Pi Attitude Zone: Self-Gratification

Unmaking Your Mark

Beam Inc. should know better, particularly after the same damn thing happened with their Sauza tequila brand.

Maker’s Mark is Beam’s lead premium bourbon whiskey, one of the ‘power brands’ with which the company has cemented huge trade supply deals.  Maker’s takes six years to mature, so decisions on how much to distil for sale in 2013 were taken back in 2007.  Beam Inc. underestimated the brand’s future success, and undershot on production.  Shortages have been aggravated by the brand’s growing popularity for mixing in cocktails, which blur its subtle flavors.

What to do?  Classic market logic says that shrinking supply and growing demand mean price increases.  Instead, this brand’s managers held the price and diluted the product in the bottle from 90 proof to 84 proof.  

Big mistake.  Mess with “perfection”, and you risk your core consumers getting seriously riled at you.  Along with demand, the other thing Beam Inc. underestimated was the almost holy reverence that aficionados accord to their preferred liquor, and their fury if they find out it has been adulterated. 

Pi has seen all this before, in the ‘tequila wars’ of decades ago. 

Tequila is made from the agave plant. Long-standing Mexican law (like French ‘appellation controlée’) said the product had to be made to designated standards within a small area around the town of Tequila in Mexico’s Jalisco state.  For years most tequila was consumed in Mexico. Production was limited, because agave takes a long time to reach maturity. Finer tequilas are aged (añejo) or “rested” (reposado), increasing production time still more.

Then along came Spaghetti Western movies, and tequila started to be adopted by image-conscious young drinkers. The global liquor empires smelled opportunity, and went down to Mexico to buy a tequilero or two. “Hey, Hoe-Zay” they asked, “How can we produce more of this stuff?”  “But, señor, we can’t”, was the answer. “It will take years to grow more agave. You’ll just have to sell what we’re making”.

“No way, José”, said the new proprietors, (Beam Inc. included).  “Bulk it out with something else”. The Mexican government relaxed the official standards to meet world demand.  Most tequila was cut with sugar-based alcohol which had never seen an agave in its sweet, sticky life. Young drinkers everywhere started getting hangovers worth bragging about the morning after.  Tequila’s reputation slipped badly. Aficionados of high-grade tequila brands were horrified.  Many switched to whisky.

But the tequila story had a happy ending. Pretty soon the top-end tequilas were back, with “100% Agave” on their labels, premium-priced, their delicate flavor intact. Real aficionados didn’t mind paying extra for quality.

The lesson for Maker’s Mark?  Add a super-premium level to your brand offering, and let market forces set your pricing.

Zone: Self-Gratification Country: USA / North America Product – Consumer Products