Companies not shy to put Cuban brands on their own products

Odalis Fonseca (left) and Marta Diaz apply wrappers to cigars at a factory in Miami's Little Havana neighborhood. A 47-year-old trade embargo has kept Cuban products out of the United States, but has hasn't stopped companies from slapping Cuban brand name

SAN JOSE DE LAS LAJAS, Cuba -- Cuban rum maestro Jose Navarro's taste buds sing when he sips Havana Club, the sweet spirit distilled in this farming town south of the capital.

"It has to be Cuban," said Navarro, the oldest of the island's nine certified rum experts. "Havana Club can't exist anywhere else."

But another Havana Club does exist, one made by Bermuda-based rum giant Bacardi. Also, Cohiba cigars, once rolled exclusively for Fidel Castro, are produced by Swedish Match North America of Virginia, and a Miami firm offers its own version of Cubita, a top Cuban coffee.

Washington's 47-year-old trade embargo has kept Cuban products out of the U.S., but hasn't prevented companies from using Cuba's brand names.

As the United States and Cuba consider better ties, such trademark issues would have to be settled before any easing of the embargo.

The fight between Bacardi and the Cuban government for the Havana Club name already has played out in U.S. courts and Congress for more than a decade and is now before Spain's high court.

But the battles are about so much more than brand names. They are charged with 50 years of emotion over Castro's 1959 revolution and expropriation of private companies as he implemented socialism.

They also are rooted in the future as U.S. corporations face the specter of new competition from Cuban products, which may carry a special allure after being banned for nearly a half century.

"There are U.S. interests thinking about how they are going to be affected by an influx of Cuban products, and the outlook is notalways positive," said Jake Colvin, director of the Washington-based USA Engage, which opposes the embargo.

Americans craving all things Cuban already can buy products inspired by the Caribbean island, just not made there.

Bacardi's Havana Club is an 80-proof rum that has sold in Florida since 2006, and sales have been so strong the Bacardi is thinking of expanding the label to other states, said spokeswoman Patricia Neal.

Even though Cuba's Havana Club rum can't be sold in the United States, the Cuban government still sued Bacardi for using the name.

Bacardi argues that it owns the name because the original Havana Club was expropriated by Castro from its Cuban producers, the Arechabala family, who went into exile.

Bacardi bought the name and recipe from the Arechabalas in 1997.

Cuba said it registered the Havana Club trademark in the United States in 1976 after the Arechabalas let their claim on it expire. It has sold the rum internationally since 1993 in a joint partnership with French spirits consortium Pernod Ricard.

So far the U.S. courts have sided with Bacardi, based on a 1998 federal law that prevents the registration or renewal of U.S. trademarks tied to companies nationalized by the Cuban government.

Cuba has appealed its most recent case to the U.S. District Court of Appeals.

Meanwhile, Cuba's Havana Club is winning abroad. A Bacardi suit filed in a Spanish court against the Cuban government and Pernod Ricard over the trademark in that country was thrown out in 2007. Bacardi now has appealed, and the case is before the Spanish Supreme Court.

The true argument is over who can claim to produce authentic Cuban rum, especially if the country opens up to global commerce.

Bacardi, a family-owned spirits conglomerate founded in Santiago, Cuba, in 1862, pioneered the light, dry smoothness Cuban rum is now famous for, devising a charcoal-filter system and aging in oak barrels for added sweetness.

The Bacardis joined the fiercely anti-Castro exile community in Miami after Castro nationalized the company in 1960. Havana Club, like most of Bacardi rums, is made in Puerto Rico, and says so on the bottle.

Still, Neal said her company's Havana Club transports consumers "back to the time it was created: sultry nights, classy nightclubs, and pulsating Latin music, enjoyed by locals and visitors alike."

Cuba and Pernod Ricard spent $70 million to rehabilitate a Havana Club distillery specializing in darker, higher quality anejo rum in San Jose de Las Lajas.

"If I have a recipe, am I producing a Cuban rum? No. Cuban rum is not a recipe. It's an expression of an entire culture," said Navarro, while scrutinizing stacks of barrels filled with aging rum.

Even without the United States market, 40 percent of world rum drinkers, Cuban Havana Club has seen its annual sales soar 13 percent to 3.4 million cases. Bacardi's more than 200 brands and labels sell 20 million cases in 150 countries every year.

It's a debate that may ultimately be decided by consumers.

John Verburg, manager at Cafe Habana in Ann Arbor, Mich., uses Bacardi to mix his mojitos, the famous Cuban cocktail of rum, sugar and mint. But he's asked all the time when he will get rum "authentically from Cuba."

"I don't know if people are salivating yet," Verburg said, "but it could be something very exciting."

The thought of competing with Cuba is keeping executives at Swedish Match North America up nights. The Richmond, Va.-based company owns General Cigar, which has sold Dominican Republic-made Cohiba cigars in the United States since 1997.

"It's not the brand that's going to make the difference, it's whether it's Cuban or not," said Gerry Roerty, the company's vice president and general counsel. And smokers are willing to pay a premium for Cuban, he said.

Cohiba was founded in Cuba to make cigars for Castro and visiting dignitaries. Today it is the flagship of 27 premium brands produced by Habanos, equally owned by the government and Madrid-based Altadis SA, which was acquired last year by Britain's Imperial Tobacco Group.

Cuba never registered its version of Cohibas in the United States but still sued General Cigar. The U.S. Supreme Court sided with General Cigar, which has factories in the Dominican Republic and Honduras and produces versions of signature Cuban brands Partagas, Hoyo de Monterrey, Bolivar and Punch.

It also makes the La Gloria Cubana, Rico Habano and Havana Honeys brands, which despite their names are unknown on the island.

U.S. industry estimates show that 85 million Cuban cigars could be shipped to the United States annually in a post-embargo world, slashing profits for U.S. companies that sell about 255 million premium cigars a year.

Roerty said not only would General Cigar face a trademark war, but the company would not have access to Cuban tobacco leaves or other raw materials to match its new competitors.

Some experts have said that the forbidden-fruit factor around Cuban cigars and other products won't last if the embargo vanishes.

Still, most U.S. aficionados are eager to get their hands on real Cubans.

At Havana Connections, a cigar shop in suburban Richmond, General Cigar's own backyard, mention of Cubans sparked an hour-long discussion.

"When you smoke, it's taste. And the Cuban seed and Cuban cigar -- they're smoother and creamier," said Dan Tater, 60, a smoker for about a quarter-century. "There's got to be something to that lore that this is really a better cigar."

Americans hankering for super-strong, Cuban-style espresso can get Cubita, a coffee imported by Universal Brands in Florida that shares a name with one of the best-selling coffees on the island.

Universal Brands President Raul Diaz said his company has held a U.S. trademark for Cubita since the early 1990s and is confident that it will stand regardless of any change in America's Cuba policy.

He did acknowledge that "at some point, if Cubita from Cuba is sold in the United States, one of the Cubitas is going to suffer."

More than 3,000 U.S. brands continue to hold trademarks in Cuba, with everything from McDonald's to Macy's to Mr. Peanut paying periodic registration fees in case the island one day embraces the free market, according to a 2002 list compiled by U.S.-Cuba Trade and Economic Council in New York.

Experts worried that the 2006 decision to nullify Cuba's Havana Club trademark in the U.S. would prompt Cuba to stop respecting American brand names on the island, especially after Castro famously threatened to produce Cuban Coca-Cola.

So far, there has been no retaliation.

Colvin said Cuban leaders know that violating U.S. trademarks will weaken the island's case before the World Trade Organization and other groups.

"They've always made the case that they are right on this issue and they are the victims," he said. "If they start violating trademarks, they lose the moral high ground."

Andrea Rodriguez of the Associated Press contributed to this report.