February 18, 2013

"Ironically, for Maker’s Mark drinkers, the best outcome they can hope for..."

"... is that the bad press that surrounded the short-lived reduction in alcohol content will lead to a slump in demand for the product...."

Can you see why? Explanation at the link for why Beam, Inc. could not deal with increased demand by simply raising the price.

65 comments:

Expat(ish) said...

Bourbon is just something you drink if you didn't drink too much of it in college.

Let's talk about something interesting: cask strength scotch.

If a scotch maker runs out of cash they can sell a cask to a rebottler who can then bottle it using the brand name, but not diluted, only at cask strength. Which is why you can get some really amazing scotch experiences at a fair price.

-XC

PS - Oh, yeah, and if you're going to pour coke on booze, you might as well use vodka and a shot of bourbon flavor for all that you can tell what you're drinking.

edutcher said...

This is the problem in these times - raise the price or make another concession.

I have no idea how dedicated the drunk market is to one particular brand.

Nonapod said...

A decrease in demand for the product they love is good for an enthusiast consumer since it reduces the risk of shortages and can mean a better price.

I still think it would've been simpler if they just raised the price.

The Drill SGT said...

I am not a bourbon drinker, but in the Scotch world, the answer is simple. Raise the price to clear the shortfall.

Nonapod said...

As dumb as it may be I think the biggest reason that MM has been so successful isn't the taste, it's the cool looking bottle with the wax seal.

dmoelling said...

This is another instance of a company attempting to disguise the Obama/Bernanke inflation. Drudge highlighted the rise in Gasoline prices today. I compared the rise for crude oil in Euros vs US Dollars in a similar time (since Dec 7, 2012). In Euros the price rose 7.5% while in Dollars the price rose 10.5%. This extra 3% is due to the weak dollar (about 10-15 cents/gallon of gas roughly).

Ipso Fatso said...

Stuff tastes like water. Gimme Jack any day. Only Andrea Dworkin castrated liberal men drink MM.

DADvocate said...

After the Schlitz beer and New Coke debacles, Beam, Inc should know better than to screw with a brand's "formula." Drinkers will find another brand and never go back. I like bourbon and sour mash whiskey (Jack Daniels). Makes no difference to me.

Pogo said...

Inflation and shortages.

I expect James Earl Obama to have a TV chat while wearing a sweater, and asking his daughter what she thinks about those yucky bombs in Iran.

Ann Althouse said...

"I am not a bourbon drinker, but in the Scotch world, the answer is simple. Raise the price to clear the shortfall."

Read the article. It's very interesting why that is NOT the solution.

whoresoftheinternet said...

Alcohol is recession and depression proof (ha!). It's why, during the 1st Great Depression, they finally re-legalized alcohol---too many people needed the drink to survive the leftist policies that ruined the economy for more than 15 years.

In this Obama economy, more and more people are drowning their unemployment and high prices sorrow in alcohol and other drugs, both legal and non-legal.

Why do you think there's a been an Obama-ea crackdown (double ha!) on the ingredients for "purple drank" (cough syrup) and on Four Locos? Why do you think there's a big marijuana legalization push now, and Obama is running drugs to the increasingly powerful Mexican drug lords?

Because the problem has gotten worse thanks to the Obama Recession (soon to be an official Depression).

Thank Mein Obama and his leftist lackeys and Squealers like Inga the Lying Obama Whore, Garbagee Pail, Andy the Fag, and O Retardo for ruining many people with addiction and depression.

Seig Heil, Mein Obama! Forward, to the further decline! Onwards, leftist comrades! We can be like Venezuela soon, people!

Shanna said...

I have no idea how dedicated the drunk market is to one particular brand.

When you order a drink with the brand of liquor in the name, you are pretty dedicated (ie, jack and coke, etc.). MM has been getting pretty popular, not that I drink much hard liquor these days.

Bob R said...

Not a big fan of Jack, and I'm not alone.

I think that Beam's bigger problem is that people develop pretty strong brand loyalties with booze. Either shortage or price increases will force a lot of people to look elsewhere and there are a lot of good bourbons out there (no matter what style you like.) Once people are gone they won't come back in 6 years when you have a lot of booze in cask.

Rabel said...

The post writer didn't consider the possibility that the whole thing was a publicity stunt.

The happiest people in this are the liquor retailers who will now be able to raise prices on MM due to the highly publicized shortage.

Nonapod makes a good point. The wax seal is a good marketing ploy. It also makes a great handle if you're doing some serious dranking.

KLDAVIS said...

I mourn the loss of Wild Turkey Rye...they diluted their 101 strength whiskey to 81 last year with little to no controversy. The new product is dreck, kind of like any sort of Maker's. There is much cheaper, higher proof, and more delicious wheated whiskey out there than Maker's.

whoresoftheinternet said...

p.s they should have raised the price and merely moved MM to a higher-end product market. Call it "maker's mark select" until production re-ramped up.

Market share is only worth fighting for if the quality doesn't dip. For a few years, I noticed McDonald's having an expansion, only to find both old stores and new being poorly run---ghettoized with Sons and Daughters of Obama, with all the requisite rudeness, low-intelligence, inefficiency, and uncleanliness. What was once an efficient U.S. fast food chain is now perceived poorly. I take my burger business to a higher-end one, like Wendy's or Five Guys, which doesn't have the poor reputation.

Market share increased/stayed the same, but quality and brand name got cursed. And the curse allowed higher quality chains to get market share later.

Now Beam, Inc. hurt the brand by letting this slip out. Bad move.

edutcher said...

dmoelling said...

This is another instance of a company attempting to disguise the Obama/Bernanke inflation. Drudge highlighted the rise in Gasoline prices today.

Real inflation today is 10%, due largely to all the manipulation of fuel prices.

Since gas prices have gone up $.50 in the last month (why aren't we talking about that instead of booze?), We can expect to see another 3% or so around June.

Happy motoring.

KLDAVIS said...

"Rabel said...
The post writer didn't consider the possibility that the whole thing was a publicity stunt."


Nope, bottles of the 42% shipped to a friend's bar in Chicago. I've seen pictures. He's wondering if they are now collector's items.

Bob R said...

@KLDAVIS- I used to buy Wild Turkey Rye when it was just about the only one available. But the past year has seen a huge increase in the number of ryes (many very good) offered by VA ABC. Good time to make a Sazerac.

KLDAVIS said...

@Bob R - WT Rye made terrific Sazeracs. Most of the ryes flooding the market at the moment (Templeton, Bulleit, Willett, Dickel) were all made by LDI in Indiana. It's the exactly same recipe, diluted to different extents (and, in the case of Dickel, charcoal filtered), sold to various concerns to put in their own bottle. Of them, Willett is the only one I care to drink...whoever is picking their barrels knows what they're doing, and they bottle at higher proof than the others. Rittenhouse, long the standard for serviceability, mixing Rye is sadly going down hill.

All that said, I'm not sure I can echo your mood. I think the popularity of Rye is killing off or driving down the quality of a lot of formerly excellent products. Thankfully I have a number of old WT & Rittenhouse set aside, as well as a few Van Winkle Family Reserve.

Sorun said...

Let's water down our whiskey. No one will mind.

DADvocate said...

There is much cheaper, higher proof, and more delicious wheated whiskey out there than Maker's.

Got some recommendations? Seriously. I've found some that I like OK, but if you have some suggestions, it might save me some time and money.

Brew Master said...

This was a huge flop of a ploy. MM is not all that great when compared against other quality whiskeys and/or scotch. They built up their name rather than their product.

The dilution attempt to avoid a shortage was about to ruin the name, and probably has already done quite a bit of damage that the new retraction won't be able to cure.

For the bars that use this as a mixer, the shortage produced by non-dilution will force them to look elsewhere, just as a sudden price rise would have done. So, lose-lose for MM on that score.

The dedicated drinkers of the product have now been pissed off, and not all of them will hear about the retraction. Pissed off drinkers go brand shopping, so once again lose-lose for MM.

So, now you have a situation where MM is forced to sell at the lower price, is faced with a shortage of product. People who want it are now forced to brand shop, once again lose-lose for MM.

What they should have done was input a gradual price increase over time, rather than a single large price increase. You would lose a bit of money short term while retaining customers, explaining that the popular demand for your product has grown so large. Bars will understand that and be able to price in/ride out increases knowing that supply will catch up and price will return to normal, their customers will still ask for MM now knowing that it is a popular option.

Your dedicated customers would keep buying even at increased price knowing the while that they were part of the popular choice (preference cascades and all).

rehajm said...

That's a bit of a sticky wicket. Given Beam's desired brand positioning, dilution seems like a reasonable strategy- remember Makers is supposed to be a mid market product. A 3% reduction in alcohol really won't make a difference in taste, especially in a mixed drink. Given their predicament, I would have tried the same thing. Clearly, consumers brand perception of Maker's is more upmarket than Beam had intended. Oops! I suppose they could have bifurcated the Makers brand into a white label, diluted 'well' formula for mixed drinks, while maintaining the original formula for straight drinkers. Hindsight is 20/20.

KLDAVIS said...

"DADvocate said...
Got some recommendations? Seriously.

There's the rub...I want to save it all for myself. But, seriously, check out the Weller line: Special Reserve, 'Antique' (107 proof) or 12 year.

Mitch H. said...

I liked Maker's Mark before I discovered Bulleit, which is a smidge cheaper, and yet sweeter and smoother. Same goes with what I've had of Buffalo Trace, but I haven't burned through quite as much of that as I have of Maker's Mark and Bulleit. I'm still figuring out my preferences.

I have no idea how dedicated the drunk market is to one particular brand.

It's an identity thing. Where I grew up, it was Arncity or nothin'. Didn't matter that Iron City was tin-flavored horsepiss. As a result, I never got the taste for beer, regardless of the quality.

Stuff tastes like water. Gimme Jack any day.

Speaking of brand and identity, Jack Daniels just isn't a particularly good whiskey. A hair better than Jim Beams, which itself is no better than generic stuff like Ezra Brooks, and worse than bottom-shelf utility bourbons like Evan Williams.

The wax seal is a good marketing ploy.

Yeah, it's a lot better than the sticky crap they wrap around a bottle of Knob Creek. That stuff is disgusting - the sealant, not the bourbon, which is passable if kind of oversharp - too high-proof to be smooth.

There is much cheaper, higher proof, and more delicious wheated whiskey out there than Maker's.

Any recommendations? I've tried some ryes, but my local stores don't seem to have anything other than the Wild Turkeys (eh, not terrible) and Jim Beams (harsh).

rehajm said...

Rabel said...
The post writer didn't consider the possibility that the whole thing was a publicity stunt.


New Coke

DADvocate said...

KLD - Thanks. I need something to get me through reading garage's and ritmo's comments.

Marshal said...

I've been wondering if Makers Mark had run the most successful guerilla ad campaign in history.

rehajm said...

BTW, Jack Daniels has been monkeyed with this way- formerly 90 proof, it is now 80 proof. Although some special edition premium labels are sometimes sold above 90 proof.

bagoh20 said...

Should have raised the price instead of trying to outsmart the market. You might lose some sales, but you can't fill them anyway, so with raised prices you can still get the money you would have without the shortage. The perceived value of the brand rises rather than falls, and later when you have more product, you capitalize on the higher value and quickly get your spot back by selling your higher valued product against the lower valued standard at competitive pricing. You always protect the value of the brand. With that you have power and flexibility.

Shortage of a product like this can be an opportunity. That's why companies sometimes create artificial shortages. This works especially well in a brand dependent market like bourbon. Somebody at Jim Beam was being progressive. Trying new things, being open minded.

EMD said...

What's Maker's Mark?

Marshal said...

bagoh20 said...
Should have raised the price instead of trying to outsmart the market. You might lose some sales, but you can't fill them anyway


This only makes sense if they intend to reserve / ship for their bar customers first and make the retail customers take the full shortage. So why not maintain the price for bar customers and increase retail?

bagoh20 said...

" So why not maintain the price for bar customers and increase retail?"

Good point, and a smarter alternative unless the bar business is a majority of their market and would have drained them anyway. I don't know.

dreams said...

The first time I drink Maker's Mark was in 1969 and from then on the rare times when I bought any bourbon it was always Maker's Mark.

bagoh20 said...

Although the publicity alone may increase sales. Just looking at the photo of those bottles makes me want to get some. So now, they got their name out there in a big way, and with the message that they listen to customers, the stuff is rare, and their product is as good as ever. Nicely played.

Brian said...

I followed this story pretty closely.

Maker's Mark is perfectly serviceable bourbon, and over the years I have consumed many gallons of it (and Wild Turkey, and Eagle Rare, and Knob Creek, and Woodford Reserve...I am a Rebel.)

The biggest problem, from my POV, is Beam's ridiculous insistence on pretending that this was something *other* than a price hike --- a pretense that continues in the linked article. The fact is that Maker's Mark is simply not good enough to drink neat. (And yes, some bourbons are. Don't flame me about how much better Scotch is. I love Scotch. And Canadian, and Irish, and those Japanese pseudo-Scotches, too. Let a thousand flowers bloom.) Everyone who reaches for Maker's with his right hand reaches for a mixer with his left. At a lower proof, he's just got to add more Maker's in order to mix the same drink.

The bottom line is: a price hike on the standard bottle, the proposed-and-abandoned dilution, or putting the whisky in smaller bottles at the old price & strength; there's no functional difference between any of the three. No amount of biz-school bullshit can obscure this.

whoresoftheinternet said...

Apparently, Beam, Inc. took their logic on how to serve drinks from the local titty bars.

Because those places have a reputation for quality.

Astro said...

I agree with some other commenters that it was a publicity stunt. It's a bit over priced for being the mediocre bourbon it is. It has probably lost some market share to the smaller regional distilleries that are springing up as well as to older, better bourbons. So this serves as a great publicity stunt and rebrands it as loyal to its customer base.

Bob R said...

I liked Wild Turkey Rye. A couple of years ago it was that or Beam, and the Turkey was much better of course. But in SWVA, the Turkey is no longer on the shelves. My favorites so far are the Russell Reserves, but I like the Bulleit as well so I'll keep an eye out for the other LDI brands. This area is bourbon country, so the rye fad is good news for us.

Bob R said...

For those of you saying it was a publicity stunt - were all of the other brands that lowered their alcohol content over the past few years (without too much fuss) just engaging in an unsuccessful stunt?

Peter said...

In most other product categories, if you didn't want to raise the price you'd just make the package smaller.

After all, a pound can of coffee is down to about 11.5 ounces and soon the "three pound" size will be less than two pounds.

Of course, you can't do that with liquor (or milk, for that matter) as everyone expects the bottle to contain 750ml (or twice that).

But I think those of us who realize that watering the product would cost the brand far more than it's worth know more than the MBAs who came up with this strategy in the first place.

Hagar said...

It's kind of gross to hear that Jim Beam now owns Courvoisier, though for me it does not really matter since I can't afford the good stuff anymore, anyway.

Found a bottle- actually a stoneware crock of Courvoisier Cognac Napoleon in El Paso once and bought it from curiosity even though the price was $16 and something with tax. Came home one day and found my ex-wife had been into it and mixed herself a brandy and coke with it, since she had run out of Mexican Bacardi.

rehajm said...

a price hike on the standard bottle, the proposed-and-abandoned dilution, or putting the whisky in smaller bottles at the old price & strength; there's no functional difference between any of the three.

Usually valid, though not when you consider the "overarching strategic needs" of the parent and it's desire to position MM as a 'power brand'. This is a really a pure supply problem. A reduction in demand does not fix things.

Brian said...

@rehajm:

"This is a really a pure supply problem."

And how does a supply increase that comes with a built-in demand increase help the perceived problem? If you can produce 6% more whisky this year but all of your customers instantaneously demand 6% more whisky, what have you gained?

Note that I'm assuming that bartenders (both home and commercial) mix to strength. I think that's accurate but perhaps all these years in a college town have given me a skewed perspective.

Methadras said...

It's another drinking trend that the neck beards have fallen in love with.

Palladian said...

I'm not a big Bourbon fan, though I like it well enough. I like Maker's Mark, but then I like Old Overholt Rye so perhaps I'm not the most discerning connoisseur of American spirits.

But I'd rather have even a mediocre scotch over a good Bourbon any day. But these days I stick mostly to gin, as I can't afford my favorite scotches.

viator said...

The world can go to hell but don't lower the proof of Maker Mark. Politicians can lie thorough their teeth and people say "that's great" or "ho hum". Water down premium bourbon, that's another story. The people speak.

High end bourbons are hot, go to any well stocked liquor store and there are rows of dust covered $50-100 scotches. Try to find the most sought after bourbons, you can't bribe a bottle out of the store. There is not one to be found or reserved.

The Drill SGT said...

Ann Althouse said...
"I am not a bourbon drinker, but in the Scotch world, the answer is simple. Raise the price to clear the shortfall."

Read the article. It's very interesting why that is NOT the solution.


Why do you assume I did not read the article, which you encouraged in your post. Of course I read the article, and I am offended at your assumption that I did not. I was trained in economics, not marketing, so my response is a price mechanism. But I do have an MBA, so I understand marketing at some level, so I know they have other 'core brand equities' to maintain their bar and distributor presence.

It wasn't their solution, but it didn't work well did it. So it's rationing or raise the price. The jury is out on whether my recommendation will be what they chose...

I'm not a student, I don't need lectures about what I read...

Chip S. said...

One thing you've gotta love about marketing is that there's always a stupid story about price to justify any decision.

Usually the story is that a higher price lends a brand cachet, thereby increasing demand. This, of course, has the unfortunate implication that all prices rise w/o limit.

But now the story is stupid in a whole new way:

If the price of Maker’s gets too out of whack with other bourbons of similar quality, they might rethink that practice and turn to less pricey options.

IOW, the demand for MM is highly elastic with respect to price. Which means that it would only take a small price increase to reduce quantity demanded to the equilibrium level.

So it's not a coherent explanation at all. It's just a ridiculous story made up to excuse a strategic blunder based on the premise that MM drinkers wouldn't care about a few proof points.

Presumably similar crap was handed out during the New Coke fiasco.

dbp said...

"Read the article. It's very interesting why that is NOT the solution."

And yet, that appears to be the solution they are going with at this point. Of course we will never know (and be able to compare) the outcome not chosen, but a brand is most of the value for a product like this. Messing with the value perception of a brand represents massive value destruction, usually.

rehajm said...

And how does a supply increase that comes with a built-in demand increase help the perceived problem?

Question is moot- can't increase supply, not in the short/mid run anyways. So the solution has to be something else. Raise the price you say? Not so easy when you consider the parent goals for the brand: 1) penetration/ubiquity as the standard bourbon for mid/high level establishments 2) platform for additional rising star products under the parent umbrella. Raise the price and you risk losing the entire strategy, not just for MM, but the other brands as well.

The Drill SGT said...

"Read the article. It's very interesting why that is NOT the solution."

PS: Somebody in the supply chain is going to raise the price. The Maker, the distributor, or the retail outlet. In a state of shortage, price is the only thing that solves the problem.

The question is whether Beam captures the price premimum, or suffers the consequences without doing so.

bpm4532 said...

The real story is that premium bourbon is facing a slump (at the moment - with the Post oblivious to effects outside of the Beltway). As Beam has to plan supply years in advance, any drop in demand leaves a glut that has lingering effects. BTW, they still have lots of Maker's Mark at Costco.

This amounts to free publicity for Beam. Many people will now ask for Maker's Mark to see what the fuss is about over a supposedly high quality bourbon for a bargain price.

bpm4532 said...

A bar would NEVER water down their drinks to increase the profit!

kentuckyliz said...

Someday we will enjoy the decline with rubbing alcohol on the rocks. Mouthwash on the rocks for the ladies and teens.

fivewheels said...

This article seems to miss the real marketing reason they couldn't raise the price on Maker's, which is that the parent company has bourbons on each point of the price scale -- cheap Beam, mid-priced Maker's, to Knob Creek above that.

If you move Maker's up the price chain, it cannibalizes sales of your upmarket bourbon, and leaves an unfilled gap above regular Jim Beam. A distiller that makes one product can adjust its price whenever it makes sense; gigantic Beam Inc. cannot do so without mucking up too many product lines.

Mark said...

Nonapod wins the cigar.

Mark said...

Buffalo Trace is my current favorite mid-tier bourbon. If price isn't an object you really have to buy a bottle of Bookers.

FleetUSA said...

IMO the best bourbon is Booker's.

The best Scotch is Laphroaig.

Both excellent sipping beverages in small quantities (to go with the high price).

McTriumph said...

Jack Daniels is the top selling whiskey in the world. JD lowered their alcohol content years ago to protest, but it made no difference in sales.

Mark said...

Once upon a time Knob Creek was reasonably priced. Sigh.

Mitch H. said...

Mark, Knob Creek isn't outrageously priced, not like the various pedestrian top-shelf scotches. It's just... not as drinkable as bourbons four-fifths as expensive. I dunno, it just seems like anything over ninety proof just is too much alcohol to make it worth the premium. Hell, the guides I've seen on hundred-proof-plus bourbons all recommend watering the damn stuff before drinking anyways.

Tim said...

Nonapod said...

"As dumb as it may be I think the biggest reason that MM has been so successful isn't the taste, it's the cool looking bottle with the wax seal."

Yep.

As a Whisky drinker (mostly Single-Malts, but Irish, Bourbon and Rye too), Makers is too sweet. I think it's the wheat.

Anyway, when it comes to Bourbon, I think I prefer Buffalo Trace. Drier, not so sweet.

Mitch H. said...

OK, for those arguing in favor of Bulleit Rye, you're right, it is pretty damn good. I had been pretty lukewarm on rye whiskey until trying this one. Bulleit Rye > Wild Turkey Rye > Jim Beam [bletch] Rye.