The Beginning of the Beginning

on 25 September, 2015

After the "normalisation" of Cuban-American relations this summer, DI's business columunist Hamish Smith tells us when to expect the doors of bussiness to swing open and what it will mean for the rum industry

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ALONG THE SNAKING MALECÓN WATERFRONT Havanans chat, romance and stare into the blue between Cuba and Florida. In August John Kerry was among them – the first US foreign secretary to share their views, of sea and perhaps even politics, since the Cuban Revolution. With Cuba removed from the US’s list of state sponsors of terrorism and embassies now open in both Cuba and the US, for the first time in 55 years there is a catalyst for reconciliation.

So what does the ‘normalisation’ of relations mean for business? Well, before business must come travel. Twelve categories of American tourists can visit Cuba, though the dollar-loose, fanny-pack-and-cap brigade that will change Cuba forever cannot, neither visitors bent on business. The American trade embargo remains and its lifting requires a transition to democracy.

We are only at the beginning of the beginning of a process. But, for the spirits industry, official peace could engender the most anticipated of wars – Bacardi could finally face old foe Havana Club in the world’s largest premium rum market, the US. Alex Ricard has called the announcement to normalise relations “a historical date for the world – and for Pernod Ricard”, while Jérôme Cottin-Bizonne, CEO at Havana Club International, has pledged his rum will be the first “100% Cuban rum” in the US.

The assumption has always been Havanista (American for Havana Club – long story) will be embraced in the US. Indeed, there are 1m Cuban- Americans, about half of which live in Florida, a gateway for rum. But they are casualties of revolution. Might they eschew a product half-owned by the Castros, who took their businesses and livelihoods? No, says Cottin-Bizonne: “Americans of Cuban origins who have been coming to Cuba over the years have regularly consumed Havana Club.” What of the wider US? Martin Cate, owner of San Francisco rum bar Smuggler’s Cove, says he expects Havanista, as forbidden fruit, “to be very popular very quickly”.

But trade works both ways. American companies will be poised to move in on a new green market – not least Bacardi. The group’s chairman, Facundo Bacardi, has spoken about the family’s wish to return. It would be more than just romantic. Cubans consume 6.5m 9-litre cases of rum a year, according to Euromonitor International, a good chunk of which is Havana Club. As wealth and tourism grows, so will the market. It would be a sideshow to the US, but Bacardi could emerge as the rum of Santiago and Havana Club of Havana.

Though not while the Castros are still in power. And it’s worth considering Bacardi has produced in Puerto Rico and Mexico since the 1930s – almost as long as it was in Cuba. It won’t pull out of its adopted homes. Despite the ‘born in Cuba’ brand-speak a good number of the Bacardis were not. Facundo Bacardi has never been to Cuba.

Perhaps it’s just staring into the blue to think Bacardi and Havana Club will soon meet. It’s still a long way off, but it has never been so close.

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