Ringing the changes at Bacardi?

f1_120For more than two decades, Seamus McBride was busy selling toothpaste for Colgate-Palmolive in the US, and then Bacardi beckoned. McBride’s appointment as the new Bacardi chief executive comes amid speculation that the current chief executive of the family-owned spirits company, Andreas Gembler, will move to a more senior role on the board as it prepares to join in the recent wave of consolidation in the industry.

That a man who made his name launching teeth-whitening products to Americans is to be installed as a successor is a widely unexpected outcome. McBride is viewed as a “safe” choice by many, as he not only happens to be the fifth non-family member of a company whose history has often been marred by family disputes, but also the first Bacardi chief executive who is a former marketer. Gembler, formerly of Philip Morris and who has been on the Bacardi board since 2003, will retire after McBride steps into his new role in September.

“We will continue to watch Bacardi with interest, especially now that it has got a marketer running a company who already has a fantastic track record as a brand marketer,” says a rival.

After 15 years at Colgate, McBride left in 1994 to spend four years as marketing director at Bass at the time the brewer launched Hooper’s Hooch, the first major alcopops brand to the UK market. He is also part of the team that bought into the memorable Carling Black Label advertising campaign. He went back to Colgate in 1998 and was promoted to vice-president, as well as president of North America and worldwide commercial effectiveness, last year.

It is his experience of selling brands such as Speed Stick and Palmolive that is expected to help him at Bacardi, which is likely to pursue its focus on premium and super-premium brands, such as the recent minority stake in tequila brand Patron. “A company run by ex-Cubans waiting for Fidel Castro to die needs someone as understated as McBride to enable Bacardi to continue to compete in a rapidly changing global spirits market, in a sector struggling to find profitable growth,” says an observer.

Critics also say that it is fast becoming a “second-tier” spirits company and needs someone aggressive at its helm. The fiercely private company, with more than 500 shareholders (all family members), has long held back from a flotation, which could provide it with the funds to pursue big global deals. Bacardi says it has no current plans to float.
Alex Smith, editor of the International Wine & Spirit Record, says the company has fallen behind in the consolidation game, “missing out on the three biggest deals in the past ten years”.

In 2001, Bacardi teamed up with Brown-Forman to bid for Seagram’s prized business that included Chivas Regal Scotch whisky and Captain Morgan rum brands. A bidding war ensued and, in the end, Bacardi was beaten by a joint bid from Pernod and Diageo.

In 2005, Pernod Ricard’s takeover of Allied Domecq also left Bacardi well behind competitors Diageo and Pernod Ricard. Bacardi has only 4.3% of global share of the market in terms of retail value, compared with Diageo which has 13.7% and Pernod Ricard’s 8.6%. More recently it lost out to Pernod Ricard in the auction for Absolut vodka, the third biggest vodka brand by sales volume.

A Bacardi spokeswoman says: “At Bacardi, which has an enviable portfolio of brands, we believe that it is not companies, but brands that compete. And the fact that this year was the eighth year of record growth in sales shows the strength of our brands. You don’t have to be the biggest to be the best.”

Global marketing chief Stella David adds that the company has done an “amazing job” at promoting its brands such as Bacardi, which is almost synonymous with ordering a rum and Coke. “It is always Bacardi and Coke, and the same with brands such as Grey Goose vodka and Bombay Sapphire gin, which consumers always ask for by brand name,” she says. Bacardi bought Grey Goose in 2004 when it paid over £1.2bn ($2.3bn ) in cash – the highest price ever paid for a single alcohol brand.

“At the time it was thought that Bacardi had over-paid hugely, but the brand has seen 25% compound annual growth rate since, which is incredibly profitable,” says Smith.

David says the acquisitions that the company makes do not just grow in terms of profit, but also generate brand equity. And no one understands the “power of brands” better than Bacardi, says advertising guru Robin Wight.

Bacardi has travelled down a long and colourful road since it was founded in Havana, Cuba, more than 140 years ago by the patriarch Don Facundo Bacardi y Maso. The family fled after the revolution, their assets confiscated.

But they regrouped, won a trademark battle with Castro and prospered by selling the spirit of Havana, marketing its products as “youth and vigour in a bottle”.

And a series of unforgettable campaigns followed, including the TomCat as the icon for Bacardi Breezer, a brand that helped create the ready-to-drink alcoholic sector a few years ago, but which, like the sector, is now in freefall. Other campaigns such as “Welcome to the Latin Quarter” celebrated its Latin origins, including the one featuring footballer-turned-actor Vinnie Jones, who was sacked after an air-rage incident.

But with increasing restrictions and scrutiny of alcohol advertising, the days of a flamboyant marketing communications strategy are long gone. Instead, Bacardi is promoting itself as a socially responsible company. Early this year it launched a partnership with Michael Schumacher to work across its brands to communicate a global “don’t drink and drive” message.

“Bacardi is essentially a marketing company and it couldn’t have chosen a better pedigree than McBride’s,” adds Wight, who worked with him during his time at Bass. His advertising agency WCRS was responsible for the famous Carling Black Label campaign.

Wight describes the new chief executive as a “sophisticated advertiser who stood out because he was never an exhibitionist” and a great fit with Bacardi. “When up against Diageo and Pernod Ricard, which continue to expand their brand portfolios, Bacardi needs someone who understands both the business and the brands,” he says.

For McBride to have shunned the limelight while in high-profile jobs, Bacardi could be no different. But this will be a bigger train-set, at a time when the spirits sector is sluggish and the market is hungry for further consolidation.
Yet analyst Sam Hart at Charles Stanley says that there are no obvious candidates other than small fry. A merger with Brown Forman, with which Bacardi already has an alliance to distribute Jack Daniel’s in the UK, could be another possibility, according to Smith.

Whatever the brief, as Wight concludes, “McBride brings the Colgate ring of confidence with him”.

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