Olly Wehring

Comment - Wehring's Way: Beam Inc and its Maker's Mark Gamble

By | 11 February 2013

Beam Inc will reduce the abv of Makers Mark from 45% to 42%

Beam Inc will reduce the abv of Maker's Mark from 45% to 42%

Pick up a bottle of Maker's Mark, and you can't help but notice the attention to detail, the provenance, the history. That's all the more impressive when you learn that the brand is owned by a listed company.

So, when Beam Inc confirmed its intention to reduce the abv of the Bourbon brand yesterday (11 February), from 45% to 42%, the purists of the whisk(e)y world started sharpening their knives. Charges of “throwing away its premium positioning”, and “doing whatever they can to boost near-term profitability” abound this afternoon.

Put bluntly, this appears to be a capacity issue.

It is clear to me that there has been some miscalculation at the Maker's Mark Distillery in Loretto, Kentucky. That miscalculation appears to be driven by the brand's over-performance – volumes up by 30% since 2010 is a pretty pleasant problem to have to deal with.

Were this to be about profit alone, consider this: In 2012, the Jim Beam brand sold around 7m cases. Maker's Mark sold just over 1m. Much as the latter is positioned as one of the company's “Power Brands” - along with the likes of Jim Beam, Sauza, Courvoisier and Teacher's - it is not yet delivering the type of volumes that make it ripe for 'pillaging'. It would have to be going gangbusters in markets like China and/or India.

Let us, then, consider definitions: To qualify as a 'Straight Bourbon', the liquid needs to be aged for at least two years. Maker's Mark is aged for between five years and nine months, and seven years. Beam is keen to flag that it ages Maker's Mark based on taste, not on legal definition. So, when making the move from 45% to 42%, you can be certain the company will do its utmost to make sure the taste profile is factored in.

And, enough with the 'watered down' accusation. Like Scotch, Irish and - come to think of it – every whisk(e)y category, Bourbon is cut with water as a matter of course. That more water is now being added to Maker's Mark does not mean it's being 'watered down' a whole lot more than before: Working on that basis, it's always been 'watered down'.

My question, ultimately, is this: If you owned a brand that has delivered volume growth of around 60% since 2008 and, as I suspect is the case here, you've been caught out by this success, what would you do with your brand?

In an age where many drinks companies are clinging to price rises to drive their profits, Beam's move isn't quite as offensive as the so-called purists make it out to be.

Expert analysis

Beam Inc. (BEAM) - Financial and Strategic SWOT Analysis Review

Beam Inc. (Beam), formerly known as Fortune Brands, Inc, is a premium spirits company. The company offers branded distilled spirits products. The product portfolio of the company consists of bourbon whiskey, Scotch whisky, Canadian whisky, tequila, cognac, rum, cordials, and ready-to-drink pre-mixed cocktails. The renowned brands offered by the company include Jim Beam Bourbon, Canadian Club Whisky, Maker’s Mark Bourbon, Sauza Tequila, Courvoisier Cognac, Teacher’s Scotch, Laphroaig Scotch, Knob Creek Bourbon, Cruzan Rum, Basil Hayden’s Bourbon, Kilbeggan Irish Whiskey, Hornitos Tequila, Skinnygirl Cocktails, EFFEN Vodka, Pucker Vodka and Sourz Liqueurs among others. The company’s major markets includes North America, Australia and Europe, and also maintains presence in the markets of India, Brazil, Russia, Central Europe, Asia, and other geographies. The company is headquartered in Illinois, the US. The company is expanding its operations as evident from its recent acquisition related agreement with White Rock Distilleries to acquire the fast-growing Pinnacle Vodka and Calico Jack rum brands and other related assets for $605m in cash.

Sectors: Spirits

Companies: Beam Inc

There is currently 1 comment on this article

So the brand is a major succes, simply because people like the taste of it, so we change the recipe? Doesn't make sense to me.

 

Sjakes.com said at 10:56 am, February 13, 2013

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