Bacardi Limited Company Profile Publication Date: 13 Apr 2010 www.datamonitor.com Asia Pacific Americas Europe, Middle East & Africa Level 46 245 5th Avenue 119 Farringdon Road 2 Park Street 4th Floor London Sydney, NSW 2000 New York, NY 10016 EC1R 3DA Australia USA United Kingdom t: +61 2 8705 6900 t: +1 212 686 7400 t: +44 20 7551 9000 f: +61 2 8088 7405 f: +1 212 686 2626 f: +44 20 7551 9090 e: [email protected]e: [email protected]e: [email protected]
Transcript
Bacardi Limited
Company Profile
Publication Date: 13 Apr 2010
www.datamonitor.com
Asia PacificAmericasEurope, Middle East & AfricaLevel 46245 5th Avenue119 Farringdon Road2 Park Street4th FloorLondonSydney, NSW 2000New York, NY 10016EC1R 3DAAustraliaUSAUnited Kingdom
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Bacardi Limited (Bacardi) is the largest privately held spirits company in the world. The companyproduces and markets a variety of spirits and wines. It operates in America, Europe and Asia. It isheadquartered in Hamilton, Bermuda and employs about 6,000 people.
The company recorded revenues of $4,394 million, during financial year ended March 2009 (FY2009),a decrease of 3% compared with FY2008. The operating profit of the company was $1,030 million,during FY2009, a decrease of 3.8% compared with FY2008. The net profit was $805.1 million inFY2009, an increase of 1.3% compared with FY2008.
KEY FACTS
Bacardi LimitedHead Office65 Pitts Bay RoadPembroke Hamilton 08BermudaBMU
Bacardi is one of the leading wine and spirits group in the world. The company's portfolio consistsof more than 200 brands and labels, including Bombay Sapphire gin, Martini vermouth, Dewar'sScotch whiskey, and B&B and Benedictine liqueurs. Other offerings by Bacardi include vodka, tequila,cognac, and sparkling wine. The company serves more than 110 countries including the US, Spain,France, the UK, Mexico, Germany, Italy and Russia.
The company operates 27 production facilities, including bottling, distilling, and manufacturingfacilities, located in 17 countries including Puerto Rico, Scotland, Italy, France, Spain, Germany andMexico.
Don Facundo Bacardi Masso formed Bacardi Company in Santiago de Cuba in 1862. The early1900s witnessed strong growth as sales and exports increased.
During 1910s, the company opened two bottling plants, one in Barcelona and the other in New YorkCity. During the same period, due to prohibition the bottling plant in New York was shut down. Thegrowth continued in 1920s with the opening of another bottling plant in Santiago de Cuba.
The company's name was changed to Compania Ron Bacardi during 1930s. In the following decade,Bacardi Imports was founded, which became the company's US marketing and sales branch. During1950s the company built a distillery in Puerto Rico, Mexico and a bottling plant on the outskirts ofMexico City. During the same period the company constructed two new Hatuey breweries in Cubaand started the construction of a new distillery in Recife, Brazil.
The company's Cuban assets were confiscated by the socialist government of Cuba in 1960. Despitehaving to leave Cuba, the Bacardi family completed building new production facilities in Brazil,Bahamas and Canada during 1960s. During the same period, the company moved Bacardi Importsfrom New York City to Miami, Florida.
New facilities were built in Spain, Panama, and Bermuda during the 1970s. All Bacardi operationswere consolidated into Bacardi & Company with its headquarters in Hamilton, Bermuda in 1990s.
In 1992, Bacardi made multiple acquisitions including Martini & Rossi. It acquired Dewar's scotchand Bombay gin in 1998.
Bacardi concluded an agreement with Brown-Forman in 2002, to share sales force and logisticsoperation in the UK. Bacardi completed the acquisition of brand Grey Goose vodka in 2004.
The company renewed its contract with Brown-Forman during 2006, extending it till 2012. In thesame year, the company acquired 42 Below, a New Zealand spirits company.
In 2007, the company completed the purchase of 106-acre tract of land in central Scotland to bedeveloped as a second maturation, blending and storage facility for its premium portfolio of Dewar'sScotch whiskies.
Bacardi acquired 100% of e.s.japan, its distributor in Japan, in 2008.The company also entered intoa long-term distribution agreement where Bacardi would market, sell and distribute the CUTTY SARKWhisky brands in Japan.
Bacardi launched Bacardi 'O' an orange-flavored rum in Bangalore, India in December 2009.
In February 2010, Bacardi and Brown-Forman agreed to end their distribution arrangements inGermany. They decided not to renew the contract expiring at the end of September 2010.
Board: Executive BoardJob Title: President and Chief Executive OfficerSince: 2008Age: 55
Mr. Mcbride has been the President and Chief Executive Officer at Bacardi since 2008. He hasnearly 30 years of global management experience in the consumer goods industry including marketing,commercial operations and systems.
Mr. Bacardi has been the Chairman at Bacardi since 2005. Previously he was the Deputy Chairmanof the company. Mr. Bacardi received a BSBA in Finance from American University and a JD degreefrom Emory University Law School.
Michael Brennam
Board: Senior ManagementJob Title: President and Chief Executive Officer, Bacardi International Limited
Mr. Brennam is currently the President and Chief Executive Officer at Bacardi International Limited.He has been with Bacardi since 2000 working in the finance area both in Europe and Bermuda. Mr.Brennan is also Vice President of Finance and Corporate Controller for Bacardi Limited. Prior tojoining Bacardi, Mr. Brennan worked in professional public accounting firms in Canada and Bermuda.Mr. Brennan holds both Canadian Chartered Accountant (CA) and Chartered Financial Analyst (CFA)designations.
Jeri R. Dunn
Board: Senior ManagementJob Title: Global Chief Information OfficerSince: 2006
Ms. Dunn has been the Global Chief Information Officer at Bacardi since 2006. Previously, sheworked for Nestle, Tyson Foods and Curtis Industries.
Harold Dyrik
Board: Senior ManagementJob Title: Regional President, Asia PacificSince: 2005
Mr. Dyrvik has been the Regional President, Asia Pacific at Bacardi since 2005. He has been withBacardi since 2005. Prior to joining Bacardi, he worked as a strategic management consultant tomultinational FMCG companies in Asia. Previously, he worked for Philip Morris International formore than 20 years.
John Esposito
Board: Senior ManagementJob Title: Regional President, North AmericaSince: 2006
Mr. Esposito has been the Regional President, North America at Bacardi since 2006. He has spentmore than 25 years in the Wines and Spirits industry. Previously, he was President and ChiefExecutive Officer of Moet Hennessy. He also has held a number of key positions including Presidentand Chief Executive Officer at Schieffelin & Somerset, President of Premier Beverage Company ofFlorida, Vice President and Director of Sales for W.A. Taylor & Co, and Vice President, NationalSales Manager Seagram Wine Co.
John Grey
Board: Senior ManagementJob Title: Chief of Global OperationsSince: 2005
Mr. Grey has been the Chief of Global Operations at Bacardi since 2005. He has been with Bacardisince 2005. Previously, he served as Global Logistics Director for The Big Food Group, responsiblefor all supply chain and distribution activities and had served as Managing Director for its internetretail business.
Robbie A. Jamieson
Board: Senior ManagementJob Title: Regional President, Latin AmericaSince: 2007
Mr. Jamieson has been the Regional President, Latin America at Bacardi since 2007. Prior to joiningBacardi, he has served in general management roles for the past 16 years. He also held the positionof Marketing Director KFC Puerto Rico.
Eduardo Sanchez
Board: Senior ManagementJob Title: Senior Vice President and General CounselSince: 2003
Mr. Sanchez has been the Senior Vice President and General Counsel at Bacardi since 2003. Hehas been with Bacardi since 2003. Previously, he served as the Vice President and Deputy GeneralCounsel, North and Latin America, at The Coca-Cola Company. Before that, Mr. Sanchez was withBestfoods, a leading international consumer food company acquired by Unilever, where he servedas the Vice President and General Counsel.
Patrick Sauvageot
Board: Senior ManagementJob Title: Regional President, Europe, Middle East and AfricaSince: 2007
Mr. Sauvageot has been the Regional President, Europe, Middle East and Africa at Bacardi since2007. Previously, he served as the Chief Executive Officer at Hennessy. Prior to that, he spent 17years with Danone, serving in a variety of key roles-including Chief Executive Officer at Danone inthe Czech Republic, Argentina, and France. Mr. Sauvageot holds a Master's Degree from ESSECin Paris.
Scott M. Northcutt
Board: Senior ManagementJob Title: Senior Vice President, Human ResourcesSince: 2009
Mr. Northcutt has been the Senior Vice President of Human Resources at Bacardi since 2009. Heis responsible for all aspects of employee career development, employee benefits, successionplanning, as well as management and organization development. Mr. Northcutt has more than 20years of experience in the international human resources field, having held key leadership positionsin several global companies.
Mr. Vora is currently the Vice President, Business Development at Bacardi. Mr. Vora is responsiblefor building and expanding strategic relationships and driving business development activities innew markets. Previously, Mr.Vora spent 13 years with Coopers & Lybrand in its Audit and TransactionSupport functions in the UK and Kenya.
The company recorded revenues of $4,394.0 million, during financial year March 2009 (FY2009), adecrease of 3% compared with FY2008. For the FY2009, Europe, Middle East and Africa, thecompany's largest geographic market, accounted for 51.4% of the total revenues.
The company generates all its revenues from the sale of wines and spirits.
Revenue by Geography
Europe, Middle East and Africa, Bacardi's largest geographical market, accounted for 51.4% of thetotal revenues in FY2009. Revenues from Europe, Middle East and Africa reached $2,260 millionin FY2009, a decrease of 0.9% compared with FY2008.
North America accounted for 38.6% of the total revenues in FY2009. Revenues from North Americareached $1,698 million in FY2009, a decrease of 5.4% compared with FY2008.
Latin America and Asia Pacific accounted for 9.9% of the total revenues in FY2009. Revenues fromLatin America and Asia Pacific reached $436 million in FY2009, a decrease of 4.2% over FY2008.
Bacardi is the largest privately held spirits company in the world. It manufactures varieties of rumapart from gin, vermouth, whisky, liqueurs, vodka, tequila, cognac, wine and beer. It has operationsin more than 100 countries worldwide. Bacardi has a portfolio of more than 200 global brands. Strongmarket presence gives it an edge over its competitors and enhances its brand image. However,dampening consumer confidence and increasing labor costs could lead to a loss of market share ofthe company, which in turn, would affect its profitability.
WeaknessesStrengths
Lack of scaleStrong brand equityHigh debt burdenRobust manufacturing capabilities
Strong global presence
ThreatsOpportunities
Stringent advertising regulationsPositive outlook for global spirits marketIntense competitionPositive outlook for the Indian marketIncreasing labor costsGrowing wine market
Strengths
Strong brand equity
Bacardi is the largest privately held spirits company in the world. It manufactures varieties of rumapart from gin, vermouth, whisky, liqueurs, vodka, tequila, cognac, wine and beer. Its brand portfolioconsists of more than 200 brands and labels, including the following: Bacardi rum, the world's numberone selling rum; MARTINI vermouth, the world leader in vermouth; Grey Goose vodka, the worldleader in super premium vodka; Dewar's Blended Scotch whisky, the number one selling blendedScotch whisky in the US; Bombay Sapphire gin, one of the fastest growing brands in the spiritsindustry; and Cazadores Blue Agave tequila, the top selling 100% blue agave tequila worldwide, aswell as other leading brands. Strong brand equity gives it an edge over its competitors and enhancesits market position.
Robust manufacturing capabilities
Bacardi has strong manufacturing capabilities. It owns 27 production facilities located in 17 countriesincluding Puerto Rico, Scotland, Italy, France, Spain, Germany and Mexico. Bacardi's distillery inAberfeldy, Scotland produces a distinctive single malt scotch whisky under the brand name Aberfeldy;The Martini & Rossi plant in Pessione, Italy produces 12 million cases per year and is the company’s
largest bottling operation worldwide, while the Bacardi facility in Jacksonville is the company’s largestbottling facility in the Americas region.
Strong manufacturing capabilities enable the company to maintain control over quality and respondquickly to changes in demand.
Strong global presence
The company has a strong global presence with its operations in 110 markets worldwide. It has asignificant presence various regions including North America, the Europe, Middle East and Africa,Latin America and Asia Pacific. The principal markets in North America region include the US,Canada and the Caribbean.The principal markets in Europe, Middle East and Africa regions includeSpain, France, Russia, Germany, Italy and the UK. The principal markets in Latin America includeMexico, Brazil, Venezuela, and the Dominic Republic.
Furthermore, the company’s global presence enabled it to spread its customer base across all theregions. The company derives around 51.4% of its revenue from Europe, Middle East and Africanregion; 38.64% from North America and 9.92% from Latin America and Asia Pacific.
Bacardi’s strong global presence with its wide spread sources of revenues indicates it caters tobusinesses in different parts of the world. This helps in reducing its business risks across variousgeographies.
Weaknesses
Lack of scale
Bacardi lacks the scale to compete with large players in the market. Some of the company'scompetitors are much larger in size in terms of revenues. During FY2009, the company's revenuewere recorded at $4,394 million whereas some of its competitors including Pernod Ricard andDiageo's revenue were E7,203 million ($9,899 million) and £12,283 million (approximately $19,848.5million) respectively, during the same period.The company's competitors have the financial strengthto exert pricing pressure on the company and thus negatively impact its margins.
High debt burden
The company holds a substantial amount of debt. As of March 2009, the total long-term debtoutstanding for the company stood at $2,398.9 million. The company’s long-term debt increased by22% to reach $2398.9 million in FY2009 from $1961.1 million in FY2008. The servicing of this debtis draining its profitability as the interest expenses increased at a rate of 2% from $144.5 million inFY2007 to $151.4 million in FY2009. The company's substantial debt limits its ability to obtainadditional financing to fund capital expenditures for future growth, and also restricts its workingcapital for efficient operations management.
The spirits market has witnessed a steady growth in the international markets. In 2013, the globalspirits market is forecasted to have a value of $230,000 million, an increase of 12% since 2008.Market consumption volume is forecasted to increase at a compounded annual growth rate, CAGR(2008–13) of 4.3% to reach 15,600 million liters in 2013. Bacardi specializes in the manufacture,development and distribution of spirits. A growing spirits market thus provides an opportunity for thecompany to boost revenues.
Positive outlook for the Indian market
The Indian alcoholic drinks market recorded strong growth over the last few years. In 2013, themarket is forecasted to have a value of $23,300 million, an increase of 63.8% since 2008. Themarket's volume is expected to rise to 3,400 million liters, an increase of 50.5% since 2008. Thecompany has a strong presence in India through Bacardi Martini India Limited (BMIL), a (74:26) jointventure between Gemini Distilleries and Bacardi. BMIL has strong brands in India including BacardiBreezer, the largest selling brand in the Ready to Drink (RTD) segment. Furthermore, the companylaunched Bacardi 'O', orange-flavored rum in Bangalore, India in December 2009.The Indian marketshas witnessed a double digit growth in the white spirit market in the recent times, and the introductionof Bacardi O product will help the company further strengthen its portfolio of product offerings inIndia.The company can leverage the growing alcoholic drinks market in India and boost its revenue.
Growing wine market
The wine market is expected to witness strong growth globally.The global wine market is forecastedto grow to $286,000 million in 2013, representing an increase of 10.1% since 2008. Further, in 2013,the market is forecast to have a volume of 22,000 million liters, an increase of 3% since 2008. Bacardihas an array of premium wine brands in its portfolio including Martini Sparkling Wines, Grandi Auguriand Magici Istanti. Hence, it is well positioned to tap the growing consumption of wine in the US andother countries as well.
Threats
Stringent advertising regulations
Alcohol companies have been criticized for the irresponsible portrayal of alcoholic drinks inadvertisements. Especially in the European countries, advertising watchdogs have been comingdown heavily on alcohol advertising, claiming that such advertisements fuel binge drinking. In orderto control this, Most EU countries have imposed legal bans on advertising of spirits on TV and radio;on broadcast advertisements linking alcohol with children, driving, sport or promoting alcohol abuse;
and on sponsorship of TV and radio programs by companies primarily concerned in alcohol production.Such stringent advertisement regulations imposed on manufacturers of alcoholic beverages couldhave a negative impact on the brand image of the company.
Intense competition
The brewing industry is highly competitive and has been witnessing a consolidation phase, as largerplayers are taking the merger and acquisition route to secure brands and market share. Bacardifaces a stiff competition from major global players such Diageo, Pernod Ricard, Fortune Brands andBrown-Forman, each of which has several brands that compete directly with Bacardi. In the spiritssegment Diageo holds market share of 5.8% and Pernod Ricard accounted for 4.9% in FY2009which is reasonably higher than Bacardi.
Intense competition and unanticipated actions by competitors could lead to downward pressure onprices and adversely affect the company's market position.
Increasing labor costs
In recent years, the labor costs are rising in the US and the UK. The tight labor markets increasedovertime, government mandated increases in minimum wages and a higher proportion of full-timeemployees are resulting in an increase in labor costs. The federal minimum wage rate in the US,which remained at $5.15 per hour since 1997 reached $6.55 per hour in 2008, and further increasedto $7.25 per hour in July 2009.The minimum wage in the US is expected to increase further in 2010.Similarly, in the UK, the national minimum wage was increased to £5.8 ($9.4) in October 2009. Inthe UK, the minimum wage had gone up by 60% since the government introduced the minimumwage policy in 1999.The increased labor costs would affect the company's margins as the companyemploys majority of its workforce in the US and the European region.
A Joint statement by Seamus Mcbride, President and chief executive officer and Facundo L. Bacardichairman of the board of Bacardi Limited is given below. The statement has been taken from thecompany’s 2009 annual report.
We are pleased to report that despite the most challenging economic environment in the last fiftyyears, Bacardi Limited has again increased net earnings to a record level. This is an achievementeach of you should be proud of given the extremely difficult year that we faced.
As the US recession spread around the world, all markets began to feel the full effect of a weakeningeconomy and this bought new pressures to our business driving down the volumes across the keybrands and markets in the second half of the year. These volumes declines were caused by acombination of lower depletions and distributors reducing the inventory levels. We were able topartially offset the volume declines with price increases.
However, we believe despite of this challenging environment we can capitalize on our rich history,stand behind our market leading brands and emerge from this recession in stronger shape.We havean energized and dedicated team of employees who will meet the challenges we face, and continueto build on this Company’s great legacy. We would like to share with you our success over this pastyear, and comment on our challenges as we look to the further of Bacardi Limited.
The global economic outlook and its impact on our industry is difficult for anyone to predict. What isclear is that the market for branded consumer products, including alcoholic beverages, remainsextremely challenging. The spirits industry continues to be exposed to overall reductions inconsumption, and premium and super-premium brands remain exposed to the impact of consumerstrading down to less expensive entrants.
We have a great company, and our challenge is to make it even greater. Be assured we will get thatwithout losing our unique historical identity, but rather build upon it as a source of pride, distinction,and inspiration.
We would like to take this opportunity to thank our business partners, employees, executives, directorsand shareholders for their support and confidence over the twelve months.
Bacardi Limited65 Pitts Bay RoadPembroke Hamilton 08BermudaBMUP: 441 295 4345F: 441 292 0562http://www.bacardilimited.com
Other Locations and Subsidiaries
Bacardi-Martini GmbhBacardi-Martini B.V.Handelskai 94-96Groningenweg 8Millennium TowerNLD1200 Wien, Wien AustriaAUT
Bacardi-Martini Danmark A/SBacardi-Martini Asia Pacific LimitedBaltorpbakken 118/F Bank Of East Asia Harbour View Ctr2750 Ballerup, Kobenhavn56 Gloucester RdDNKWan Chai
HKG
Bacardi GmbhBacardi-Martini Ltd.Hindenburgstr 49Church Green Close22297 HamburgKings WorthyDEUWinchester
