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Havana Club rum sales up 15%; EU urges repeal of 211
CubaNews / July-August 2008

By Larry Luxner

Cuba’s Havana Club rum — the focus of a bitter, long-running trademark dispute between French drinks conglomerate Pernod Ricard and the Bacardi family — is more popular than ever.

According to the latest Impact Databank index of the world’s top 100 premium spirits brands, Bacardi ranks No. 2 (right after Diageo’s Smirnoff vodka), with 19.9 million cases in 2007. That’s down 0.5% from the 20.0 million cases sold in 2006. Havana Club, meanwhile, ranks 29th on the Top 100 list, with 3.0 million cases, up 14.9% from the 2.6 million cases sold in 2006. That made it the 12th fastest-growing spirit on the list, in a year when the average growth of the Top 100 was 5.3%.

In 2007, Havana Club outsold the following rums: Pernod Ricard’s Montilla (2.7 million cases); Diageo’s Cacique (1.7 million cases); Bacardi’s Castillo (1.3 million cases); Santa Teresa (1.3 million cases) and Wray & Nephew’s Appleton (1.2 million cases).

Yet Bacardi still sells six times as much rum as Havana Club.

“Bacardi has made a concerted effort to expand upon its enormous base of late, both in the U.S. market — where it’s still holding onto a slim lead over Smirnoff as the top-selling spirits brand — and globally. By linking itself with the popular Mojito cocktail, Bacardi has given itself a high profile among a much-desired audience: young urban professionals,” said Impact.

“But brands like Diageo’s Captain Morgan and Pernod’s formidable one-two punch of Malibu and Havana Club are winning the fight for share in key markets around the world. Those two Pernod brands complement each other effectively. Malibu is particularly strong in the U.S. while Havana Club is embargoed from that market.

“Malibu’s key selling point is flavor, while Havana Club’s is an essence of purity coming from the category’s cradle. Collectively, the duo sold 6.6 million cases in 2007,” according to Impact. “While still more than a million cases shy of Captain Morgan, Malibu and Havana Club are charging hard. Together they added 700,000 cases last year.”

Other rum brands that outranked Havana Club were Diageo’s Captain Morgan (7.8 million cases in 2007, up 7.4% from 2006); Dominican Republic’s Brugal (4.5 million cases, up 1.5% from 2006) and Pernod Ricard’s Malibu (3.6 million cases, up 9% from 2006).

Meanwhile, John Bruton, European Union ambassador to the United States, has called on the Bush administration to resolve outstanding disputes over the ownership of the Havana Club rum trademark in this country.

Inside U.S. Trade reported earlier this year that Congress is split on how to comply with the WTO finding that a clause of appropriations law known as Section 211 of the Omni-bus Appropriations Act of 1998 violated Washington’s most-favored nation and national treatment obligations by applying only to Cuban marks. Bacardi distills rum in Puerto Rico under the Havana Club trademark which it retains in the U.S. thanks to Section 211.

According to Inside U.S. Trade, 211 prohibits U.S. courts from recognizing and enforcing U.S. rights to trademarks related to physical property confiscated by Castro without the consent of the original copyright owner.

In 1997, Bacardi purchased the brand from Jose Arechabala International Ltd., a family business which had produced Havana Club in Cuba until 1960, when Fidel came to power.. Pernod Ricard seeks to repeal the section and allow U.S. courts to hear its case on why it should have the brand in the United States, while Bacardi seeks to expand the section’s language to apply equally to all countries.

Both options are expected to address the panel finding, which did not find 211 in violation of the Agreement on Trade-Related Aspects of Intellectual Property Rights. It only found that Washington was discriminating by applying a measure only to Cuba, and not to the WTO members or to domestic entities.

Sources told Inside U.S. Trade that the Bacardi bills cannot overcome the hurdle of opposition from Senate Judiciary Committee Chairman Patrick Leahy (D-VT), who introduced S. 1806 last year to repeal Section 211.

Leahy issued a statement one year ago up-on introducing his proposal, calling 211 a “most unfortunate piece of legislation” that was “slipped into that appropriations bill at the 11th hour.” He said his bill “will restore the federal courts to their proper position in considering certain trademark issues.”

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