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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