignited the rivalry with what can be describedas a do or die chance to make a notable footprint in the world’s largest rummarket.
If Pernod Ricard succeeds in taking control of the brand name, it isanticipated that it would be a major milestone for the Cuban government torevitalize its ailing economy by means of increased revenues and employmentopportunities.