Thursday, July 28, 2016

How Did the Rum War Over Havana Club Begin?

     Havana Club is an iconic brand that as we approach normalization of relations with Cuba has become a valuable property that was thought to be worth nothing in 1973 here in the United States when the trademark was about to expire.  The story of the rum war between Bacardi and Pernod Ricard is loaded with a history of bad decisions and revenge.

     The Arechabalas introduced Havana Club with Americans in mind in 1934.  The name of the Cuban capital was spelled in English, rather than the Spanish "Habana."   Soon Havana Club was served in places such as the Stork Club, a high-society night spot in Manhattan.      The Arechabalas,  according to Gjelten, sympathized with dictator Fulgencio Batista, whom Fidel Castro overthrew.  Soldiers showed up at the Havana Club office on New Year's Day 1960.   The late Ramón Arechabala was a sales manager, while one of the top executives, his uncle José María Arechabala, or "Pepe," was in Spain.  "From now on, I am Pepe, and you people will do as I say," declared a military commander, as Ramón Arechabala recalled in court testimony in 1999.

     "I say, 'Okay, no problem, whatever you say,' " he testified, "because he was armed with a machine gun."   Ramón Arechabala,  went on to sell cars in Miami.   In 1973, he realized that the Havana Club trademark was due for renewal.   He asked his uncle whether they should file the paperwork.   His uncle said no. The family did not have enough money to produce rum in the U.S. and mistakenly believed they couldn't renew the trademark without making rum.   "He told me we could not do anything right now with it, because, 'Let's wait because we might be going back to Cuba any moment,' " Arechabala testified.

     In 1976, a state-owned Cuban enterprise secured the American trademark for Havana Club.   It was a cunning yet hopeful investment in the day when Cuban rum might once again be poured on the other side of the Florida Straits.

The rum war was declared nearly 20 years later, when two things happened.   In 1993, news broke that Pernod Ricard had struck a deal to become equal partners in Havana Club.   In 1994, Bacardi filed its own application for the U.S. trademark for Havana Club.   Bacardi paid the Arechabala family $1.25 million for any rights to Havana Club that the family still possessed, plus a fraction of any sales of Havana Club.  Ever since, Bacardi and Pernod Ricard have battled on legal, regulatory, political and commercial fronts.

     This seems like a battle that will never be settled, it looked like it was settled back in the early 2000’s when the Supreme Court ruled in favor of Bacardi, but with the easing of relations with Cuba it has reared its ugly head again.

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