Defending Maker’s Mark

 

 

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UPDATE 17-FEB-13 – Maker’s Mark has reversed their decision and decided to keep their proof the same.  See details in comments section.

Maker’s Mark decided to lower the alcohol content of their flagship product and while many have expressed their dismay, I have to agree with their decision.

From the USA article:

In an interview Monday, Bill Samuels Jr. said he failed to foresee a worldwide surge in demand for premium bourbon when he was still in charge of the brand about six years ago. As a result, Maker’s Mark is being diluted to 42 percent alcohol by volume, from 45 percent, so more of the whiskey can be bottled to meet demand. That’s a cut from 90 proof to 84 proof.”

As a Free Market Capitalist, my first reaction was “They should’ve raised the price” but as I thought more on this decision, I feel they made the right call.

For those who aren’t familiar with how Bourbon is made, let me go over that first.  Three grains (typically Corn, Malted Barley and Rye) are combined with iron free water and boiled to make the “Mash” – and as someone who worked in this industry for a year during college, I can tell you that I loved the smell of the “Mash” as it was boiling.  Yeast is then added to the “Mash” and the solution is allowed to settle for a few days.  During this time, the yeast converts the sugars in the “Mash” to alcohol and CO2 and then the grains are removed yielding a product similar to normal beer (around 10% alcohol).  The beer is then put through a distilling process that boils the beer and through several distilling steps the alcohol is condensed to a “White Lightning” that has an alcohol content of around 50-60%.  This “White Lightning” is then placed in White Oak barrels that have been charred on the inside and then the barrels are placed in a warehouse to age for at least 2 years but most companies age the Bourbon 4-6 years.  The aging process allows the “White Lightning” to seep in and out of the wood, soaking in the sugars and the brown color of the charred wood.  At the end of that aging time, the barrels are removed and the “White Lightning” is filtered and cut with water (called gauging) to the desired proof (usually around 90 proof or 45% alcohol) before being bottled.

So you can see the marketing dilemma for Bourbon manufacturers.  They must manufacture product today to meet Market needs 5 years into the future!  There are three outcomes of a Bourbon company’s long term market research – 1) You guess right, 2) you overestimate demand or 3) you underestimate demand.

If you guess right then you pat yourself on the back and count your money.  If you overestimate your demand then you are left with barrels that will have to sit longer in the warehouse or you choose to fill bottles that will sit in a different type of warehouse (neither is preferable from a financial viewpoint).  This overestimation problem does have a creative solution where the distiller can let the bourbon mature a little longer and then sell those bottles as a ‘premium’ brand.  The third outcome is the most troubling – you underestimate your demand and you don’t have enough barrels to meet the Market.  This is the problem Maker’s Mark faces right now.

They could choose to pull barrels out early but this would lessen the quality of their product and a company like Maker’s Mark does NOT want to do that!  Another option is to raise the price of their product but then you cut out a loyal segment of your consumer base.  Maker’s Mark has settled into a nice mid-high range of bourbon quality and if you raise the price then customers will either move to other higher quality bourbons at similar price points or buy another mid-high range Bourbon that Maker’s Mark competes with.  The Market for Bourbon is obviously strong but there is way too much competition for Maker’s Mark to act like Apple or Microsoft and just raise the price without expecting negative implications.  The option that Maker’s Mark settled on- slightly reducing their alcohol content which will allow them to get more bottles per barrel – seems like the right call.

Full disclosure, I am a Bourbon lover and I drink Maker’s Mark far more than any other brand but my rotation includes many other brands such as Knob Creek, Colonel E. H. Taylor, Blanton’s, Booker’s, Woodford Reserve and many other higher end Bourbons.  So Maker’s Mark, for me, is my standard and although I mix in the others when I feel like it, I buy more Maker’s Mark than any other brand.  Raising the price of Maker’s Mark would have caused me to add another mid-high quality bourbon (Bulleit, Basil Hayden’s, etc.) to my rotation and this would’ve replaced my purchases of Maker’s Mark.

When I drink Maker’s Mark, I drink it ‘on the rocks’ with a little water added so as long as the quality of Maker’s Mark is the same with the lower proof, I’ll just add less water to get the same great taste and I won’t see a difference.  If you are used to drinking Bourbon ‘neat’ (straight, no ice) then you might taste a difference but I rarely drink my Bourbon like that even with the high end brands (Pappy Van Winkle being the exception).

So for this Bourbon lover/consumer, Maker’s Mark made the right business decision.

I do not fault the Maker’s Mark marketing team for not realizing, 5 years ago, how Team Obama/Reid/Pelosi would drive the country into such despair that more Americans would be driven to drink alcohol!

Addendum – If you are interested in learning more about Maker’s Mark and becoming an Ambassador then go to this link.  You will not be disappointed!

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5 Responses to Defending Maker’s Mark

  1. Well reasoned, Cosmo.
    And FWIW, I’m not any sort of connoisseur, but I like a nice bourbon as much as the next guy.

    My own thinking is more along the lines of your initial thought: that if they had raised the price just a little (at least at first), they would have likely lost a bit of market share (maybe) but it should have balanced out the net profit.

    Being in professional sales my entire adult life, pricing is always a balancing act in any market/industry. Plus, most companies work very hard to not damage the perception of their product. This reduction in ‘proof’ could damage their image, and it may not. I don’t begin to presume to know more than this company about how best to market their own product, but it does appear to run counter to normal market forces.

    Here’s hoping it works for them. Good post on an unusual topic…

  2. Hey, Cosmo:
    Looks like it’s become a moot point, after all.
    http://www.nbcnews.com/business/makers-mark-stop-watering-down-its-whiskey-1C8410338

    This has all the earmarks of a win-win. MM just received more casual consumer press in the past week than have in years. Their loyal customers feel better knowing the taste they love is secure. And, even better, MM now is perceived to be more receptive and even more customer oriented than they were just a week ago.

    This reminds me a bit of the “New Coke” fracas many years ago. If this was all a grand scheme from their marketing team, they could have scarcely done better. Of course, if it wasn’t a deliberate play, they lucked out.

    Call me cynical… ;)

    • cosmoscon says:

      I know! I am a member of Maker’s Mark ambassador’s club and I got the email this afternoon. You are dead on with suspicions of this being a “New Coke” type marketing ploy. Either way, I’m happy my Maker’s Mark won’t have to require more water!

      They didn’t say they were raising prices either but will just deal with limited supply.

  3. cosmoscon says:

    Here is the email I got from Maker’s Mark today:

    Dear Ambassador,

    Since we announced our decision last week to reduce the alcohol content (ABV) of Maker’s Mark in response to supply constraints, we have heard many concerns and questions from our ambassadors and brand fans. We’re humbled by your overwhelming response and passion for Maker’s Mark. While we thought we were doing what’s right, this is your brand – and you told us in large numbers to change our decision.

    You spoke. We listened. And we’re sincerely sorry we let you down.

    So effective immediately, we are reversing our decision to lower the ABV of Maker’s Mark, and resuming production at 45% alcohol by volume (90 proof). Just like we’ve made it since the very beginning.

    The unanticipated dramatic growth rate of Maker’s Mark is a good problem to have, and we appreciate some of you telling us you’d even put up with occasional shortages. We promise we’ll deal with them as best we can, as we work to expand capacity at the distillery.

    Your trust, loyalty and passion are what’s most important. We realize we can’t lose sight of that. Thanks for your honesty and for reminding us what makes Maker’s Mark, and its fans, so special.

    We’ll set about getting back to bottling the handcrafted bourbon that our father/grandfather, Bill Samuels, Sr. created. Same recipe. Same production process. Same product.

    As always, we will continue to let you know first about developments at the distillery. In the meantime please keep telling us what’s on your mind and come down and visit us at the distillery. It means a lot to us.

    Sincerely,

    Rob Samuels
    Chief Operating Officer,
    Ambassador-in-Chief

    Bill Samuels, Jr.
    Chairman Emeritus,
    Ambassador-at-Large

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