Bacardi and the Long Fight for Cuba

by Gjelten, Tom

The Bacardis had supported previous Cuban revolutions, but the events of 1933 presented a new political challenge. Earlier that year, Bacardi workers had organized as the Sindicato de Obreros y Empleados de la Empresa Bacardi (Union of Bacardi Workers and Employees) and affiliated with the Communist-led Confederación Nacional Obrera de Cuba (CNOC), National Labor Confederation of Cuba. On August 15, three days after Machado fled Cuba, the Bacardi workers went on strike in order “to demand our rights.” Though the union raised issues related to wages and working conditions, the action was more a reflection of the general mood of labor militancy in Cuba than of dissatisfaction at the rum company. For years, Bacardi had been a progressive if somewhat paternalistic employer, providing benefits to its workers far beyond those required under Cuban law, including retirement and sick pay, an eight-hour workday, housing loans, and profit sharing. The Bacardi workers had seen no need to organize a union, much less go on strike. The new Bacardi union leadership, however, was more ideological in its orientation, reflecting its Communist affiliation. A flyer distributed by the Santiago labor federation to which the Bacardi union belonged explained that workers in the city “have seen the importance of a ‘single front’ of the exploited and the oppressed against the exploiters and the oppressors.”

  The news that the Bacardi workers had gone on strike reached Enrique Schueg by cablegram in Havana. He angrily wired the company’s general manager, Pedro Lay, warning that he would not accept any “union imposition.” Lay, however, believed an accommodation was possible, and he informed the union leaders that Schueg had agreed to return early from Havana “for the purpose of studying and dealing with the issues raised... on August 15.” He asked the union representatives to meet with Schueg as soon as he arrived, and a fairly routine negotiation ensued. Schueg, having calmed down, presented a point-by-point counteroffer to the union’s demands and made a written plea for labor-management harmony—for Cuba’s sake.

  “In this critical hour,” he said, “when the Nation rises vigorously after being eclipsed by a despotic and horrible governmental regime, we believe that all members of this industry... should put aside an attitude of intransigence and violence.” He told the Bacardi workers that “the desire for insane profits has never been part of our approach,” and he attributed the disruption of fraternal labor-management relations to “error” on both sides. Nine days later, they reached an accord. The Bacardi management agreed to recognize the CNOC-linked union, the union moderated its wage demands, and a new labor contract was signed. “The Bacardi Company reconsidered and went back to its roots,” the union leaders announced, “finding there the productive force of those workers and directors who made it worthy, within Cuban industry, of being first in the Universe.”

  Other labor conflicts in the country were not resolved so amicably. Sugar workers seized control of sugar mills and called for socialist revolution. They were joined by tobacco workers in western Cuba, dockworkers in Havana, and coffee workers in eastern Cuba. The unrest even spread to Cuban military bases. In early September, a thirty-two-year-old army clerk named Fulgencio Batista and some of his fellow soldiers took control of Camp Columbia outside Havana in order to press their demands for better pay and housing. The students and labor leaders who were behind the larger movement recognized a political opportunity and joined forces with the dissident soldiers in a “coalition of convenience,” and what had started as a simple episode of military insubordination turned into a full-fledged military coup. Carlos Manuel de Céspedes Jr. was deposed as president and replaced by Ramón Grau San Martín, a university professor allied with the students and their revolutionary allies. Grau announced that his government would abrogate the Platt Amendment, enact woman suffrage, and mandate such labor reforms as a minimum wage, an eight-hour day, and binding arbitration.

  The U.S. ambassador to Cuba, Sumner Welles, warned his State Department superiors that some members of Grau’s team were “frankly Communistic.” At Welles’s urging, Washington chose not to recognize the new government, concluding that Grau’s quasi-socialist agenda and nationalist ideas represented a threat to U.S. economic and political interests in Cuba. The Grau government had actually taken steps to curb Communist influence in the country’s trade union leadership, even while following a generally prolabor program and opposing the role of foreign capital in the Cuban economy. Nationalism and non-Marxist socialism were the guiding ideologies. Welles, however, was uncomfortable with the revolutionary passion that infused the new Cuban government and began working behind the scenes to undermine Grau, in a manner reminiscent of the efforts of Leonard Wood thirty years earlier to block the movement for Cuban independence and universal male suffrage.

  Welles chose to work with the army sergeant Fulgencio Batista, who in the aftermath of the military coup had managed to get himself appointed commander-in-chief of the Cuban armed forces. Believing that Batista could bring order and stability to Cuba, Welles openly encouraged him to conspire against Grau, and in January 1934 Batista informed Grau that the army was against him. He first arranged for Grau to be replaced by his agriculture secretary, Carlos Hevia, Pepín Bosch’s coconspirator in the Gibara attempt, but two days later Batista installed former president Carlos Mendieta (also a Gibara conspirator) in office. Within a week, the United States officially recognized the Mendieta government, having refused to do so with the Grau government through its four-month term. Mendieta was followed over the next five years by three other puppet presidents, all of them beholden to Batista.

  The student and worker groups who had opposed Machado and then aligned with Ramón Grau went back into the opposition. Antonio Guiteras, Grau’s interior minister and the man who had drafted his ambitious social and economic reform program, attempted to organize an armed insurrection but was hunted down and killed by pro-Batista security forces. Other Grau supporters formed a new political party, the Partido Revolucionario Cubano (Auténtico), the “authentic” reincarnation of José Martí’s Cuban Revolutionary Party. Historians later viewed the abortive 1933 struggle as an “unfinished” or “frustrated” revolution that presaged Fidel Castro’s own revolutionary movement in the 1950s. One measure of the popularity of Grau’s reform program is that the Batista-backed governments that followed him eventually adopted many of his prolabor and nationalist proposals. The Platt Amendment was abrogated, Cuban economic and commercial interests were given preference over foreign ones, and social welfare spending rose. Washington did not object, because Batista’s military kept the country under tight control and was supportive of U.S. security interests. The Cuban students and workers who had spearheaded the revolutionary movement were disillusioned, however, and their pent-up anger fueled another insurrection two decades later.

  The struggle of 1933 differed from the Cuban revolutions of the nineteenth century in that the adversaries were divided more by social class than by nationality. It was mostly a fight over how to distribute wealth and organize Cuban society. For the Bacardi family business, the old commitment to the Cuban national cause was becoming more complicated. What did it mean in 1933, when the Bacardi unions were under Communist leadership and the company was a private capitalist enterprise?

  And yet the parties reached an accord. When the union representing Bacardi office workers drew up its founding statutes, it offered remarkably complimentary words for the company management, even while affirming its own Marxist ideology:Although we know the capitalist class is always antagonistic in its relations with the proletariat, ... we recognize that the Bacardi Rum Company of Santiago de Cuba, making an exception to the rule, has always maintained the most cordial and friendly relations with its employees, to whom it has been most considerate, in spite of their being undefended and without protection by virtue of not having a union. [emphasis added]

  The union’s words went to the core of the Bacardi ideal. From the company’s earliest days, the Bacardis wanted their enterprise to be “an exception to the rule” that private firms serve only their pecuniary interests an
d not those of their community or nation. But rules are rules, and exceptions don’t last forever. The Bacardi leadership was to be tested again and again.

  Chapter 10

  The Empire Builder

  Cubans might not have been able to live without their rum, but Bacardi boss Enrique Schueg should have known that Mexicans were tequila drinkers; the national plant was maguey, not sugarcane. Businessmen with a taste for imported spirits preferred brandy or Scotch. Mexican women generally didn’t drink, and sales to visiting Americans did not materialize the way Schueg had expected. The new Bacardi rum factory in Mexico City generated sales of only about forty thousand dollars in 1931, not nearly enough to justify the company’s investment. And 1932 was no better.

  After the sudden death of Pepe Bacardi in May 1933, Schueg sent Pepe’s Harvard-educated brother Joaquín to Mexico to assess the company operation. Prohibition was likely to be lifted in the United States before the end of the year, meaning U.S. citizens would have no more need to go south of the border to purchase liquor. Seeing little prospect of a turnaround, Joaquín recommended that the company cut its losses and close the Mexico facility. Reluctantly, Schueg agreed, deeply disappointed that his first major rum production venture outside Cuba had failed.

  On an impulse, he asked José “Pepín” Bosch, his daughter Enriqueta’s husband, to take charge of shutting down the Mexican operation. After the failure of the 1931 Gibara uprising, Bosch had been a marked man in Cuba, and he had moved with Enriqueta and their two young boys to Boston, where Enriqueta’s sister Lucía lived and where the young family would be beyond the reach of President Machado’s murderous thugs. Schueg visited his daughters and their husbands during a trip to the United States in 1933 and found Bosch with little to occupy his time. It occurred to him that his son-in-law’s business and banking experience and his strong backbone made him ideal for the Mexico assignment. “You’re not doing anything,” Schueg told him. “Why don’t you go to Mexico and help us sell off the business?”

  Bosch was a proud and stubborn man, and since his 1922 marriage to Enriqueta he had refused all job offers from his Bacardi in-laws. The assignment to oversee the Bacardi liquidation in Mexico, however, appealed to him in a way previous opportunities had not: Here was a chance to work independently in a new setting, using his own instincts and business judgment in a position of major responsibility. He immediately agreed to go, beginning a career with Bacardi that would span more than four decades and establish him as a pivotal figure in the company’s development and in Cuba’s modern business history.

  Pepín Bosch acquired his self-confidence and enterprising vision partly from his father, who immigrated to Cuba from Spain at the age of thirteen and worked his way up through a series of jobs to become one of the leading businessmen in Santiago. José Bosch Sr. was president of the Chamber of Commerce, a founder of the local hospital, an original partner in the electric and streetcar utilities in Santiago, and a major real estate developer. Young Pepín attended the best schools in Cuba, and his father sent him to the United States to attend prep school and college. After getting his high school diploma at the age of fifteen, Bosch enrolled at Lehigh University in Pennsylvania, but he dropped out before the end of his first year. “I was a bum student,” he said later; “too much money and too much good time.” He worked for the next two years at low-paying, undemanding jobs in New York until his father grew tired of sending him an allowance and called him home to help in the family sugar business. In Cuba, Bosch promptly showed he had inherited his father’s business skills, and within three years he had saved a small fortune from his share of the sugar profits. The money only reinforced his determination to be independent, however, and he resolved from then on to chart his own career path.

  Bosch had never been afraid to express maverick views, and in accepting the Bacardi Mexico assignment at the age of thirty-six, he told his father-in-law he would like to draw his own conclusions about what should be done there. At the National City Bank in Havana, he had worked in the collections department, deciding which business loans to cancel and which to extend, and the job gave him valuable experience assessing a company’s business prospects. In Mexico he decided it was premature to give up on the rum-making operation. Noticing that Mexicans drank a lot of Coca-Cola, Bosch proposed a bigger emphasis on the promotion of Bacardi-and-Coke cocktails. He also figured that Mexicans, with their rich handicrafts tradition, would be more inclined to buy rum in wicker-covered jugs, the way it was often sold in Cuba. Schueg was intrigued by his son-in-law’s suggestions and approved a bigger Mexico advertising budget. By December 1934, Bosch had turned the operation entirely around, doubling rum sales and paying off the Mexico debts.

  Delighted by his son-in-law’s performance, Schueg offered him another, even more challenging, assignment. While Bosch was in Mexico, Prohibition had been repealed. The vast U.S. liquor market was once again open to Bacardi and other producers, a commercial opportunity like no other. In the months preceding Repeal, industry analysts had predicted that U.S. drinkers would consume two hundred million gallons a year when they could buy liquor freely again. With the domestic supply depleted after fourteen dry years, imported spirits would have a huge share of the liquor business. If Bacardi were to break into the top rank of global spirits producers, it would need to establish a big U.S. presence. U.S. sales in the first year after Repeal, however, had fallen a bit short of expectations, and by the end of 1934, Schueg was looking for ideas to invigorate the American marketing. After seeing how he turned around the Bacardi operation in Mexico, Enrique Schueg figured Bosch could help the company even more by taking charge of the U.S. business, and Bosch agreed to give it a try.

  The U.S. liquor business had become highly complicated. In order to address the overly aggressive alcohol marketing that had spurred the Prohibition movement, the U.S. Congress conditioned the relegalization of the alcohol trade on its stringent regulation. The industry was put generally under the control of state governments (leaving individual states free to remain “dry” if they so wished), though with guidelines established under the Federal Alcohol Administration Act. A three-tier distribution system was established: Distilling companies and other alcohol manufacturers could sell their products only to wholesale distributors, who then sold to retail outlets. State authorities enforced strict separation between each tier, thus ensuring that alcohol sales could be closely monitored and efficiently taxed. For Bacardi and other foreign liquor companies, there was an additional complication: They could sell only to a wholesaler with an importing license.

  Competition among the importers for the Bacardi contract had been intense. As many as forty thousand cases of Bacardi rum made their way annually into the United States during the Prohibition period, more even than in the years when the trade was legal, and the widespread sale of fake “Bacardi” only made the brand more famous. “For the plump hand of the House of Bacardi there have been many suitors in the past six months,” Time magazine reported in the fall of 1933. “At one time or another nearly every U.S. liquorman has pleaded for the exclusive right to market Cuba’s rum after Repeal.” Enrique Schueg himself traveled to New York in October 1933 to select a sales partner. In the end, he chose an importing subsidiary of the Schenley Distillers Corporation, a Pennsylvania-based house with deep roots in the whiskey business. Schenley also landed importing deals for French champagne, wines, and vermouth, Spanish ports and sherries, Italian Chianti, and Dubonnet, making it one of the major importers in the post-Prohibition period. Under the arrangement, Bacardi would sell its rum to the Schenley subsidiary, which would see to its distribution in bars, package stores, and other retail outlets across the country. Schueg sealed the deal with Schenley president Harold Jacobi, and as the papers were signed before a crowd of reporters, Jacobi ordered that a bottle of Bacardi be brought out for display. As it was passed around, Schueg noticed to his amusement that the “Bacardi” was a bootleg product with a counterfeit label.

  Some liquor
importers, in their eagerness to land the Bacardi rum contract, had boasted they could guarantee sales of up to a half million cases per year, a figure no Bacardi executive considered credible. Schenley contracted to import just one hundred thousand cases for 1934 and of that managed to sell only eighty thousand. Economically squeezed by the Depression, Americans had cut back sharply on their liquor consumption. By the time Bosch showed up in New York in early 1935, sales were still stagnant. He went to work at the Bacardi office in the Chrysler Building alongside William J. Dorion, another Bacardi son-in-law whom Schueg had previously appointed as the company representative in the United States. Dorion, who had married Emilio Bacardi’s daughter Adelaida (“Lalita”), continued to manage some U.S. affairs for the company, but Bosch was the new man in charge.

  His first contribution was to promote the cocktails that had made Bacardi famous a decade earlier among U.S. tourists in Cuba. A former American bartender at Sloppy Joe’s in Havana, Jack Doyle, was put to work mixing daiquiris and Cuba libres at the Schenley company bar in Manhattan, while traveling salesmen were given portable bars, so they could teach bartenders around the country how to make proper Bacardi cocktails. Enrique Schueg, however, was interested in more than his son-in-law’s clever marketing ideas. For the venerable industrialist, the significance of Pepín Bosch’s achievement in Mexico was that it demonstrated what he had long argued: that Bacardi rum could be produced successfully outside Cuba. The white-haired, bespectacled man who deserved most of the credit for Bacardi’s growth over the previous three decades still saw expansion as the key to the company’s future. The company would be better positioned to compete internationally if its production were not restricted to Cuba. Mexico had been a test case. Schueg now wanted Pepín Bosch to explore the possibility of producing Bacardi rum on U.S. territory, for sale in the States. In 1934 the U.S. import duty on Cuban rum had been lowered from $4 to $2.50 a gallon (compared to a duty of $5 a gallon on other imported spirits), but even the lowered tariff left Bacardi rum at a disadvantage in comparison to spirits produced domestically. With a factory in the United States, Bacardi could compete with U.S.-made bourbon and gin. Even before he sent Pepín Bosch to New York, Schueg had laid the legal groundwork for a U.S.-based facility, establishing the Bacardi Corporation of America in Philadelphia.