"Havanista,â" the newly named Cuban rum, may become the new cheering factor for U.S. citizens as French producer of distilled beverages, Pernod Ricard, plans to bring Cuban Rum to the U.S. in light of the lifting of the embargo in the U.S. However, the behemoth present in the market, Bacardi is not easy to get rid of.
As the news came in of the 53-year old trade embargo to be discontinued in the U.S., the drinks giant from France, Pernod Ricard (PDRDY, Financial), announced its plans to bring its Cuban-made rum for sale in the states and give competition to Bacardi, which holds a strong position in the U.S., also considered as the biggest market in the world.
The entry route
Founded in 1975, Pernod Ricard is the producer of famous drinks Pernod Anise and Ricard Pastis, which are anise-flavored liqueurs. The French conglomerate with worldwide presence has even shortlisted the name âHavanistaâ for its Cuban rum, which it plans to bring to U.S. as "Havana Club," is already under use by Bacardi International which is a Bermuda based company post being abandoned by its founders from the communist island in the 1960s.
Not only targeting the niche market consisting only Cubans living in U.S., Pernod is planning something big for the Cuban rum. The lifting of embargo has opened gates to one of the worldâs largest recipients of liqueur and assures rapid growth.
One of the cues, which led to the lifting of embargo, was the re-establishment of relations between U.S. President Barack Obama and Cuban President Raul Castro. The revived relations had also led to a concession of bringing cigars and alcohol from Cuba worth $100 to the U.S.
Pernodâs presence in the U.S.
The present "Havana Club" produced by the partnership between Pernod and Cuba Ron, the state-owned company, has its aging cellars at the San Jose de las Lajas distillery. An investment of $100 million was made in the distillery last year by the company, which employs over 550 people and has a record of sale of 50 million bottles or 4 million cases per year. This was an increase by over 10 times as compared to the year 1993. The distillery exports major part of the produce as a result of growing demand of cocktails like Mojitos and Daiquiris.
Post the launch of âHavana clubâ or the newly named "Havanista" in U.S., almost 20 million bottles per year extra sales will be added to companyâs kitty. However, no matter how high, the numbers will fall too short as compared to the mammoth already present in the market- Bacardi.
Bacardi rules
Producers of Bacardi once had best of their times in Cuba before their exile in 1960s. They were the largest privately held spirits maker in the world who hasnât given any statement as yet on the embargo lifting in the U.S. The name "Havana Club" was given to the Bacardi in U.S. in 1994 after buying the recipe from the Cuban spirit-making family Arechabalas who faced confiscation of assets by the government in 1960. Post that, "Havana Club" continued to be produced by the state along with Pernod Ricard in the 1990s. Though Pernod tried to buy the rights of the name of the spirit, they were denied keeping in view a law, which barred the trademark registration of Cuban brands, which had been confiscated. This is the reason why the company took up the name "Havanista" for future use.
Market watch
U.S. is the worldâs biggest market for rum making 36% of the total 50 million 9 liter cases that are sold globally. Although Pernod holds some good numbers of its "Havana Club," which are 4 million cases, sold every year in 120 countries, it is just 10% of the total sales of its 14 brands of spirits and champagnes. The company holds the third rank in rum sales all over the world while the first and second rank holders are Bacardi and Diageo respectively as per IWSR.
The rum story
Whether or not the Cuban rum is welcomed in the states, Pernod Ricard definitely looks positive on its entry in the U.S. market. Analyst Trevor Stirling is of the view that the Cuban name might not get many takers, but Cuban-Americans might also have hard feelings for the brand considering its association with the Castro government.
