Bacardi ruled out the threat of mitigating alcohol consumption and shows that despite the darkness permeated into the spirit sector, there is no plan to pursue asset handling.
Ignacio “Nacho” Delvare, head of Bacardi Europe and Latin America and a member of the Bacardi dynasty, who has the role of the most senior executive in the business, said he does not believe the alcohol industry is in a structural decline.
“Consumer trends change, but the data there doesn’t verify that we’re adjusting (whatever) beyond the cycle,” Delvare said, referring to analysts’ research linking slower alcohol sales to a weaker macroeconomic situation.
His comments have raised concerns as moderation, health concerns, cannabis use and online socialisation are driving structural decline. Like its rival, Bermuda-based Bacardi has struggled with declining sales since the pandemic’s surge when consumers splashed into high-end liquor during lockdown.
Bacardi was burned in 1862 by Cuba in Cuba by Massas Bacardi Macardi Charetto/Bloomberg in Santiago de Cuba
According to the latest available figures issued by rating agency Fitch, they own brands that Bacardi Lamb owns, including Martini, Gray Goose Vodka, Patron Tequila and Bombay Sapphire Gin. Sales in North America, which accounts for about half of the group’s revenue, fell by medium to high single digits.
Large competitors and Pernod Ricard reported a decline in sales of 1.4% and 1% in 2024, respectively, while Diageo’s North American sales fell by 2%.
Recommended
Delval showed Bacardi has no plans to offload the brand, unlike Diageo, who reviews its portfolio and checks its portfolio to reduce leverage. “I’ve been in Bacardi for 29 years now, and I’ve never had a conversation about sales,” Del Valle said.
“It could hurt others, not us,” he said of the pressure on the industry. Bacardi is privately owned and deduces that there is no need to take dramatic measures in the recession to appease investors.
“I know there’s a bad cycle today, but I’ll do nothing wrong today to survive until tomorrow,” Delvare said. “Others may need to report something in a way that might take a shortcut, but we don’t.”
Diageo announced its $500 million cost-cutting program last month, saying it is considering major disposal three months after its medium-term growth target was scrapped. This month, Remy Cointrow abandoned its 2030 sales growth target, with stock prices falling 18% after reporting worse than expected results.
After raising the interests of Tealing Whiskey and Iligal Mezcal, Bacardi has accumulated substantial debt over the past two years, making it significantly higher than its target.
Del Val says there are still opportunities for “premium” growth while consumers ease alcohol consumption © Rob Kim/Getty Images for Nycwff
Fitch’s latest forecast shows that earnings before interest, tax, depreciation and amortization are around $1.2 billion, and are expected to rise to $1.3 billion by 2026.
According to Fitch, the company had net debt of $5.16 billion as of the end of March 2024, 3.2 times its revenues compared to its 3x long-term target, 4.3 times its revenues, compared to its 3x long-term target.
Del Val said the group is not aiming for further acquisitions.
“I think there’s something we need when it comes to portfolios, but we’re always keeping an eye on innovation,” he said.
Del Val said this is what he described as a growth of a lesser but more expensive spirit that drinkers drink while consumers ease their alcohol consumption and what he described as a transition to daytime drinking.
The group has jumped on the trends in spritz, with St. German Elderflower Liqueur, used in “Hugo” spritz and “Hugo” spritz, used in Vermouth spritz, and has also entered the burgeoning ready-made category with cans of baccardo and cans of cola.
Berkshire Bombay Sapphire Distillery. Like Bacardi Lamb, the group owns brands such as Martini, Gray Goose Vodka, Patron Tequila, and Bombay Sapphire Gin © Gareth Ivan Jones/ft
Bacardi was founded in 1862 in Santiago de Cuba by Don Facundo Bacardi Masam, who built the company’s first rum distillery. For the years leading up to the Fidel Castro revolution, the family began moving trademarks and production from Cuba.
The remaining assets of the company were expropriated by the Castro government in 1960. Five years later, they established a new headquarters in Bermuda, where the group is still based.
Del Valle, like the longtime chair Facundo Bacardi, is the great grandson of the company’s founder. According to analysts and people familiar with the company, he is in a strong position to ultimately run the group. The group’s chief executive is Maheshmadhavan, who took on the role in 2017.
He said Bacardi had surpassed that weight. “Our brands have a big global footprint, so it’s a small company that is considered a big company,” he said. “We’re against the Giants, so we’re going bold.” The company employs 8,000 people worldwide, but nearly 30,000 at Diageo and 20,000 at Pernod Ricard.
Delval added that he has put today’s challenges in sight by talking to his older relatives about past crises that have weathered the company, including the expropriation of Cuban assets.
“Are we living in difficult times? Maybe there are adversity. Maybe there are some challenges, but we’re continuing to grow.”
