PDA

View Full Version : Higher Bourbon Prices Are Coming.



cowdery
03-14-2012, 13:12
Shanken reported today that Beam Inc. has raised prices on its bourbon brands and could take a second round of U. S. price hikes yet this year. The announcement was made by Beam North America president Bill Newlands. The Beam bourbons (Jim Beam, Makerís Mark, Knob Creek, etc.) will probably go up the most. Newlands cited rising corn prices in the U. S. as the primary reason. Scotch, tequila, and cognac prices may also rise. Vodka probably won't (too competitive).

Nobody likes to pay more but this is another indication of the industry's robust good health, and that's good for everybody.

bgageus
03-14-2012, 13:47
Interesting relation to corn prices, but the bourbon I am buying now has not been corn for a while.

callmeox
03-14-2012, 14:00
Interesting relation to corn prices, but the bourbon I am buying now has not been corn for a while.


Along with many other things, we pay replacement cost. :smiley_acbt:

bgageus
03-14-2012, 14:06
Along with many other things, we pay replacement cost. :smiley_acbt:

On the brighter side, my bunker just became more valuable.

JayMonster
03-14-2012, 14:36
Interesting relation to corn prices, but the bourbon I am buying now has not been corn for a while.

Remember the recent thread about LIFO (Last In First Out) accounting practices?

MissinER101
03-14-2012, 14:50
Interesting relation to corn prices, but the bourbon I am buying now has not been corn for a while.

:confused: :confused:

Enlighten me...... How can it be bourbon if it is not more than 51% corn

cowdery
03-14-2012, 14:54
:confused: :confused:

Enlighten me...... How can it be bourbon if it is not more than 51% corn

It hasn't been corn since it was transformed into alcohol, probably six to ten years ago, or more.

Jwilly019
03-14-2012, 15:25
Remember the recent thread about LIFO (Last In First Out) accounting practices?

Except Beam is already using FIFO, so they shouldn't be seeing any additional costs from that perspective.

Hershmeister
03-14-2012, 15:41
Another reason to hate ethanol

ShewDawg
03-14-2012, 18:53
Another reason to hate ethanol

Yup, just not killing food prices anymore, killing the important stuff.

JayMonster
03-14-2012, 19:19
Actually, it sounds like corn prices is more of an excuse. Read what Newmark had to say... They are seeing an improving US economy as an "opportunity" to raise prices,


"We are watching it very closely and any chance we get to do pricing, we're doing it. At the moment we're doing it in targeted ways, places where we feel we have strength and where those opportunities present themselves, or whether there's cost structures that we'd like to recoup," Newlands said.

I guess they have figured they have already watered down the liquor as much as they can, so now they are stuck raising prices "any chance they get"

Source: Reuters - http://www.reuters.com/article/2012/03/13/us-food-summit-beam-idUSBRE82C14220120313

Clavius
03-14-2012, 20:47
Interesting. Working on the retail side I had heard that Maker's was going up in price. But I didn't know that all of Beam's brands were going to do the same.

Lazer
03-14-2012, 21:08
They're raising the price because they are raising the price, it has nothing to do with the price of corn in the US, or tea in china. Global demand is up for whiskey, so the price has to follow. We're gonna see more of this as the Asian and other foreign markets open up to American whiskey. If you want to blame someone for this blame yourselves for shooting your mouths off on the internet and telling the whole world how great our bourbon is. Just shut up and let the Chinese drink JD black and JB white and just tell them everything else sucks. It'll be our secret.

The truth is, the only reason demand is up for bourbon is because of the global financial crisis. Bourbon is cheap. At least it was. People start drinking bourbon when they lose their job and their money and their friends and they can't afford to do anything else, so they go down to the liquor store and buy a bottle of the cheap brown stuff to dull their pain and end up liking the stuff, so they realize that its not so bad to be poor. Oh yeah, when I was rich I was taking vacations to the Islands, drinking bacardi silver in a strawberry daqueri with women in bikini's on the white sand, and I didn't really care about what I was drinking. now I'm alone in my apartment but it isn't so bad because I can at least afford a bottle of this sweet brown nectar that I thought was just going to make me pass out and forget about my misery but now l have something to live for. I'm a bourbon enthusiast. I get to try all sorts of new bourbon flavors like caramel, of toffee, or butterscotch, all while getting wasted for about $.50 a pour. Life is good.

Bourbon Boiler
03-14-2012, 21:18
I would guess that bourbon makers are engaged in a variety of risk managment practices in regards to grain purchases (forward buying, futures trading, put options, etc.) to reduce volatility. It can't hold out forever, but it's doubtful that it's had much of an effect on the bottom line to this point.

cowdery
03-14-2012, 22:04
I was a little surprised he even said it. For one thing, he said they aren't raising vodka prices because the vodka market is so competitive, but there is more corn in a bottle of vodka than there is in a bottle of bourbon, so take it with a grain of salt. You want to say, "corn prices, Bill? Really? Corn prices? we're not children, Bill."

Fpst
03-15-2012, 00:10
They're raising the price because they are raising the price, it has nothing to do with the price of corn in the US, or tea in china. Global demand is up for whiskey, so the price has to follow. We're gonna see more of this as the Asian and other foreign markets open up to American whiskey. If you want to blame someone for this blame yourselves for shooting your mouths off on the internet and telling the whole world how great our bourbon is. Just shut up and let the Chinese drink JD black and JB white and just tell them everything else sucks. It'll be our secret.

The truth is, the only reason demand is up for bourbon is because of the global financial crisis. Bourbon is cheap. At least it was. People start drinking bourbon when they lose their job and their money and their friends and they can't afford to do anything else, so they go down to the liquor store and buy a bottle of the cheap brown stuff to dull their pain and end up liking the stuff, so they realize that its not so bad to be poor. Oh yeah, when I was rich I was taking vacations to the Islands, drinking bacardi silver in a strawberry daqueri with women in bikini's on the white sand, and I didn't really care about what I was drinking. now I'm alone in my apartment but it isn't so bad because I can at least afford a bottle of this sweet brown nectar that I thought was just going to make me pass out and forget about my misery but now l have something to live for. I'm a bourbon enthusiast. I get to try all sorts of new bourbon flavors like caramel, of toffee, or butterscotch, all while getting wasted for about $.50 a pour. Life is good.

I'm not sure which emoticon to use... all of them? Simply wonderful post.

wmpevans
03-15-2012, 05:49
Source: Reuters - http://www.reuters.com/article/2012/...82C14220120313 (http://www.reuters.com/article/2012/...82C14220120313)

Surprizing line in this Reuters story:

27% rise in sales of Basil Hayden.

Maybe I can sell my 2/3rd's full bottle of BH that's been open for almost a year that I don't ever seem to want to go to. :lol:

The only time it gets hit is when people come over; see it; and say

"I've always wanted to try that"

Special Reserve
03-15-2012, 05:53
I was a little surprised he even said it. For one thing, he said they aren't raising vodka prices because the vodka market is so competitive, but there is more corn in a bottle of vodka than there is in a bottle of bourbon, so take it with a grain of salt. You want to say, "corn prices, Bill? Really? Corn prices? we're not children, Bill."

It's similar to the price of diet pop going up when the price of sugar went up.

The more telling signs ares not seeing any premium quality bourbon on the shelves and the prices that they are going for on auction sites.

Bunker up if you can.

cigarnv
03-15-2012, 06:49
Charge what the market will bear.... just good business...

JayMonster
03-15-2012, 07:56
Charge what the market will bear.... just good business...

Fair enough, and granted this was said primarily for the investor set, but a little more tact than saying you are going to raise prices, "any chance we get" is also good business sense.

weller_tex
03-15-2012, 08:55
I am not a Beam hater as are many around these parts..JBW on the rocks in a pinch is fine, JBB is a good and a good deal. MM is good..

However, JBW is really not worth what they are charging already compared to competitors. You raise the price and I think you start losing customers, unless all the competitors follow suit.

It's a fine line between raising prices when times are good and not alienating the customers that made the times good.

StraightNoChaser
03-15-2012, 11:04
On the bright side of things, dusty bottles on shelves are the same price they were 10-20 years ago :grin:

Lazer
03-15-2012, 11:12
I guess I'll just have to go to the liquor store with my shotgun and ski mask, and when the clerk starts to hand over the cash I'll tell him no no no, just give me the Knob Creek and the Booker's and nobody will get hurt. :lol:

StraightNoChaser
03-15-2012, 11:26
I guess I'll just have to go to the liquor store with my shotgun and ski mask, and when the clerk starts to hand over the cash I'll tell him no no no, just give me the Knob Creek and the Booker's and nobody will get hurt. :lol:
That's basically what I want to do to the crazy Cambodian lady who won't sell me her 50's/60's era OWA :hot:

moose
03-15-2012, 11:37
Should be getting new Beam, KC, MM, and more in today, I'll have to check and see if the prices have taken a jump yet here or not. Hoping not, they are high enough already.

Bourbon Boiler
03-15-2012, 13:28
Chuck, (or anyone else)

Is there a chance that Beam's is now projecting that they are understocked on 3-4 year old product, and know that they couldn't fill demand 2-4 years from now? If they know they'd be short, it makes sense to raise prices now and increase the margins. They'd still move the same number of units either way in this situation, and wouldn't allienate distributors.

Hershmeister
03-15-2012, 14:02
Companies announce price increases In advance for two reasons:

1) push future sales into today
2) signal to their competitors

mosugoji64
03-15-2012, 22:16
That's basically what I want to do to the crazy Cambodian lady who won't sell me her 50's/60's era OWA :hot:

As long as I get to share, I'll volunteer to be your accomplice/wheelman!

Stormeh
03-15-2012, 23:32
Well, I think we all knew this was coming with Bourbon being in demand more now than ever.

JayMonster
03-16-2012, 05:13
Well, I think we all knew this was coming with Bourbon being in demand more now than ever.

To a certain extent, that is true. Bourbon makers do not want to deal with the cut throat nature of pricing that currently has to be dealt with in the Vodka and Rum markets.

On the other hand, they don't want to kneecap the growth either and send people back to whatever they switched from in the first place.

If there is a lesson to be learned from Ri1, it is that prices cannot just skyrocket unilaterally... Even if you put it in a hipster friendly bottle. Brand name and (at least perceived) quality still matterin the whiskey world.

Stormeh
03-16-2012, 12:05
To a certain extent, that is true. Bourbon makers do not want to deal with the cut throat nature of pricing that currently has to be dealt with in the Vodka and Rum markets.

On the other hand, they don't want to kneecap the growth either and send people back to whatever they switched from in the first place.

If there is a lesson to be learned from Ri1, it is that prices cannot just skyrocket unilaterally... Even if you put it in a hipster friendly bottle. Brand name and (at least perceived) quality still matterin the whiskey world.

True. Ri1 is awful (imo.) Hopefully American Whiskey does not become the new vodka market. That would lead to inferior whiskey for all.

jburlowski
03-16-2012, 13:44
I was a little surprised he even said it. For one thing, he said they aren't raising vodka prices because the vodka market is so competitive, but there is more corn in a bottle of vodka than there is in a bottle of bourbon, so take it with a grain of salt. You want to say, "corn prices, Bill? Really? Corn prices? we're not children, Bill."

Even at today's elevated price, corn is a minor component of the cost of a bottle of bourbon --- around a half a buck for a 750ml bottle. Natural gas prices have come down dramatically and energy is a significant component of the cost of production ---- why not a price decrease?

As others have stated here: they're raising the price because of demand and they feel they can without impacting sales volumes.

cowdery
03-16-2012, 15:29
The one factor that hasn't been mentioned is that Beam Inc. is a brand new company, since the shedding of the non-spirits businesses. This is a signal to Wall Street too, perhaps most of all. What Wall Street values above all else is predictability.

JayMonster
03-16-2012, 17:45
The one factor that hasn't been mentioned is that Beam Inc. is a brand new company, since the shedding of the non-spirits businesses. This is a signal to Wall Street too, perhaps most of all. What Wall Street values above all else is predictability.

Oh, of this, there is no doubt. As much as I hated to hear a statement like, "we are going to look to do pricing [increase] every chance we get," this was directly aimed at, and exactly what investors and brokers wanted to hear.

Beam Global had a good quarter, but Wall Street is a "What are you doing now to keep income growing" sort and you are only as good as your next quarter's earning.

doubleblank
03-17-2012, 10:15
Hey Chuck......Wall Street also likes pricing power. Analysts are always looking for companies who can either/or/or both pass along increases in costs quickly and increase prices due to supply/demand issues. We know the supply/demand picture is working in the industry's favor.

Randy

Gillman
03-17-2012, 10:48
I think there's a balance point though. At some point, consumers, even ones overseas, may feel bourbon is priced too high, and stocks may start to languish on the shelves. I'm not sure people will ever view bourbon as completely on a par with malt whisky, I don't mean specialist circles like here, but the market at large. I think the companies need to be careful not to go overboard with price hikes.

Gary

yountvillewjs
03-17-2012, 10:56
I think there's a balance point though. At some point, consumers, even ones overseas, may feel bourbon is priced too high, and stocks may start to languish on the shelves. I'm not sure people will ever view bourbon as completely on a par with malt whisky, I don't mean specialist circles like here, but the market at large. I think the companies need to be careful not to go overboard with price hikes.

Gary

+1. I think bourbon will always be a niche play, just now assuming a larger, higher profile and market share than it has in the past.

cowdery
03-17-2012, 14:12
I've been closely following another stock for a purpose unrelated to whiskey, and have been struck by how relentlessly short term most analysts and commentators are. Gary's point is completely valid but too long term to be pertinent.

Pricing power is a very good point and in flexing it, Beam is making a 180į shift in corporate style. Beam historically was cautious on pricing and quick with a deal. The recent explosion of new products is another 180į change. Beam's leadership is signaling that this isn't the old Fortune Brands-version of Beam.

T Comp
03-17-2012, 15:42
Here's a Bloomberg businessweek article from 7/1/91 (was that really more than 20 years ago :bigeyes: ) on how the industry was betting on global sales back then. Chuck has previously writtten about Japan and it being the first success and cause of Bourbon's renaissance. Interesting that Japanese sales were already starting to decline in 1990 and that United Distillers $20 million expansion...how'd that work out for them.

http://www.businessweek.com/archives/1991/b322047.arc.htm

Halifax
03-17-2012, 20:59
I could care less if Basil Hayden goes to $50, or Knob Creek is increased to $40... Let Beam raise the price on shit that sucks. What do I care...:rolleyes:

JayMonster
03-17-2012, 21:03
I could care less if Basil Hayden goes to $50, or Knob Creek is increased to $40... Let Beam raise the price on shit that sucks. What do I care...:rolleyes:

Well, simply put, if Beam paves the way, and shows it can sell at the higher prices, what are the chances that the brand(s) you do like follow suit? So whether you like Beam or not, it is worth caring about.

ethangsmith
03-18-2012, 12:31
Hopefully American Whiskey does not become the new vodka market.

I don't think we need to worry too much about that. You've got to be a REAL man or woman to drink and enjoy bourbon or rye. Too much of the American population has turned into Jersey Shore-watching, rap-listening, mush-brained fools that are totally incapable of recognizing the merits and flavors of a good pour of American whiskey. Vodka? You can be dumb as a brick and still enjoy its flavorless gut-rot burn.

As for upping prices- thank God I love the mid- and bottom-shelf stuff. Basically all but 1 or 2 bottles on my shelves are less than $40 each. Well over half of them are less than $20 each! Even if they increase the price 10%, I've only added a few bucks to any of the stuff I drink.

StraightNoChaser
03-18-2012, 21:08
I could care less if Basil Hayden goes to $50, or Knob Creek is increased to $40... Let Beam raise the price on shit that sucks. What do I care...:rolleyes:
Took the words out of my mouth, man.

StraightNoChaser
03-18-2012, 21:08
Well, simply put, if Beam paves the way, and shows it can sell at the higher prices, what are the chances that the brand(s) you do like follow suit? So whether you like Beam or not, it is worth caring about.If the other producers don't follow suit, that will put Beam in a pinch.

Halifax
03-19-2012, 08:54
Well, simply put, if Beam paves the way, and shows it can sell at the higher prices, what are the chances that the brand(s) you do like follow suit? So whether you like Beam or not, it is worth caring about.

I try not to worry about things that are out of my control. But... One can plan accordingly.

sob0728
03-19-2012, 13:51
Well, simply put, if Beam paves the way, and shows it can sell at the higher prices, what are the chances that the brand(s) you do like follow suit? So whether you like Beam or not, it is worth caring about.

And if that happens, we are all going to have to start posting pictures of pens and watches with no bourbon in them.:grin:

I can't wait for the "what writing utensil did you buy today?" and the "what time piece are you enjoying this fall?" threads.

cowdery
03-19-2012, 15:16
When the higher prices hit I suspect they'll be modest, <5% in most cases, maybe more on whatever are perceived as the most premium brands, such as Booker's and, yes, Basil Hayden. Anything with Jim Beam in the name will be less and the cats and dogs, like Old Crow, may not change at all since they're in such a price-sensitive segment. Beam is maybe 4 MM cases domestically. Another dime to the bottom line per bottle is nice money.

CorvallisCracker
03-19-2012, 17:33
And if that happens, we are all going to have to start posting pictures of pens and watches with no bourbon in them.:grin:


You don't expect her to see that comment, do you? I've watched her in Who's Online and she reads only the threads she's started.

sob0728
03-19-2012, 18:29
You don't expect her to see that comment, do you? I've watched her in Who's Online and she reads only the threads she's started.

She's not the only one doing it.