Dolan unveils ‘Mike Tyson’ business methods

Mike Dolan has made some bold, if controversial, decisions as the new head of Bacardi. He tells SB why he believes his ‘Mike Tyson approach’ to business will put the group back on top.

Mike Dolan was named permanent CEO of Bacardi at the start of last year

*This article was first published in the September 2015 issue of The Spirits Business magazine

A tidal wave of change has swept across the world’s largest privately held drinks group, Bacardi, in the last year. Acquisitions in completely new spirits categories have been made, the firm’s advertising and marketing business has been entirely restructured, and a number of key executives have unceremoniously announced their departures. All of this has occurred at the same time as Bacardi reaches a critical point in its premiumisation trajectory, and while sales of its core rum expression continue to plummet. It can’t be easy to be the person calling the shots at the 150-year-old company – indeed, the group has seen four chief executives come and go in the past decade alone.

But the indefatigably confident Mike Dolan believes he is just the man to turn its fortunes around. After sitting on the Bermuda-based group’s board for six years, Dolan left the media, sports and fashion management company IMG Worldwide to act as Bacardi’s interim CEO in May last year, as previous incumbent Ed Shirley retired following a short stint of just two years in the role. He was then named permanent CEO in January and in the months that ensued implemented the most extensive string of structural changes seen in the firm’s modern history.

“One of the things we should have done as a company was be bolder about change, and that’s certainly one of the lessons I have taken away from my predecessors,” says Dolan candidly. “In my experience, if you are going to change something, you need to do big change, particularly if the stakes are high. And that’s what we have done, because we are in this to win.”

Streamlining business

Dolan set about putting his philosophy into practice by streamlining Bacardi’s global advertising business in April this year, appointing BBDO Worldwide and OMD Worldwide – both part of Omnicom Group – to handle its entire publicity, media and digital operations.

“During my deep dive into Bacardi as CEO, what struck me was we had way too many agency relationships – it was very fragmented and it was too difficult for us to communicate across geographies,” he claims. “So we took a sword and made dramatic change. We went from literally hundreds of agencies to one major agency relationship, and that was an important landmark. The company had never done that before.”

In order to “match up” with this new agency internally at Bacardi, Dolan made the radical decision to restructure its own marketing division by creating two “Centres of Excellence”, one based in North America and another in Europe. Each centre is headed by a chief marketing officer who reports directly to Dolan on the group’s global brands, and to regional presidents with regards to local labels. The North America CMO is also “global lead” for Bacardi and Grey Goose, while the CMO of Europe is “global lead” for Martini, Dewar’s, William Lawson’s and Bombay Sapphire. Dolan, who claims that he is now “effectively global CMO”, stresses that the new structure “eliminates” a gap between the group’s global and local levels and “gets resources closer to the field”. He adds: “That’s not to say we are in any way moving away from managing these brands as global brands, in fact it’s just the opposite. We want to manage these brands in a way where we have a complete link right down to store level.”

Sales of Bacardi rum have been in decline for a number of years

Executive resignations

However, for some, the change was all too much. Dmitry “Dima” Ivanov left the group at the same time as the restructure was announced, less than six months after being appointed global CMO. Dolan says that while the role had been “redefined” under the new structure, he offered Ivanov a “great opportunity” that he “chose not to take”. “I was very sorry to see Dima leave,” says Dolan. “But in life things like this happen, and he had a difficult choice.”

Ivanov is not the first top executive to quit the group in the past year. Far from it; Bacardi’s North America president, global CFO, European president and other regional heads have all stepped down from their roles. When asked whether some key figures left Bacardi as a direct consequence of its dramatic changes, Dolan leaves no room for ambiguity: “Oh for sure. In some cases these were people we were glad to see go, in others we were really sad to see them go. There are going to be many people who say they prefer the old world, working with hundreds of different agencies, and they are going to have to go. I want to make it black and white; you need to be on the team, fully committed, and committed to great work. Those who aren’t should go and work for an insurance company.”

Among Bacardi’s critics is the former president of its Canadian business, Rob McPherson, who penned a scathing open letter addressed to the firm’s chairman Facundo L. Bacardi on his LinkedIn page. McPherson claimed that while he “thoroughly enjoyed” his nine years at the group, it needs to address “fundamental issues” before it “falls off a business cliff”, adding that Bacardi has failed to form an “area of competitive advantage” and “acts with passion without direction”.

‘Wrenching change’

In response to the letter, Dolan says, coolly: “Welcome to the world of social media. Everyone has a podium and can get on a soapbox – and God bless them, I think they should. But there were individuals, and I am not saying he [McPherson] was one of them, that were part-and-parcel of the problem, offering small change and small ideas that did nothing.” Despite a frosty reception among some executives, Dolan insists that his big ideas for “wrenching change” have been “totally supported” by the Bacardi family board members. “Our issue was not the board or the family,” he says, “it was with management. We were our own worst enemy.”

Central to Dolan’s vision is linking Bacardi with other industries, or “verticals”, namely music, fashion and sport. The group appointed former IMG Worldwide executive Akiko Maeda to the new role of vice president of fashion and hired a number of “experts” to enhance the presence of Bacardi’s brands in each of these respective fields. It even hosted one of the world’s most elaborate gigs last October, flying up to 1,800 guests to a party on a private island in the Bermuda triangle, where stars including Calvin Harris, Ellie Goulding and Kendrick Lemar took to the stage.

This gig, described as “the biggest brand experience Bacardi has ever held”, grabbed headlines around the world. Somewhat inconveniently for the firm’s PR, it also took place just six months before Bacardi confirmed it had axed 10% of its North American workforce. In hindsight, would Dolan hold such an extravagant event in what was perceived as a time of economic difficulty? “In many regards it was dead on and achieved what we wanted to, in others there were many lessons we have taken away,” he admits. “We could have done things better and been a bit more thoughtful. But when we do more on music, which we will, we will take this as a learning curve and apply it better next time.”

Bacardi’s party in the Bermuda triangle was one of the world’s most elaborate gigs

‘List of woes’

As a privately held company, Bacardi is not required to make its finances public. So when news of these cuts was leaked to the US media, it offered interesting insight into the organisation’s latest fiscal performance and market challenges. In line with other drinks giants, it seems 2014/15 has been a tough trading period for Bacardi too. “I could give you a list of woes,” says Dolan frankly. “The currency issue has clearly affected us, as it has done everyone who operates in Russia, same in Venezuela. And those are two very important markets for us. But we are doing fine. We are strong and have all the capital we need.”

In a recent spate of acquisitions this year, Bacardi has put this capital to good use, entering two new spirits sectors. The group made its first much-anticipated foray into Bourbon with the acquisition of Louisville-based Angel’s Share Brands, its subsidiary the Louisville Distilling Co. (LDC), and the Angel’s Envy Bourbon brand in March. It then purchased super-premium Banks Rum and entered the cachaça category with the takeover of Leblon in July. In the middle of this, the company also upped its presence in Scotch with a minority stake in independent whisky bottler, Compass Box.

Were these transactions also part of Dolan’s master plan? “In the world of deals, it’s often not your own timing, it’s the timing of other people as well,” he claims. “So you do the deal when the deal is doable.” He also concedes that while this is an unusually high number of acquisitions in a small space of time, the brands will not be integrated into Bacardi’s wider portfolio and will be run as bolt-on businesses. “We want them to do exactly what they’ve been doing, which is grow like wildfire. We will support them with the resources they need, but the intention was not to try and integrate them into the company in the short or mid-term.”

Core brand decline

At the same time as broadening its portfolio, Bacardi has continued to diversify the premium selections of its namesake rum; expanding the availability of its Facundo sipping collection, launching super-premium white rum Bacardi Gran Reserva Masetro de Ron and most recently the Single Cane Estate Rums range. Yet despite this focus on innovation, sales of the core Bacardi rum expression have failed to return to growth after three years of declines, with volumes falling by 5% to 18.2m cases in 2014. As such, the brand has lost its title as the world’s best-selling rum to India’s McDowell’s No. 1 Celebration. Looking at what has gone wrong for the brand, Dolan states: “I think the brand deserves better marketing. It deserves more talented people as our agency partners to develop great communication. But I think we are starting to get our ducks in a row.”

Dolan’s hardline, uncompromising approach to implementing radical change at Bacardi may not have been fully embraced by all. But it’s clear that in order to inject new life into the group’s rum and simultaneously broaden its portfolio an ambitious outlook is imperative. “I subscribe to the Mike Tyson school of thought,” concludes Dolan. “Tyson said, ‘everyone starts with a strategy until they get punched in the face’. But then you have adapt and be quick on your feet.” Time will tell if this attitude can give Bacardi the heavyweight title Dolan so desperately wants.