CubaNews / July 2005
By Larry Luxner
Two gregarious New Yorkers with a background in food service think they’ve discovered how to make it big in Cuba.
Brooklyn-born Richard Waltzer, 36, and his business partner, 42-year-old Craig Jacobs, originally from Queens, both drive Hummers and they’re both certified executive chefs.
They’re also co-owners of Fort Lauderdale-based Splash Tropical Drinks, which has sold at least $1 million worth of commodities to Cuban state entity Alimport since late 2002.
That makes Splash one of the very few South Florida companies already profiting from a 2000 law which allows U.S. food exports to Cuba on a cash-only basis.
“Cuba is the best-paying customer for us,” says Jacobs. “They pay faster than any other country we do business with in the Caribbean.”
CubaNews interviewed Waltzer and Jacobs last month at their warehouse, which operates out of a nondescript industrial park that also houses companies like Lucent Technologies, B-Link Florida Ltd. and Sea Aerospace Group.
The two men met around 15 years ago, while they were running separate restaurants within the Ritz Carlton Hotel in Naples, Fla. They decided to start a business in logistical procurement for hotels throughout the Caribbean.
“If you have eight or ten hotels and they’re all using a separate olive oil, the hotels have no real value to a manufacturer,” explained Jacobs, a graduate of the New England Culinary Institute. “But if you get them to all use the same olive oil, then they present a value to the manufacturer, giving you — the hotelier — better leverage.”
Waltzer, who attended New York’s Culinary Institute of America, said “we followed the McDonald’s system of giving customers exactly what they expect every time, predictable quality and consistency.”
Especially when it comes to fruity drinks.
“Throughout our logistical procurement business, we noticed that many hotels in the Caribbean were serving a strawberry daiquiri that consisted of grenadine and lime juice. It was terrible,” said Waltzer. “There was no consistency in flavor. We sat at corporate meetings and asked the hotels, ‘if we can develop a product that’s much better than what you have now, for nearly the same price, would you buy it?’ They said yes.”
That led to the establishment of Splash Tropical Drinks in 1996. Within a few years, the company was landing contracts to supply drink concentrates to Sandals, SuperClubs, Marriott and other all-inclusive resort chains throughout the Caribbean.
Splash also sells to Sysco Food Service, which in turn sells to thousands of distributors across the United States and Puerto Rico.
According to Waltzer, Splash now employs around 200 people and operates two manufacturing facilities: a 10,000-sq-foot plant in Fort Lauderdale, and a 20,000-sq-foot factory in Orlando. Annual revenues are in the “multimillions of dollars,” though Waltzer declines to be more specific.
Considering its extensive footprint throughout the Caribbean, it was only a matter of time before Splash awoke to the Cuba potential. Waltzer’s first trip to Havana was back in September 2002, when Connecticut trade show organizer Peter Nathan put together the first-ever U.S. Food & Agribusiness Exhibi-tion in Havana.
“I flew down, set up a booth at the show and wound up getting a contract with Alimport,” said Waltzer. “After the show, for the next year or two, I kept going down there, developing a business relationship with Alimport.”
That groundbreaking event was made possible by the Trade Sanctions Reform and Ex-port Enhancement Act of 2000 (TSRA) which allows U.S. agricultural sales to Cuba on a cash-only basis.
TSRA, as the law is known, was essentially a humanitarian gesture aimed at helping Cuba’s 11.2 million people recover from the effects of Hurricane Michelle.
Yet in a twist of irony, that same loophole in the embargo also allowed companies like Splash to begin selling food items to the Cuban government that would largely benefit Cuba’s tourism industry.
“I’m an American businessman exporting capitalism and helping our export deficit and our U.S. economy,” Waltzer boasted shortly after getting his first deal with Alimport (CubaNews, December 2003, page 7). Since then, Alimport CEO Pedro Alvarez and his deputies have contracted for over $1 million worth of Splash products.
The two men have since been to Cuba over 50 times, though Jacobs says they’re extremely careful to abide by the laws of both countries — and to not run afoul of regulations set by the Treasury Department’s Office of Foreign Assets Control.
Each year, we provide OFAC with a synop-sis of every trip we take, where we went, who we saw. We only spend money to help further the marketing of our product,” said Jacobs. “OFAC knows us very well. They call us the foremost experts on doing business in Cuba.”
About 75% of that business consists of tropical drinks, which are available in a variety of flavors including piña colada, strawberry daiquiri, mango daiquiri, margarita, banana daiquiri and blue lemonade.
One container of Splash frozen concentrate contains 1,200 cases, and a case — which costs Alimport around $60 apiece — contains six half-gallon plastic jugs of concentrate made from an all-natural, fresh fruit base.
One jug of concentrate is enough to make 64 drinks. Those drinks sell for $2.00 to $3.00 or more at hotels such as Havana’s Sol Meliá Cohiba, the Hotel Nacional and dozens of establishments along the Varadero beach hotel strip.
“We manufacture and sell a very cost-effective product that streamlines our operational procedures,” Waltzer told CubaNews. “It’s in a concentrate form so the customer doesn’t need to use as much of it as with fresh fruit. It’s not as messy, and there’s no waste or spoilage. It’s shelf-stable.”
At the company’s Fort Lauderdale warehouse, Splash products are loaded onto pallets and trucked to nearby Port Everglades. From there, Crowley transports the containers to Havana, where they arrive a day and a half later. Jacobs says the short transit time means Alimport doesn’t have to hold as much inventory, which is a big plus.
Getting paid isn’t an issue, and neither is OFAC’s recent ruling that U.S. companies must use letters of credit in order to satisfy the “payment in advance” requirement.
“As long as we’re getting paid, there’s no issue,” said Waltzer, lavishing praise on Alimport’s Pedro Alvarez and his team.
“They’re very shrewd negotiators,” he said. “They’re absolutely professional, some of the most professional people we’ve ever dealt with. The Cubans know exactly what they want, and how much they want to pay for it.”
Asked how Cuba compares to Jamaica, Grand Cayman and other Splash customers in terms of volume, Waltzer said “Cuba is probably somewhere in the middle, but its potential is probably greater than the rest of the Caribbean combined.”
He insisted that only a handful of the 250 or so U.S. companies which exhibited at the 2002 food show in Havana are still doing business with Cuba on a regular basis.
“We’ve been there from the very beginning, and obviously those companies which have stuck by them will get preferential treatment because you’re showing your loyalty.”
That loyalty could certainly help Splash as it starts expanding into other food products that have nothing to do with tropical drinks.
“The tourism market is a very small percentage of what we’re doing because there’s a whole world of products that the Cuban people need. That’s really what we’re targeting now,” said Jacobs.
He pointed out that Cuba’s Ministry of Food (Minal) manufactures yogurt, soymilk, sardines, popcorn kernels, peanut butter and spices. These products end up at supermarkets run by Cimex and other state entities.
Cuba subsidizes yogurt every day to kids in school. We’ve been working on [that contract] for some time. Also, you have to earn a relationship with these companies to find out what they need on a month-to-month basis. We have a doctor on our staff and we’re trying to open up medical sales to Cuba.”
Things Cuba specifically needs — which are allowed under TSRA — include fruit purées, colorings, flavorings, vitamins and sugar derivatives. Other products are out of the question, like PVC resins and flashlight batteries, but they won’t be off-limits forever.
“These things we’re not allowed to sell, so we just take note of it,” said Jacobs. “People like us who put in time and effort, and have forged relationships without any financial gain for many years, will be first in line when Cuba opens up.”
In the meantime, Splash has acted as a consultant to other U.S. firms hoping to crack the Cuban market — not always an easy task.
Said Jacobs: “We field calls [from companies] all the time, but we’re not a guided travel operation. We find that brokering products into Cuba is a difficult task in itself. You need to be the manufacturer of the product.”
Several years ago, Splash hinted that it had reached a preliminary agreement with Havana Club International S.A. — a 50-50 venture between French drinks giant Pernod Ricard and the Cuban government — to help market Havana Club rum throughout Cuba. No deal was ever reached, though the company has done business with Cubalse, Minal, Cimex, Habaguanex and other state entities.
Waltzer said Slash products are now available at “100 to 200 points of sale” throughout Cuba, including the Hotel Habana Libre, the Restaurante El Patio and Ambos Mundos in Old Havana, the Jazz Café in Vedado and at SuperClubs in Varadero.
In December 2003, when CubaNews asked the company’s former Cuba sales rep, Bob Guilmartin, what Splash’s ultimate goal was, he responded: “To expand into virtually every single outlet possible, from all-inclusive and boutique hotels to restaurants and cafeterias.”
That’s still the company’s goal, yet even Jacobs admits it’s unlikely that Splash daiquiri mix will ever be used by bartenders at El Bodeguita del Medio or La Floridita — Ernest Hemingway’s favorite Havana watering holes.
“Floridita makes its daiquiris from scratch,” he said. “You’re talking about two of the most classic daiquiri joints in Cuba. They’re not gonna change. That would be blasphemy.”