Higher Bourbon Prices Are Coming.

[Bourbon Boiler]

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]

Companies announce price increases In advance for two reasons:

1) push future sales into today

2) signal to their competitors

[mosugoji64]

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:

[Stormeh]

Well, I think we all knew this was coming with Bourbon being in demand more now than ever.

[JayMonster]

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]

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.

[jburlowski]

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]

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]

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]

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]

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]

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]

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 180° shift in corporate style. Beam historically was cautious on pricing and quick with a deal. The recent explosion of new products is another 180° change. Beam's leadership is signaling that this isn't the old Fortune Brands-version of Beam.

[T Comp]

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]

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...

[JayMonster]

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...

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]

Hopefully American Whiskey does not become the new vodka market.

[StraightNoChaser]

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...

Took the words out of my mouth, man.

[StraightNoChaser]

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]

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.

[sob0728]

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.

[cowdery]

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]

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]

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.