Thursday, February 14, 2013

Maker's Mark: Is Diluting the Boubon a Good Idea?

I have to admit that I was very surprised when I heard this week's news about Maker's Mark bourbon.  The company announced that they cannot keep up with customer demand, and therefore, they are cutting the proof from 90 to 84 to boost availability.   As Roger Dooley points out in his column at Forbes, the move risks damage to the brand.  Even worse, Dooley cites a statement by the company's chairman emeritus, Bill Samuels, Jr (son of the company founder).    Here is an excerpt from a news report by the Louisville Courier-Journal:

In an interview Monday, Chairman Emeritus 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.“I was the forecaster in chief around here. ... I must have been asleep at the wheel,” Samuels said.  Samuels and his son, Maker’s Mark Chief Operating Officer Rob Samuels, insist consumers won’t notice the change when the slightly weaker bourbon hits shelves in the next few weeks. Even Maker’s Mark’s professional taste testers couldn’t tell the difference, Rob Samuels said.

Wow... as Dooley rightfully points out, why makes things worse by claiming that your loyal customers won't know the difference!   Perhaps it is true, but should you really say that?   The bigger question is whether Maker's Mark has put short term revenue and market share goals ahead of what is good for the brand in the long run.  Does this move really fit with a company whose historic slogan was:  "It tastes expensive... and is." 

How does a firm handle scarcity?    Should it try to capitalize on the excitement and frenzy that scarcity can create, or should it move to rapidly expand supply?   One other interesting note:  Beam Spirits now owns Maker's Mark.  Would the company have made the same move if it was privately held?  Does being part of a publicly traded company put too much pressure on management to make up for this supply shortage? 


gauvinpamgen said...

It questions the strategic abilities of leadership to make a decision like this - sacrifice the brand to meet demand - bourbon drinkers will equate the dilution to a reduction in quality, competitors will love this blunder....

Lesson from Pappy Van Winkle bourbon (M. Roberto blog) - small batch distiller creates high demand (scarcity) for high quality product. Fabulous positioning strategy.

Thanks Mike

Scott Beaty said...

They reversed the decision today.