Cuba: The consumer revolution

Cuba has always had a special place in my heart – my mother is Cuban and I visit my family there at least once a year. Over the last few years, since Fidel Castro gradually transferred power over to his brother Raúl in 2008, I have keenly watched how the country has slowly relaxed some of its laws surrounding private enterprise, and the rise of cuentapropistas (small-scale entrepreneurs) starting to take advantage. Since President Obama’s and President Castro’s simultaneous announcements in 2014 that diplomatic ties would be restored between the countries, a number of international businesses have started to make their way onto the island. With change in the air, it’s anybody’s guess how the country, and the world, will react.

I, along with a new breed of upwardly mobile Cubans, have benefited from the huge improvement in tourism services, including the marvellous paladares (restaurants run from private homes), many of which would rival any cool, upscale location you might find in New York or London, but with an inimitable Cuban vibe. Even Miami, try as it might, will never possess the rich culture and history that runs through Cuba’s veins, making the island so irresistibly romantic. Cocktails on a sultry terrace overlooking the city after an evening of contemporary art in a converted factory? You have it. Dinner on an Oscar-winning film set? You have it, with the most elegant and successful paladar in all of Havana. And if you really want some good old-fashioned poolside posing à la Soho House, you have the Paladar Vistamar. Havana’s burgeoning party scene is being helped along by a country that is palpably sizzling with a very exciting, unique feeling of creativity, art, music and entrepreneurship. Sounds like a land of opportunity? Perhaps, but not so fast.

Carnival’s Adonia set sail for Cuba this past week from Miami

Enterprise, large or small, is riddled with the bureaucracy that comes with the dichotomy of running a business in a communist state, despite the well-publicised thawing of the bloqueo – as Cubans refer to the embargo. This past week, the Adonia – Carnival Corp’s first cruise connecting Miami with Havana – set sail on a historic 200-mile journey that nearly didn’t happen. Back in April, the company faced a backlash as it emerged that two Cuban-born Americans had been refused tickets on the new service. Cuban law prevented those born in Cuba from returning to the island by sea, even though they are permitted to arrive by air. Under the threat of a civil rights lawsuit, Carnival was forced to delay launching the route indefinitely. In the end, mounting pressure on the government led to the law being overturned a week before the scheduled departure. The episode foreshadowed a rocky road ahead for any company wishing to profit from these opportunities.

With up to 110 flights imminently due to run daily between the US and Cuba, the country’s tourism industry stands to benefit hugely from more relaxed laws, which will allow Americans to enter the country as tourists for the first time in decades. But the infrastructure needed to cope with the growing numbers is visibly creaking at the seams, and (much needed) hotel brands looking to enter the market will face decaying buildings, many of which have not been touched since the mid-twentieth century, and up to a three-year wait to get permission for operation from the Cuban government. Consumer brands will face similar difficulties: although Starbucks can officially import coffee to the US from Cuba, complex rules will prevent the coffee chain from selling freshly-prepared drinks in franchises in Havana, forcing it to focus on its packaged foods.

However, several brands have shown that with some creativity, it is possible: Spanish group Barceló Viajes, which manages two properties on the island, has opted to start offering private homes in Cuba to cope with skyrocketing accommodation demands, coping with logistical issues by incorporating the traditional Cuban homestay concept – casas particulares – which officially launched in 1997 when the Cuban government started to allow citizens to rent out their homes to tourists.

Airbnb has also moved into the new market, with over 4,000 homes on the island already listed on the site, juxtaposing a low-tech Cuban tradition with the American booking giant. But public internet access in Cuba, which only arrived last year, moves at dial-up speeds on ancient computers. Nevertheless, Airbnb’s manager for Latin America describes the country as the ‘fastest-growing of all time’, a statement backed up by Google’s investments in incubator hubs on the island.

A piece from the Liudmila and Nelson ‘Hotel Habana’ series

For those trying to grow their businesses from the inside, the red tape still exists, with the main barrier being supply of material due to no discernible wholesale market. ‘No hay’ is a term used frequently to refer to mass shortages in households, hotels and restaurants alike, from toilet paper to bottled water, which will only get worse as tourism increases – already up 37% this year. Lacking the stronger purchasing power of bigger hotel chains and government-run insititutions, the small-scale sole trader and the ordinary Cuban, earning an average wage of $20-25 per month, always suffers most from the country’s frequent lack of supply of basic goods.

It begs the question, therefore, why Karl Lagerfeld chose to stage his show for Chanel’s Cruise Collection in Havana on Tuesday. All eyes are on Cuba and its magnificent yet crumbling architecture, and its vintage Cadillacs and Buicks provide a unique, whimsical and decadent backdrop for the world’s most iconic fashion brand, drawing celebrities including Tim Blanks, Carine Roitfeld and Suzy Menkes. Yet, you could probably count on one hand the number of actual Cubans living in Cuba who might afford a single item. And therein lies the question that consumer brands will seek to answer: outside of catering to tourists, when will ordinary Cubans have a reasonable disposable income? And what can we make of the Chanel show – was it an event of cultural significance, or a stunt in an industry where fashion shows are seen more and more as advertising campaigns?

Brands looking to enter the market might look to past success stories for hope: in 2012, Coca-Cola relaunched in Burma after the US reopened trade with the country following a six-decade military junta. With significant investment in sales training through Coca-Cola University, the brand is working within its expectations in Myanmar, four years into the expansion. With an expected GDP growth rate in Cuba between 2% and 4% over the coming years, brands that enter the market carefully and purposefully can expect a curious market awaiting them – and results to follow.

On the other hand, it comes as no surprise that some companies, such as Zara, have chosen not to enter the Cuban market: the bans on TV and billboard advertising, government-mandated staffing and required joint ventures with the government are all difficult compromises. But with President Raúl Castro’s promise to stand down in 2018 and the enthusiasm shown by the Cuban people, I doubt it will be long before the new generation in Cuba brings to surface the ideas that have been bubbling away for the past five decades. More than Chanel, which is a brand I love, that’s what I want to see: a consumer revolution from the inside.