Endgame: Maker’s Mark to meet increasing demand by … reducing its alcohol content

posted at 8:41 pm on February 11, 2013 by Allahpundit

I’m trying to imagine any other company in any other industry handling a global clamor for its product this poorly. It’s like BMW advertising the fact that it can’t keep pace with demand and as a result will shift to slightly lower-quality engine components.

Alternate headline: “Prestige brand turns PR bonanza into PR disaster.”

Maker’s Mark is distilled to 45 percent alcohol by volume — or 90 proof — and, after the change, would go down to about 42 percent ABV or 84 proof.

“Lately we’ve been hearing from many of you that you’ve been having difficulty finding Maker’s Mark in your local stores,” Maker’s Mark executives Rob Samuels and Bill Samuels Jr. wrote in a joint email to clients.

“Fact is, demand for our bourbon is exceeding our ability to make it, which means we’re running very low on supply.”

A local bartender insists that consumers will notice the difference, the same way they’d notice if he started diluting beer by pouring a half shot of water into everyone’s pint. I’m … pretty sure most people wouldn’t notice that, but that’s not the point. The point is that MM is actually broadcasting the fact that fans will get less bang for their buck henceforth. If only there was an alternate solution suggested by, say, third-grade economics:

As I joked on Twitter, the geniuses at Maker’s Mark are diluting their product in order to ensure that more people have access to a crappier product. This is so remarkably stupid I don’t even know where to begin. All I’ll say is that we have a tried and true solution to this problem: raise the price! When demand for your product increases and you have no ability to make the same product at the same price point, you raise the price of the product. Then, once your production capabilities have caught up or demand slackens, you lower the price again. You don’t damage the brand by making an inferior product.

Indeed. Wouldn’t surprise me if they see fewer profits doing it this way than if they declared a worldwide shortage, jacked up the price by 20 percent, and forced Maker’s Mark fans to start hoarding bottles in a scarcity panic. If anything, they should have boosted the alcohol content by a point or two. Madness.

Update: Wanted to yank this out of the Greenroom and put it up front now that Maker’s Mark’s COO has responded to the outcry. Quote:

Why not just raise the price? That’s another common solution to problems of supply and demand.

“Rob’s grandfather did not like ostentatiousness,” Bill said, referring to Bill Samuels Sr. ”It deliberately was not marketed as an image-transfer brand.” I pointed that out Maker’s Mark was once marketed under the slogan, “It tastes expensive…and is.”

Rob said that, yes, “for a period, it was a little more expensive than others,” but described Maker’s Mark as more a mid-market brand now. Jim Beam, owned by the same company, is a cheaper bourbon; Maker’s 46 is higher-end and higher proof. In that sense, lowering the proof of Maker’s Mark is diversifying the company’s selection of bourbon.

So the idea is, since higher global demand means consumers will have to pay a tiny bit more per unit of alcohol no matter what, rather than keep the same proof and jack up the price such that MM begins to compete with the company’s premium brands, they’ll keep the price more affordable for middle-class drinkers and simply give them less booze. Hard for me to believe that that’s more profitable for them than simply raising the price and losing some sales to intracompany competition given the brutal publicity they’re getting from this for “cheating” their regular customers, but okay.

Exit question via Megan McArdle: Does this de facto price hike actually have to do with the rising price of corn? If it does, why haven’t other bourbon makers followed suit? (Or will they?)

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Just switch to a real corn whisky, Balcones True Blue from Texas, which is usually bottled over 110 proof (55-58% ABV).

smfoushee on February 12, 2013 at 10:02 AM

My solution? Drink Scotch.

Polish Rifle on February 12, 2013 at 10:06 AM

JohnnyL on February 12, 2013 at 9:56 AM

In other words Americans are suckers for gimmicks..

Beam owned “Makers Mark” now also owns one of my favorites– “Old Crow”.

But the MBA marketing types know their prey (whether it be Makers Mark or BMW) and they will maximize profits at the bottom line over loyalty to a silly beverage recipe (ie: screw you Mr Consumer !!).

Lowering the alcohol content is not noticeable to most suckers….but if you do away with the “red wax” or change bottle packaging to help corporate bottom line …that’s serious bad marketing as suckers notice these things..but they don’t notice changing the ingredient of the swill being produced

As for just raising prices on suckers? ..Beam MBA marketing types apparently think this is a bad idea in the highly competitive booze industry…The “fluffery” around tradename “Makers Mark” could be dampened by a price hit….yuppies would look for another gimmicky bourbon at better price…oops..maybe they would flock to “Old Crow” …then Beam could jack up the Old Crow price….and I’d be looking for another brand of sour mash whiskey !!

BigSven on February 12, 2013 at 10:35 AM

Does anyone remember New Coke? What a flop! People don’t like it when you mess with a proven product. We here in Kentucky love it just like it is.

generouse on February 12, 2013 at 10:48 AM

Does anyone remember New Coke? What a flop! People don’t like it when you mess with a proven product. We here in Kentucky love it just like it is.

generouse on February 12, 2013 at 10:48 AM

To this day, I’m still not convinced that wasn’t some publicity stunt.

Makers Mark isn’t revamping their product into something entirely different like the Coke/New Coke debacle (along with Pepsi Clear) They’re simply diluting their bourbon, a “premium” liquor, so it can stretch out it’s production, much like a cocaine dealer would cut his product in order to make his inventory go further, thus selling more, and making a tidy profit.

I’m no big fan of bourbon…I’m a single malt scotch fan…but this whole idea of a brand like Makers diluting their product in order to meet demand doesn’t make much sense on any level. Brand image is highly important for liquor makers and distillers…it’s probably the biggest single factor influencing consumer choices. Why screw around with that image that was finely tuned and presented over the years?

Makes no sense. Unless it’s some gimmick…unlikely, but not entirely unheard of.

JetBoy on February 12, 2013 at 11:17 AM

My solution? Drink Scotch.

Polish Rifle on February 12, 2013 at 10:06 AM

Cheers to that

JetBoy on February 12, 2013 at 11:33 AM

But this is not new: it’s been happening in your grocery stores since the first days of fuel cost spikes years ago. The easiest example, though there are thousands, is the disappearance of the “half-gallon” of ice cream, and the birth of the “cube,” “square” and any other number of euphemisms for 1.75 quarts of ice cream instead of 2.

The product is reduced in some fashion and the price is kept the same or even still increased. What these idiots didn’t want to do was add the expense of rejiggering their bottle size, an enormously expensive operational undertaking, and their foolish brain trust thought diluting the product would make the customers happy to pay the same (remember, wholesale) price. If there were half the raisins in the raisin bran, would customers still pay the same in the same numbers? Of course not.

It’s been eight years and the ice cream is more expensive, by far, yet still smaller. They think somehow things will get better, the poor dears.

I would be interested in the politics of this so-called business leader. Probably the laughingstock of the monthly CEO Roundtable.

winoceros on February 12, 2013 at 11:57 AM

To this day, I’m still not convinced that wasn’t some publicity stunt

It was a business stunt. In the early 80’s the price of sugar was going up and going up faster than the bottlers, who were at that time (and perhaps still are) independent businesses, could sustain. They demanded that the formula be changed to decrease or eliminate sugar. Thus New Coke. Less sweet, less taste, less zing. Flop. Then Coke Classic makes an appearance. Same formula as original (so the story goes), except less sugar and (I believe) the first appearance of high fructose corn syrup in a soft drink. The only real difference in taste (to me) between original Coke and “Coke Classic” is less zing – produced by the confluence of sugar, caffeine, and carbonation.

Did they know that New Coke would flop? I find it hard to believe that they didn’t do some blind taste testing and know it would go over like the Edsel. I think they were more concerned about keeping the bottlers happy and their business model favorable.

jclittlep on February 12, 2013 at 6:26 PM