Maker's Mark 1.75 L Size on Allocation

[cowdery]

There has been a rumor going around that Maker's Mark, due to its tight supplies, is discontinuing everything except the 750 ml and 1 L sizes. I knew that couldn't be true when I heard it, but figured the problem that fostered the ill-fated proof cut hadn't gone away, so there might be something behind it. I did some checking and here's the scoop. Availability of the 1.75 L size will be extremely limited. Stores may run out. At least for now, that should allow them to fill most orders for the other sizes.

[mark fleetwood]

There has been a rumor going around that Maker's Mark, due to its tight supplies, is discontinuing everything except the 750 ml and 1 L sizes. I knew that couldn't be true when I heard it, but figured the problem that fostered the ill-fated proof cut hadn't gone away, so there might be something behind it. I did some checking and here's the scoop. Availability of the 1.75 L size will be extremely limited. Stores may run out. At least for now, that should allow them to fill most orders for the other sizes.

Here's another opportunity for Heavenhill and Sazerac to pump out 10,000 POP cardboard displays of Parker Beam and William Weller holding Larceny and OWA, cheshire cat grins on their faces and a sound chip set to go off every time a customer walks past Makers Mark that startles them with "Well me, first they lower proof, now they're running out. Why don't you try Larceny, better taste, and $10 less."

[HighInTheMtns]

It's not clear to me how not bottling 1.75s will alleviate the MM shortage. Won't the dedicated MM drinker who is accustomed to family size bottles just switch to a smaller size and grumble about the extra cost?

[DBM]

It's not clear to me how not bottling 1.75s will alleviate the MM shortage. Won't the dedicated MM drinker who is accustomed to family size bottles just switch to a smaller size and grumble about the extra cost?

I would imagine the goal is to have product on shelf in as many locations (retail, on-prem) as possible, so cutting out or restricting the 1.75 would allow just that... maximize availability.

[HighInTheMtns]

I would imagine the goal is to have product on shelf in as many locations (retail, on-prem) as possible, so cutting out or restricting the 1.75 would allow just that... maximize availability.

I think the goal is to sell the bourbon they have in more expensive containers. Not necessarily a criticism, plenty of things don't come in 1.75s, but this move doesn't cause them to have more bourbon.

[P&MLiquorsEric]

This was the case before christmas and before the proof change announcement. 1.75s were the first to go. They were also the first to change over to 84 proof.

No shock that they would be the first to get rationed when an actual shortage appears

[DBM]

I think the goal is to sell the bourbon they have in more expensive containers. Not necessarily a criticism, plenty of things don't come in 1.75s, but this move doesn't cause them to have more bourbon.

Not more bourbon, but bourbon in more places. I agree that it could just be a way to collect more revenue for the same amount of product, but the timing suggests it has more to do with keeping (and expanding) MM on every grocery store, liquor store, bar and restaurant shelf.

[cowdery]

The screaming and yelling that is a problem isn't the screaming and yelling of consumers, it's customers--distributors, bars, liquor stores--to whom Beam sells a lot of other products too. That's who they're trying to keep happy. Yes, everybody makes more money from the smaller sizes, so it makes sense to take the pain out of the size that's the best value. People can piss and moan about the consumer getting screwed and all that, but it's a business, and they're trying to be smart business people. It was explained to me that it just takes a heck of a lot of product when they bottle 1.75s. The math is simple. They can put more small bottles out there than big ones.

Where I think we can do with a little more honesty here is that Maker's got caught playing the scarcity game, because a little bit of scarcity can be a good thing. They did actually cut back a little bit on production, being careful not to exceed demand, keeping it just a little tight. Let's say they were able to supply customers with 90% of what the customers wanted. Customers might grumble a little, but as long as they're getting their fair share, they can live with that. Now let's say there's a demand surge and they're only able to accommodate 75% of what customers want? I don't know what the actual numbers are, but that's what happened. They were trying to engineer in a little bit of scarcity to support the price and image, and not be pressured into dealing, then demand took off unexpectedly and they got caught with their pants down. They got way more scarcity than they bargained for.

Because of their long term vision for Maker's, they don't want to raise the price and send people to the competition. That's why there's probably not an opportunity for Larceny and Weller, because they're doing what they can to take care of folks, at the current price, with what they hope will be a temporary problem, although 'temporary' in this business can be a couple years.

If you usually buy the 1.75 and can't get it, you might buy two 750s, but you might only buy one. In that case, you probably won't look for an alternative. If you go to the store and there is no MM to be had at all, then you'll buy something else. By keeping MM on the shelf, they're making sure most folks won't look for an alternative.

Because they made some production adjustments a couple years back, they found themselves in a trough at exactly the wrong time. Each quarter will probably see a little more availability and hopefully they can work through this. Maker's drinkers are tremendously loyal. They've shown what they won't tolerate, changing the product. Now MM is banking that what they will give the brand is a little more time.

Edited April 29, 2013 by cowdery

[BFerguson]

my two cents.

WHat they need to do is somehow figure out a better way to allocate the product to where it needs to go, which means, who is selling a lot of that size.

Case in point, I walk into my local Costco, and I see the same pallet of 1.75's sitting there that always sits there. Do they move product, sure they do. Do they move a pallet's worth, I don't think so. Nor the overstock sitting elsewhere.

Put the product to where the markets moves it, not who buys the most a lets it sit.

B

[ThomasH]

I have a 1.75 in my basement and most of an 84 proof 750 that was given to me so I think I will be safe!

Thomas

[P&MLiquorsEric]

my two cents.

WHat they need to do is somehow figure out a better way to allocate the product to where it needs to go, which means, who is selling a lot of that size.

Case in point, I walk into my local Costco, and I see the same pallet of 1.75's sitting there that always sits there. Do they move product, sure they do. Do they move a pallet's worth, I don't think so. Nor the overstock sitting elsewhere.

Put the product to where the markets moves it, not who buys the most a lets it sit.

B

The numbers beam is looking at is cases sold to retailers from distributors. Those cases sitting at costco are sold product. Places like costco will throw a fit and pull makers if they cannot get enough product to fill shelves. Costco also only deals with pallets not cases.

It wont be places like costco that run out of Makers, it will be your mom and pop operations who buy only a weeks supply at a time.

[VT Mike]

Isn't the Maker's distillery in the process of expanding capacity? If that is true, how long before they can significantly increase production? And what is the typical age of Maker's? 6 years? I'm just wondering how long it will be before they are in a position to have supply exceed demand, if they care to.

[Grain Belt]

My local Costco has a large supply of the handles of MM. I wonder if Costco will cut a deal with Maker's to keep that going or if they will move on to another bourbon? My local has Kirkland 7 year old 103 proof bourbon in liters (Beam), JBW in handles, WR in .750's, and the Maker's handles. They also have 1.75's of Jack and .750's of Jack Single Barrel.

[Kalessin]

I'd say the 1.75 isn't used too much by bars and caterers; too big on the bar, and harder to pour from.

[mark fleetwood]

The screaming and yelling that is a problem isn't the screaming and yelling of consumers, it's customers--distributors, bars, liquor stores--to whom Beam sells a lot of other products too. That's who they're trying to keep happy. Yes, everybody makes more money from the smaller sizes, so it makes sense to take the pain out of the size that's the best value. People can piss and moan about the consumer getting screwed and all that, but it's a business, and they're trying to be smart business people. It was explained to me that it just takes a heck of a lot of product when they bottle 1.75s. The math is simple. They can put more small bottles out there than big ones.

Where I think we can do with a little more honesty here is that Maker's got caught playing the scarcity game, because a little bit of scarcity can be a good thing. They did actually cut back a little bit on production, being careful not to exceed demand, keeping it just a little tight. Let's say they were able to supply customers with 90% of what the customers wanted. Customers might grumble a little, but as long as they're getting their fair share, they can live with that. Now let's say there's a demand surge and they're only able to accommodate 75% of what customers want? I don't know what the actual numbers are, but that's what happened. They were trying to engineer in a little bit of scarcity to support the price and image, and not be pressured into dealing, then demand took off unexpectedly and they got caught with their pants down. They got way more scarcity than they bargained for.

Because of their long term vision for Maker's, they don't want to raise the price and send people to the competition. That's why there's probably not an opportunity for Larceny and Weller, because they're doing what they can to take care of folks, at the current price, with what they hope will be a temporary problem, although 'temporary' in this business can be a couple years.

If you usually buy the 1.75 and can't get it, you might buy two 750s, but you might only buy one. In that case, you probably won't look for an alternative. If you go to the store and there is no MM to be had at all, then you'll buy something else. By keeping MM on the shelf, they're making sure most folks won't look for an alternative.

Because they made some production adjustments a couple years back, they found themselves in a trough at exactly the wrong time. Each quarter will probably see a little more availability and hopefully they can work through this. Maker's drinkers are tremendously loyal. They've shown what they won't tolerate, changing the product. Now MM is banking that what they will give the brand is a little more time.

Chuck, do we have a sense for how much MM ships internationally each year? Is that much of a factor here (btw are international sales more lucrative, does MM still have to pay state and federal US taxes on international sales?). Or is international a drop in the bucket compared to domestic sales?

[P&MLiquorsEric]

Chuck, do we have a sense for how much MM ships internationally each year? Is that much of a factor here (btw are international sales more lucrative, does MM still have to pay state and federal US taxes on international sales?). Or is international a drop in the bucket compared to domestic sales?

I am not sure on the taxes etc. But there is strong incentive to place your product in the foreign markets. If you have a shortage, there is a damn good chance you will lose placements overseas before you lose them here.

[BFerguson]

The numbers beam is looking at is cases sold to retailers from distributors. Those cases sitting at costco are sold product. Places like costco will throw a fit and pull makers if they cannot get enough product to fill shelves. Costco also only deals with pallets not cases.

It wont be places like costco that run out of Makers, it will be your mom and pop operations who buy only a weeks supply at a time.

While it is sold product from a distributor, I'm pretty sure sure Costco has worked directly through Beam to establish their purchase price and volume.

I'm just saying that Beam could ratchet their volume sold to places like this if they wanted to in order to better balance supply. Granted, that may piss them off, but if it ain't moving to begin with, whats the point in having that much excess?

We've all seen example of product where in one area their is more than enough-al the time, even in "shortages", and on others, you'd be lucky to see a single bottle.

B

[P&MLiquorsEric]

Depends on the state. In most they will still buy from distributors at same price as everyone else. Here in Kentucky, makers is (rarely) discounted. The first case costs the same as the 1000th.

The reason you see multiple pallets of 1.75s may be because they are aware of the upcoming shortage and have bought enough to get through. Big box chains are also notorious for buying a ton of inventory just before a price increase. Pallets of bourbon that never goes bad and they know will eventually sell is a much better use of funds than pallets of the newest 70" led tvs that will only go down in value the longer it takes to sell them.

[emr454]

Still a ton of handles at the local big box liquor store for $43.

Eric

[cowdery]

International sales are a factor. How big of a factor, it's hard to tell. They downplay it--they don't want fans screaming about how all their whiskey is going to fereners--but international growth is the engine driving the industry right now and nobody wants to slow that down.

As for Maker's expanding capacity, that's the thing I've been harping on. Although they have done a few preliminary things, like raising the height of their dam to get more water into the lake, the planned 3rd still has not even been ordered (and Vendome has a 9-month backlog), this from a plan that was first announced as imminent something like eight years ago. This is what I mean about Maker's/Beam playing the scarcity game. They could be producing significantly more than they are. If they had done the planned expansion while still under Allied, or shortly after the acquisition by Beam, all of that new volume would be in the pipeline by now and they wouldn't be having this problem. They like to keep saying this is something beyond their control and there is some truth to that, and Maker's is unique because it only makes the one product (before you say it, Maker's 46 starts as regular Maker's, so there's really only one product), but this is a problem largely of their own making, and they are loath to admit that .