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Anheuser-Busch InBev NV
“If it ain’t broke, don’t fix it,” is an appropriate characterization of the Maker’s Mark approach to whiskey making, a distilling process that has remained largely unchanged since Bill Samuels Sr. founded the company in 1952.
That’s how a Businessweek corporate profile of the Kentucky bourbon opened in 2006. The story went on to celebrate the distillery’s reverence for tradition and how this had contributed to its growth.
So, predictably, Kentucky bourbon drinkers (and I count myself among them) were taken aback this weekend when the distillery, owned by Beam (BEAM), announced that it was lowering the alcohol content in Maker’s Mark from 45 percent to 42 percent. “Bourbon drinkers everywhere are pretty pissed off right now,” Amy McKeever wrote on Eater.com.
The watering down, so to speak, of Maker’s Mark has been largely portrayed as a decision by a smallish distillery grappling with its success. “Fact is, demand for our bourbon is exceeding our ability to make it, which means we’re running very low on supply,” lamented Rob Samuels, chief operating officer of Maker’s Mark, in a letter to customers, according to CNNMoney.
But things have changed at the Loretto (Ky.) distillery since Businessweek paid it a visit in 2006. Three years ago hedge fund manager Bill Ackman acquired shares of Fortune Brands, then the owner of Jim Beam (parent of Maker’s Mark), and called for the company to spin off its liquor assets. Fortune reluctantly complied. Beam is now a separate company and considered by Wall Street analysts to be an acquisition target, with Diageo (DEO) the likely buyer.
Of course, when companies focus on making deals, their interest in maintaining tradition can slacken. A good example is Anheuser-Busch InBev (BUD), the global beermaker whose decisions to brew Beck’s and Bass Ale in the U.S. and fiddle with the ingredients of Budweiser were the basis for a Bloomberg Businessweek cover story, “The Plot to Destroy America’s Beer,” last November. Not all of its customers were overjoyed, but Wall Street has cheered AB InBev on.
Beam, which refers to Maker’s Mark in its corporate filings as one of its “power brands,” seems to be more concerned about hitting numbers than maintaining its credibility with Bourbon aficionados. There are risks involved with such a strategy, though. One of the reasons bourbon drinkers embraced what were then considered “small batch” brands like Maker’s Mark was that their parent companies were careful to present them as more authentic than mainstream competitors such as Jack Daniel’s. Another reason Maker’s Mark was appealing: It had a higher alcohol content than Jack Daniel’s. (And still does, though barely, at 42 percent vs. 40 percent.)
Beam’s share price is down today on the news. And longtime Maker’s Mark drinkers, who get less alcohol and less authenticity for the same price, may look elsewhere for comfort.