BACARDI Spirit is moving company to make stirring change

Bacardi is moving way beyond just rum and may be nearing going public.
KNIGHT RIDDER NEWSPAPERS
If Don Facundo Bacardi were alive today, he probably wouldn't recognize the company he started in 1862.
While Bacardi rum remains the centerpiece of the family-owned business and the world's best-selling spirit, it's no longer the only brand driving sales and profits. After a decade of baby steps, the formerly tradition-bound Bacardi now has its hand in everything from gin to malt beverages and tequila.
And the winds of change show no signs of dying down. At an informational meeting called for January in Miami, Bacardi Ltd. Chairman Ruben Rodriguez will discuss with shareholders a number of options to raise capital, which could include an initial public offering, partnership or private financing.
Split leadership
He will also discuss plans to split his current jobs with another executive. He would remain chair of the far-flung liquor empire, and the new person would take on the role of chief executive and president, with responsibility for overseeing the daily operation of the company.
This discussion comes on the heels of a busy year for Bacardi, with the launch or acquisition of four products aimed at filling voids in the portfolio or capitalizing on changing consumer tastes. The newest additions to the Bacardi liquor cabinet: Ciclon, a tequila-infused rum; Turi, a superpremium vodka; Tequila Cazadores, a premium reposado tequila; and Bacardi Silver, a malt-flavored beverage produced in a joint venture with Anheuser-Busch.
"It's a very competitive environment, and we have to get bigger in order to be able to effectively compete," said Rodriguez. "It's important to be the first one in the marketplace giving consumers what they want. If you don't do it, your competition is going to do it for you."
Hard lesson
Bacardi, the Bermuda-based parent company, whose subsidiary Bacardi USA is based in Miami, learned that lesson the hard way during the 1980s and early 1990s. Rum sales declined and the company that had done nothing but make rum for more than 100 years lost market share to the growing popularity of premium vodkas and tequilas. As consolidation swept through the industry, analysts say Bacardi had to change to remain competitive with Diageo PLC, Pernod Ricard and Allied Domecq.
Bacardi's move toward diversification began in 1992 with the acquisition of Martini & amp; Rossi, then picked up speed with the 1995 launch of Bacardi Limon and the 1998 acquisition of Dewar's Scotch and Bombay gin. During the last seven years, Bacardi has developed more new products than ever in its history.
"They stood apart for a long time, but now they've joined the mainstream," said Tom Pirko of Bevmark, an industry consultant. "For the first time in a long time they're doing the right kind of things. Are they doing them fast enough? In my view they should be doing more."
Decision-maker
That decision will be up to Rodriguez, the first non-Bacardi family member to hold all three top executive titles. The 65-year-old who grew up with some Bacardi family members in Cuba took the helm in 2000 after 11 years with the company, most recently as chief financial officer.
Rodriguez took over from Chief Executive George B. "Chip" Reid Jr. and later Chairman Manuel Cutillas. Both of them departed not long after Bacardi's board in November 1999 put the brakes on a proposed IPO because of a lack of shareholder support.
But industry analysts say market conditions are changing, and Bacardi may be forced to go public to keep up with the fast pace of industry consolidation, driven by Diageo.
"This is a money game, and at some point they're going to need more funds if they're going to play the game," Pirko said.
In what may be an effort to lay the groundwork for that day, Rodriguez has been taking steps to raise Bacardi's profile. He meets regularly with financial analysts around the world and speaks at prominent spots in academia, including Harvard Business School and Dartmouth University.
At the same time, a brief speculation in the British press in October suggested that Allied Domecq's Chief Executive Philip Bowman had his eye on acquiring Bacardi and was trying to arrange a deal. Rodriguez denies there is any truth to that suggestion.
Although privately held Bacardi doesn't release its financial results, industry sources say that in the fiscal year ending March 31 Bacardi rang up sales of $2.9 billion, up from $2.7 billion the prior year. At the same time, the company posted operating profits of $734 million and net earnings of $444 million. Part of that boost to the bottom line came from a court-ordered $155 million tax refund in Mexico.