The news that Maker’s Mark is watering down its core expression to meet demand has drawn a surprisingly wide reaction; even Slate’s economics blogger, Matthew Yglesias, has weighed in. The reactions have been predictable: mostly snobs, but also some strange theories – Yglesias suspects that it’s all about Beam, which owns Maker’s, trying to “rebalance” its portfolio in favor of Beam’s small batch whiskeys:
… one way ot think about this is part of an overall rebalancing of Beam, Inc.’s bourbon portfolio … Raising Maker’s Mark prices would have spillover consequences for the price of other bourbons in the portfolio, while if some customers are alientated by the steps taken to keep Maker’s prices low they may simply upshift to Basil Hayden’s or Booker’s.
But Maker’s isn’t part of the same portfolio as Beam’s whiskeys. They’re all owned by Beam, but Maker’s is a wholly owned subsidiary of Beam, with its own facilities and marketing and leadership structure – so I don’t know what “spillover consequences” a price-hike at Maker’s would have on Beam’s directly controlled expressions. That’s simply not how decisions are made at Beam, Inc.
In any case, it’s not as if these are the only whiskeys in the world – Maker’s may compete with Booker’s (or may not; given their differences in proof, that’s a debatable point), but it also competes with Buffalo Trace and Evan Williams and a whole host of non-Beam-owned whiskeys. So I sincerely doubt that Beam believes it will keep all the “alienated” customers it loses from the Maker’s switch. It will keep some, but not all, and not enough to cavalierly damage the brand identity by watering it down.
As usual, the smart take comes from Chuck Cowdery, who notes that, in the grand scheme, it’s not about the U.S. market. Check out the latest numbers from the Distilled Spirits Council of the United States: domestic Tennessee and bourbon whiskey sales are up a healthy 5.2 percent, but spirits exports are up 16.5 percent, with whiskey comprising 70 percent of that.
The domestic bourbon boom may be a fad, Beam/Maker’s probably figures, so why invest heavily in new facilities, which won’t be ready for another several years? (Which is why, as Chuck notes, Maker’s promised expansion hasn’t materialized.) What is real, however, is the endless demand coming from Canada, Europe and especially East Asia – markets that Rob Samuels himself told me are a key to Beam and Maker’s growth plans.
The thing about those markets is, they expect whiskey to come in at lower proofs – as Chuck notes, Maker’s in Australia is already sold at 80 proof. So if Maker’s can thin out the product and still please new-drinker palates, it’s a no-brainer. And since Maker’s 46 will still be sold in the States at its original higher proof, there’s no reason to spend the extra money creating two proofs of Maker’s Mark, one domestic and one foreign. Clay Risen
Just to add my theory to the chorus (and it’s not a particularly original theory): At this point, the contents in a bottle of makers are far less important than the brand itself. Makers has become the de facto premium American whiskey at most places that sell booze, from the airport lounge to the casual happy hour bar to the sports bar to the chain restaurant to the dance club. At most of those places you have Beam White Label, Jack Daniels No. 7, and Makers. Yes, there are a smaller number of places that pride themselves on their numerous whiskey offerings, and at those places, Makers will not have pride of place, but at the majority of places that sell booze, it’s the brand to call for when you want to call for a “better” brand. They advertise more aggressively than their competitors in the same niche, they sponsor more aggressively, and it shows in terms of the strength of the brand identity among the broad spectrum of drinkers. Whatever kind of backlash they may get from the minority of serious bourbon drinkers simply isn’t going to affect them, and most folks who call for Makers at a bar or pick up a bottle at the ABC store won’t notice the difference. Interesting point you made about the international market; that makes a lot of sense and I hadn’t thought about it, nor was I aware it was 80 proof overseas. Also, for the first time in a long time, I’m thinking about going out and buying a bottle of Makers Mark, mostly as a novelty since the old bottling is not long for this world. I wonder what kind of short-term sales spike they might receive from this?