Mahesh Madhavan lays out vision for Bacardi’s future

In his first interview as CEO of the world’s largest independent spirits firm, Bacardi’s Mahesh Madhavan tells The Spirits Business why the next 10 years will be the company’s best.

Mahesh Madhavan was appointed Bacardi CEO in October 2017

*This feature was originally published in the August issue of The Spirits Business magazine. 

“My surname is not Bacardi, but I feel that this is my company and I run it as if it were my own. It’s been a wonderful ride,” Mahesh Madhavan says of his appointment as chief executive officer of Bacardi after spending 21 years with the independent spirits firm. “Not once in my wildest dreams did I think that I would become CEO. I have always done my job, concentrated on doing it well, and what I know I do well is building brands and getting the best out of people.”

Born in Chennai, India, Madhavan started his career as an engineer, building warships for the navy, before completing an MBA and moving into the consumer goods industry. His drinks journey began at International Distillers & Vintners and progressed to Bacardi, which he joined in 1997 as India’s general manager for marketing. It was an exciting time for the fast-­growing business, whose namesake rum had just overtaken Smirnoff to become the world’s best­selling international spirit brand.

Over the years, Madhavan was promoted to senior roles throughout the business, moving to various regions and subsidiaries. According to the executive, he has always sought an intimate understanding of each department he worked in. In his previous position as Bacardi’s president of Europe, Madhavan even took to joining the sales team on the road to “understand and observe what they do, listen to what they have to say about the company and the challenges they face”.

Last October, Madhavan became CEO, taking over from Mike Dolan – who, in an interview with The Spirits Business in 2015, extolled the virtues of a “Mike Tyson school of thought” in business.

WRENCHING CHANGE

Dolan became interim CEO of Bacardi in May 2014 – a position that later became permanent – and in his tenure implemented, by his own admission, “wrenching change” throughout the business. One of the biggest transformations was the condensation of Bacardi’s global advertising business into one “major agency relationship” with Omnicom Group. Under Dolan, Bacardi then completely restructured its marketing division, which he admitted led to the resignations of a number of top executives. “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,” Dolan said in 2015. “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.”

Asked if he is a different type of leader to Dolan, Madhavan replies: “I believe no two individuals are the same. Mike was fantastic; he brought a different set of skills and expertise to the organisation. Perhaps mine are slightly different, but I think each one benefits the organisation. He did work that was necessary at that point in time.”

St-Germain is part of the Bacardi stable

After years of upheaval, Madhavan is now focused on implementing a cultural shift at Bacardi that focuses on a concept of “the three fs”: fearless, founder and family. He says of the first principle: “When fear creeps in it’s very difficult to have trust and empowerment, and if you don’t have trust and empowerment, how do you get the best out of people? Being fearless is a fundamental change that we want to drive within Bacardi.”

The second ‘f’ refers to instilling a “founder’s mentality” throughout the business to “leave a legacy for the future”. Madhavan says: “If we can convert 5,500 employees across the world to feel that this is their company, can you imagine the pride that this brings to the organisation?”

The final ‘f’ – family – is the “understanding that we act as a team”. Madhavan says: “Life is never about a straight line that goes upwards. You will have ups and downs, and when somebody falls down, you lean over and pick that person up – it could also be a market, it could be a region, it could be a brand, it could be anything.”

The CEO’s staunch belief in nurturing people is obvious, but this does not mean his expectations are not high. “When we say ‘family’, it doesn’t mean we will settle for mediocre performance or that we will accept people who don’t perform. You’ve got to give it your best to be part of the family.”

As demonstrated in his previous positions, in which he restructured businesses, implemented new strategies and moved from joint venture to wholly-­owned company models, Madhavan is unafraid of change – but only if it is beneficial for the long term. “I have always seen myself as a builder of brands, a builder of people and a builder of business,” he says. “I have never seen myself go into any kind of business and strip away costs to deliver profits, because, frankly, you can do that for the short term but it’s very difficult to sustain in the long run.”

A particular change that Madhavan compliments his predecessors for is the decision to move Bacardi’s US distribution contracts to a single operator. In 2016 the then newly formed Southern Glazer’s created a dedicated network called Transatlantic Spirits to handle Bacardi’s portfolio in the market. Madhavan says that while the division initially experienced challenges, it now “works beautifully well”.

He adds: “It’s a great partnership and was perhaps ahead of its time. I have to give a lot of credit to Peter Carr, our president for North America, as he was the one who was fearless in taking that decision when no­-one else had even contemplated it. Now there are a few followers, but he was the first mover.”

PREMIUM TEQUILA BOOM

Bacardi’s North American business has also undoubtedly been boosted by the group’s acquisition of Patrón, which was completed in April. Bacardi bought a minority stake in the Tequila maker in 2008, when the premium Tequila boom was in its infancy, and now owns 100% of Patrón Spirits International – valued at US$5.1 billion.

“Both John Paul DeJoria [Patrón co­founder] and Ed Brown [Patrón CEO] have been fantastic partners right from the get-­go,” enthuses Madhavan. “Both of them wanted to see Patrón become a legacy brand for hundreds of years, and the only way to do that was to allow the product to grow in a company that will not only nurture it but also extend it in terms of distribution into far more markets.”

The Patrón hacienda

To match this ambitious global growth strategy, Patrón is working to increase its production capacity by “close to 50%”. The project began before Bacardi’s takeover, and will be conducted in three stages, the first of which is “going on stream now”. Madhavan is keen to stress that Patrón’s manufacturing team “will be given the same independence as they had before [the acquisition]. We do not want to change the process, the way Patrón is made, and that’s the reason we have kept it completely separate from our existing structure”.

The Patrón deal rounded off a busy M&A period for Bacardi. Since 2015, the firm has taken minority stakes in Irish whiskey maker Teeling, Ilegal Mezcal and Scotch whisky blender and bottler Compass Box, as well as majority stakes in super-­premium rum brand Banks, Leblon cachaça and Angel’s Envy Bourbon.

Madhavan claims that Bacardi has an affinity with such independent brands and “understands their values”. Of Bacardi’s acquisition strategy, he says: “We have seen that in-­house innovation is OK for line extensions, if you are doing a new flavour or a limited ­edition innovation. But when you put completely new brands with new concepts and new ideas [on the market], that isn’t done too well in house. So we always look for jewels in the making.”

Bacardi will put even greater emphasis on its core brands, in particular its namesake rum, which has struggled to return to growth in recent years. Sales fell again in 2017 to 16.8m cases, according to Brand Champions data. What went wrong for what was the world’s best­selling international spirit?

According to Madhavan, frequent changes in top management at Bacardi, including chief marketing officer roles, resulted in an inconsistent brand strategy for Bacardi. He claims that to remedy this, the rum’s new ‘Do What Moves You’ campaign will “remain in place for the next 10 years”. He explains: “That’s why I keep saying that our next 10 years will be our best 10 years, because I want our teams, companies, partners and customers to know that we are going to have the same set of leaders driving the same strategies for the next decade.”

Also key to Bacardi’s future success will be premiumisation and diversification. For Madhavan, the challenge will be to create a pricing ladder similar to that in other brown spirits categories. “The idea is to build a very premium portfolio, alongside the core range of Superior, Gold and Black, to straddle different price points,” he says. “It’s not a short run; it’s something that’s going to take time to build.”

Bacardi’s eponymous rum was once the world’s best-selling spirit

This year, the brand launched premium line extensions Bacardi Añejo Cuatro and Bacardi Gran Reserva Diez to sit alongside its Bacardi Reserva Ocho and Bacardi Gran Reserva Limitada expressions.

As well as new product development, Bacardi will seek to enhance its association with the worlds of art, music and sport. “Now is the day of digital, and consumers are looking for relevant brands,” observes Madhavan. “So one of the things we are looking at is how we ingrain our brands in culture.”

An example of this action is Bacardi’s partnership with music trio Major Lazer and the subsequent launch of its ‘Sound of Rum’ campaign, which aimed to unite fans of reggae, dancehall, soca, hip­hop and electronic music. Described as “more than traditional sonic branding”, the collaboration spanned different media platforms and saw the creation of a limited edition rum.

Similarly, Bacardi recruited Grammy award-winning music producer Swizz Beatz as its ‘global chief creative for culture’. As part of the multi­year agreement, described as the “first of its kind” in the drinks industry, Swizz Beatz is working with Bacardi to “deliver events, marketing and social activations with industry influencers in exciting and new ways”.

PORTFOLIO SPREAD

Rum is the soul of Bacardi, a company founded in Cuba in 1862, and which now resides in Bermuda, with production and distribution spread across the globe. While its namesake brand is one of the world’s best­selling spirits, Bacardi’s portfolio is becoming ever fuller, and has a distinctive premium focus.

“When I tell some consumers and customers that we also make Grey Goose, Bombay Sapphire, Patrón, Martini, Dewar’s, Angel’s Envy, Banks, Cazadores, Leblon, StGermain and Dom Bénédictine, they are surprised,” says Madhavan.

The firm has achieved the rare feat of becoming a multifaceted global spirits player while remaining fiercely independent – something Madhavan does not think will ever change. “We will always remain a family-owned company,” he says, “one that has fantastic brands and one that continues to grow top line. There are no plans to go public and there never will be.”