Whisky into water is no fix for too many customers

Too many customers and not enough product. It’s the kind of problem that every brand manager dreams of. But for bourbon brand Maker’s Mark, it’s become a nightmare.

Mark Ritson

Demand for the brand, which was first produced in 1958, has been surging at unprecedented levels. Things have become so serious that the brand has been on “allocation” for several years – meaning an emergency distribution strategy in which only limited supplies are sent to distributors. The situation has, if anything, worsened in the past year and at the start of 2013 it was clear that a major strategic response from Beam Inc, the company that owns the brand, would be required.

The branding playbook is relatively straightforward when it comes to stock shortages. There are really only two options. One: make more product to meet demand. Unfortunately Maker’s Mark needs to be aged for about six years before it can be bottled. The good news is that this relatively long maturation produces the smooth, caramel flavours that the brand is renowned for. The bad news is that even if the distillery ups production immediately, it will be 2020 before any of this extra stock is available for sale. That’s six years of increasingly angry distributors and six more years of lost potential for the brand.

So how about option two? Increase prices. This would enable the brand to generate better profits and the higher price would reduce demand, allowing existing stock levels to suffice. There is also the additional attraction of the impact of premium prices in bolstering brand equity. We make more money, we strengthen the brand and we don’t need any additional production.

But here again there is a problem. Maker’s Mark has an average selling price of $30 (£19.80) in the US. A price rise of between $7 and $10 per bottle would, almost certainly, curb demand and provide increased profitability for Beam Inc. Unfortunately Maker’s Mark is not the only bourbon that Beam owns. Along with Jim Beam, which is priced around $20 a bottle, the company also owns and distributes Knob Creek at $36 and Basil Hayden’s, which retails at $40. Increasing the price of Maker’s Mark might solve the brand’s production problem but it would also result in Maker’s Mark competing directly with its sister brands on price.

And so the team at Beam Inc came up with an unlikely third option. Like all Bourbon, Maker’s Mark comes off the still as a much stronger spirit which is then watered down to make it palatable. In the case of Maker’s Mark, the bourbon starts life with a strength of 65 per cent alcohol by volume (ABV) before being diluted down to 45 per cent ABV for the bottle. Unable to make more bourbon or to charge more for it, the executives at Beam decided to add more water instead. By reducing the ABV from 45 per cent to 42 per cent, the brand would be able to make its stock go that little bit further and thus satisfy demand.

Keen to avoid accusations of an underhand move to make more money by lowering quality levels, Maker’s Mark went on to the front foot. Rob and Bill Samuels, the son and grandson of the brand’s founder and currently chief executive and chairman, respectively, of the brand, sent an email to their 200,000 brand ambassadors announcing the change. The email explained that the brand had “worked carefully” to reduce the ABV in order to “increase our limited supply so there is enough Maker’s Mark to go round”.

They then reassured advocates that they had tasted the new bourbon and were convinced it “remained consistent” with the original taste profile of the brand. The email also added that the new strength had also been “extensively tested” with loyal drinkers, who could not tell the difference. They concluded: “In other words, we’ve made sure we didn’t screw up your whisky”.

But they had screwed up their whisky. Within a few hours the brand was deluged by ambassadors enraged at the move. So strong was the response that a mere 72 hours later the company had back-flipped and the 45 per cent strength version was back in production and the company admitted they had been “extremely humbled” by the response from customers.

There has, of course, been the usual raft of conspiracy theorists speculating in the press that this was a clever move to build awareness or bed in the idea of a price rise. Alas, the mass-media tends to usually assume marketers are a) smarter than we really are and b) manipulative villains with a mastery of subterfuge.

The truth is, as usual, far more prosaic. Most big companies don’t understand their customers and they don’t understand their brands. Blind taste tests and open communications are no substitute for understanding who buys your product and why they buy it. Check out what Walkers has just done to its Chicken crisps (reformulated to contain real meat and so angering vegetarians) if you need an example closer to home.

The irony here is, however, that now even more people want to buy a bottle of Maker’s Mark, which isn’t going to help matters one bit….

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