The Bacardi Story: A Different View

An interview with Mr. Cynic

Bacardi announced this week that it is realigning its U.S. distribution network and joining Southern Wine & Spirits and Glazer’s. They are leaving more than 30 former distributors including RNDC, Charmer (now Breakthru Beverage), Young’s Market, and others.

The spirits and wine industry has been abuzz with press releases, interviews, and statements. Many in the business have done little work this week, instead spending time speculating on why this happened and what the implications might be.

Booze Business has spoken with many people throughout the industry and, aside from those employed by those involved, the reaction was pessimistic and negative. To capture this mood, we conducted an interview with an imaginary industry executive known as Mr. Cynic.

So, here is another side to the Bacardi story.

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Booze Business: Mr. Cynic, let’s start with the basic question. Won’t this change in distributors, this consolidation, improve Bacardi’s standing in the market?

Mr. Cynic: Let me ask you a question. When was the last time you went into a bar or restaurant or even a hole-in-the-wall joint and Bacardi Rum or Grey Goose wasn’t there? What distribution problem are they correcting? Seems to me that the wholesaler network they’re leaving did a great job with their two leading hemorrhaging brands. It wasn’t their fault that the company couldn’t fix the problems. How are they going to get deeper penetration than they already have?

Booze Business: Well, they’re saying that they want to consolidate their wholesaler network and have one national entity.

Mr. Cynic: Sure. Dealing with one distributor makes it easier to poke your finger into one chest and demand sales increases than into thirty. Charmer and RNDC made their brands, including the stuff that was impossible to sell. They got screwed. What I don’t understand is how competing brands can be in the same house.

Booze Business: What they’re saying is the Southern-Glazer operation will have dedicated and incremental sales forces.

Mr. Cynic: So they are adding people. Tell me, what were these people doing until now? You mean they’re not getting the best and brightest? Or, are they moving their best people to work on Bacardi?

Booze Business: Come on, a larger and more powerful Southern and Glazer has got to benefit other brands they already handle.

Mr. Cynic: Are you kidding me, we can’t get their attention now.

Booze Business: Well, then aside from Bacardi, will anyone benefit from this change?

Mr. Cynic: I’ll tell you this… there’s a lot of nervous sales reps on the street. But, my money is on the distributors who are losing Bacardi.

Booze Business: Why’s that?

Mr. Cynic: Hell hath no fury like a distributor scorned. This move ignores the consumer and the changing industry. It’s no longer about dinosaur brands like Bacardi Rum or yesterday’s vodka. The industry has become more grassroots focused and this move is old-old school. The distributors they dropped just got a wakeup call. They’ll focus on the new crop of brands.

Booze Business: So who benefits?

Mr. Cynic: Don’t you get it? The winning brands these days didn’t come from the large traditional powerhouse suppliers. They came from consumers—mainly Millennials—with brands like Fireball, Rumchata, and Tito’s. Brands made with “pull” not distributor “push.” These distributors, if they’re as smart as I think they are, will start asking themselves, “Where else can we make money?”

Booze Business: And the answer?

Mr. Cynic: Make the second tier brands stronger and more available. Focus on craft and startups. Take some risks. Change the business model. Give the consumer what they want not what the supplier and wholesalers want.

Booze Business: But won’t this new alignment mean Bacardi will do better with startup brands?

Mr. Cynic: Give me a break. The first order of business will be to manage the consolidation—legal, logistical, resources, etc.—then they need to show the owners that this was a smart move and start making money. The smaller brands… the brands of the future? Forget about it.

Booze Business: What do you think was the most important driving force behind the change?

Mr. Cynic: You want to hear cynical? Can you handle it?

Booze Business: Go on.

Mr. Cynical: Over the last 10 years or so—no, make that ever since I’ve been in this business—Bacardi has changed executives and management more than any other major player.

Booze Business: So what?

Mr. Cynical: This move will take time for the dust to settle. They say one to three years. Ha! This year and part of next will be focused on consolidation. The following year will be better because they’ll be going against soft numbers. Then maybe further growth down the road. Meanwhile the owners will be pleased, and management will have 3 to 4 years of job security. That is, until it all catches up with them. Brilliant move. Better job and income protection than a series of line extensions. Meanwhile, the brands at the other distributors will have real and steady growth.

Booze Business: Why do you think this happened?

Mr. Cynical: Who knows? Maybe it’s as they say, consolidation and one giant footprint will benefit Bacardi. Or, maybe, desperate times call for desperate measures.

Booze Business: Care to sum it up?

Mr. Cynical: Yeah. This deal will cost tons of money to make it happen. And, while they’re focusing on winning, it will create opportunities for the rest of the industry. While Bacardi and their new distributors are concentrating on their new arrangement, everyone else will be moving in a new direction.

Booze Business: Thanks for your time, and a word of advice.

Mr. Cynical: What?

Booze Business: Stay out of Southern Florida.