Quality/Profits Discussion

[smokinjoe]

Much of the discussion on SB of late has been in response to the actions that we are seeing from the bourbon distilleries that are resulting in potentially troubling outcomes for us bourbon enthusiasts. We have seen age statements dropped, products dropped, shortages, proofs dropped, price increases, etc., on some of their brands. Throughout these discussions, several have commented that this is indicative of the distilleries "Lowering the quality" of the whiskey. It is also being suggested at times, that the reasoning for the lowering of quality, is so that the distilleries may see "Increased company profits".

My question to this board: Do you think that the distilleries are indeed, "Lowering the Quality" of our bourbon? If so, in what ways throughout the process? Also if you think they are, do you feel it is being done simply so the distilleries may see "Increased profits"?

Incidentally, I'm only talking about changes that we are seeing currently, and not some of the changes that have taken place in bourbon production over the decades. That's worthy

[squire]

I don't think we're seeing a lowering of quality, the quality is very good and quite consistent. What we are seeing though is less refinement and that is due to efforts on their part to increase profit. That's nothing new though and has been going on since the first distiller got big enough to buy grain in bulk, lower his production costs and undersell his competitors.

[GaryT]

Honestly, I'm a bit torn. I don't think this is a "one size fits all" thing. You see HH adding the age statement to Bernheim, selling ECBP at a fraction of what they COULD sell it for (and they know it too!) ECBP is one of the best whiskies I've had in recent years, so can't knock a quality decrease there either.

I think that the age statement drops are for two reasons.

1. If a distillery drops an age statement and can use a little younger whiskey in the final product while still hitting "close enough" to their flavor profile - they certainly stand to make more money (since younger whiskey has a higher yield in terms of volume, and is produced - faster!) Does it lower the quality? Not always. But it certainly impacts perception (and if they try to do it really sly-like, it can really impact perception - ala Barton 6 but not 6 yrs).

2. If a distillery has been bottling something at 10 yrs, but due to climate change bottling the same whiskey (aged in the same locations for the same amount of time) would arguably change from their target flavor profile. If they want to deliver that same, consistent flavor - they may have no choice other than to lose the age statement (and for those who don't subscribe to "climate change", think of it as just "recently warmer than usual summers" if that helps). So, one could argue that the dropping of age statements is a necessary evil to continue to deliver what customers like! Would many of us be happy if over the next couple of years the flavor of Weller 12 came across with markedly more wood despite them doing everything exactly the same way? I guess they could try some climate control - but I can see a tidal wave of whining about that being "not how it was done in the old days".

Personally, I don't buy into the notion that age = quality. But I do believe a lower age = more profits. I don't see dropping products as being a drop in quality either. Hell, if you don't have enough stock to distribute 25 labels at the same level of quality, isn't it better to distribute 20 at that same level than 25 at some questionable quality? Does cutting labels improve profitability? Sure, but if enough were buying it - they wouldn't be cutting it.

Your last line means I can't mention the increasing the barrel entry proof, doesn't it? Because I have no idea when they started doing that, but it would be hard to argue that is a big factor in why some dusty bourbon tastes better than the same stuff they make today (and certainly cost them more to make).

[jonhalter]

Its a business. Everything they do is to increase profit. I dont blame them either. A lot of us have done a sbs with a bourbon that has recently "changed". I personally taste no difference. SO, I dont think there is a lowering of quality. Even if a few changed slightly from the old profile, there are still so many to choose from at each shelf level. Does it suck if one of my favorites ceases to exist? Sure, but my gosh, most bourbon is so damn good, that I can easily find a suitable replacement.

[hn4bourbon]

I have been thinking about recent events such as dropping of AS, moving older or better quality product into a different offering/label that fetches more money, etc. I'm not sure if I'm off base here but I think we have ourselves and the NDP and the craft producers to thank.

The reason I say that is because we have shown these larger producers that the market is willing to pay more. Most of us prefer to pay less but the reality is that we are willing to pay more. Several business methods/strategies have been proving to work really well over the past several years. So, in a way...we've created this situation:)

Edited February 18, 2014 by hn4bourbon

[Phil T]

I'm not sure there is any "right" answer Joe, only us being hypothetical. Of course we are seeing age statements dropped, but that is not a new phenomenon. So, has this lowered the quality? ? Only time will tell...we know it won't be the same, but lower quality?? We'll see.

And we are seeing prices going up, but I'm not sure this goes to " increased profits". I'm sure the cost of doing business goes up almost every day, so the cost of the product has to go up also, at all the levels involved in getting the product to us.

Edited February 18, 2014 by Phil T

[danz]

... My question to this board: Do you think that the distilleries are indeed, "Lowering the Quality" of our bourbon? If so, in what ways throughout the process? Also if you think they are, do you feel it is being done simply so the distilleries may see "Increased profits"?

I can't really say I have been able to find enough high end bourbon to tell if the distilleries are lowering the quality. However, given the pressure to make a quick buck in the current bourbon mania, it is hard to believe they are not giving in to the temptation to cut corners, which has shown up in several objective ways as noted: dropped age statements, proof and impossible to find products like the age stated Wellers.

Will cutting corners give the distilleries "increased profits"? I think the answer in the long run is no. Eventually people will get bored of the mania and find something else to chase and people will remember the corner cutting and price gouging, and not fondly.

[Richnimrod]

Two thoughts that I believe impact this subject... in opposite directions, I guess.

Think back a couple decades or even three. The famous 'Bourbon Glut'. There were some fabulous whiskeys being sold as 4-year old stuff that really had much older and fuller flavored liquid in those bottles. Wonderful, eh? ... But, the distilleries were getting killed! Well, now we have pretty much the opposite situation. Bourbon is suddenly (well, ...over the last several years) become "THE" drink of popular culture, and "THE" whiskey for mixologists. So, the distilleries suddenly are finding themselves short of many previously predicable stock brands at their previously stated ages. What to do??? Lose the age statements! Well, no surprise there. What else could they do; while still supplying their distributors the quantities needed to satisfy our thirst? Does this increase their profits? I suppose it does; but did the previous glut impact those profits in the opposite direction? Hell Yes! This is the market forcing adjustment on businesses that rely on a fairly long lead-time to produce sale-able products, within a fairly short cycle of big change. Personally, I think they are doing the best they can. If they're making more money per-day, or per barrel... Good! We all want healthy distillery businesses, right?

[smokinjoe]

I don't see dropping products as being a drop in quality either. Hell, if you don't have enough stock to distribute 25 labels at the same level of quality, isn't it better to distribute 20 at that same level than 25 at some questionable quality? Does cutting labels improve profitability? Sure, but if enough were buying it - they wouldn't be cutting it..

I like this. I'm of the thinking that the age statement dropping is really a step in the more efficient reallocation of resources. Like the OldCharter 8 year age statement drop. I'm sure there's a guy named Charlie at BT who banged his spoon on the table like crazy, fighting to keep the last age stated iteration of the beloved OC line going, because it was important, and he's been selling it for 40 years...the Answer? Sorry Charlie. We need that whiskey somewhere else. And, "somewhere else" makes $6 more a bottle. If no shortage, Charlie still has his 8yr (heck, and probably the 12 and 10, to boot).

[squire]

Charlie also gets to keep his job.

[393foureyedfox]

no one ever mentions it on here, but corn prices have been all over the map for years now. For the relatively short period Ive been into this, prices havent changed much, until now. Sooner or later it would have to.

I dont think theres a decline in quality going on, or really even any price-gouging going on (at least not at the distillery level). Profit margins are higher on the upper shelf, and very tight on the lower shelf. Again, sooner or later, the cheap good stuff had to bite it, or have a price increase. I can understand them taking the better whiskies and moving them up-label into higher price categories, and taking the good cheaper stuff with them. I mean, some of the good and cheap stuff was on the quality line between upper-bottom shelf and mid-shelf, so why keep putting it into the bottom shelf stuff? Its a decision any company would make.

That said, deceiving the customer through tricky labeling isnt the way to do it. Keep a product and label as-is and raise the price, or change it a bit and keep the price where it is. Most bottom-shelf liquor purchasers are more concerned over a $5 price hike than upper shelf guys. Just dont try to trick people and lie to them.

[squire]

Bottom shelf shoppers are noted for their determined tenacity. Prying an extra fiver out of their hands will take more than a new add campaign.

[oke&coke]

Charlie also gets to keep his job.

I think that pretty much sums it up right there. Every distillery employee wants to keep their job. They have to cut costs where they can to make money but I think they all know they can't cut quality to far or customers won't by the product. In the end they all have to answer to someone else.

[smokinjoe]

I think that pretty much sums it up right there. Every distillery employee wants to keep their job. They have to cut costs where they can to make money but I think they all know they can't cut quality to far or customers won't by the product. In the end they all have to answer to someone else.

Right, to a degree. It's difficult to make money in the commodity business, particularly if you can't make enough. What do you do? You turn that commodity producing capacity to premium producing capacity. The cost structure to produce both is at/or near the same. The question remains, though. Is this "lowering quality"?

[BigRich]

Right, to a degree. It's difficult to make money in the commodity business, particularly if you can't make enough. What do you do? You turn that commodity producing capacity to premium producing capacity. The cost structure to produce both is at/or near the same. The question remains, though. Is this "lowering quality"?

Yes and no. There are plenty of underlying cost concerns around the profits issue and we could go on and on about commodity corn prices, taxes, and earnings per share and that's all valid. To your question about quality though I think it's a slippery slope. It can start off innocently enough. I think we all know how barrels can vary, so then as a distiller you decide to "open up" the age statement so that you can use those extra mature five year olds in your VOB and not miss a beat. However, I think that over time it does degrade as more younger (or less desirable) barrels slip in and as the other pressures (cost, supply, demand, etc.) start slipping into the equation.

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[Kyjd75]

I like this. I'm of the thinking that the age statement dropping is really a step in the more efficient reallocation of resources. Like the OldCharter 8 year age statement drop. I'm sure there's a guy named Charlie at BT who banged his spoon on the table like crazy, fighting to keep the last age stated iteration of the beloved OC line going, because it was important, and he's been selling it for 40 years...the Answer? Sorry Charlie. We need that whiskey somewhere else. And, "somewhere else" makes $6 more a bottle. If no shortage, Charlie still has his 8yr (heck, and probably the 12 and 10, to boot).

Why do you think AAA 10 yr has disappeared? More juice for Blanton's and Rock Hill Farms.

[smokinjoe]

Why do you think AAA 10 yr has disappeared? More juice for Blanton's and Rock Hill Farms.

I agree. It's an inevitable move in today's environment. We can say that is a profit motivated move. I would say Bravo, BT. But, if there were no shortage, my guess is that it would still be around.

I can be cavalier on the AAA 10 yr, because I have a liter in the bunker thanks to a kind Kentuckian...

[sailor22]

In this discussion are we using the word quality as a descriptor of taste? Can't a whiskey be of top quality and well crafted, but just not taste particularly good? Admittedly a subjective opinion.

The loss of an age statement is not important if the whiskey remains the same. Unfortunately it seems it never really does. Compare EW 1783 from just a few years ago with an age statement against todays product. It would be hard to argue the quality (defined as taste) hasn't declined. It's a great example of the slippery slope mentioned earlier and the declining quality (taste) of bottom/middle shelfers.

If younger stock is a larger part of 1783 does that free up some of the older stock for other labels? ECBP maybe? Or even the still age stated lower proof EC12? From that perspective an argument can be made that loosing an age statement actually raised the overall quality (again, defined as taste) and likely the profit of the manufacturer. A delicious $12 bottle of whiskey is gone and in it's place is a delicious $40 bottle. From the producers perspective a reallocation of resources produces larger margins. How you feel about that is down to your willingness to pay and your subjective opinion regarding the relative taste.

[smokinjoe]

In this discussion are we using the word quality as a descriptor of taste? Can't a whiskey be of top quality and well crafted, but just not taste particularly good? Admittedly a subjective opinion.

The loss of an age statement is not important if the whiskey remains the same. Unfortunately it seems it never really does. Compare EW 1783 from just a few years ago with an age statement against todays product. It would be hard to argue the quality (defined as taste) hasn't declined. It's a great example of the slippery slope mentioned earlier and the declining quality (taste) of bottom/middle shelfers.

If younger stock is a larger part of 1783 does that free up some of the older stock for other labels? ECBP maybe? Or even the still age stated lower proof EC12? From that perspective an argument can be made that loosing an age statement actually raised the overall quality (again, defined as taste) and likely the profit of the manufacturer. A delicious $12 bottle of whiskey is gone and in it's place is a delicious $40 bottle. From the producers perspective a reallocation of resources produces larger margins. How you feel about that is down to your willingness to pay and your subjective opinion regarding the relative taste.

That's the way I see it. Quality as a descriptor of taste is purely subjective. Say, they drop an age statement and begin working in younger whiskies...and you end up liking it better, that would certainly not be a case of lowered quality. Of course, the opposite can happen. So, if you take the subjective part (taste) out of it, is there anything that the distilleries are doing that is in fact, "lowering quality"? I can't think of any. They're just reallocating resources. And like I said earlier, if they weren't faced with the supply/demand imbalance, there probably would be no changes.

It may be picking a nit and getting a bit lumbersome, but my point for all of this is that I have been surprised by the number of comments recently regarding "lowering quality" standards from the distilleries. I just don't see them.

[squire]

Again, I don't see a lowering of quality (it's the same make whisky after all) rather a shift in flavor profile and 1783 is a good example.

Unless they do an Old Overholt number on us which may cause me to revise my remarks.

[MauiSon]

It's not about 'lowering quality standards'. It's about finite supply and increasing high-shelf product volume. To do that, more of the better barrels are not going into lower-shelf batches, causing the quality of lower-shelf products to suffer.

As for, "Quality as a descriptor of taste is purely subjective", I don't know what that means. If it tastes good, that's good quality and if it tastes better, that's better quality - I know that much. No matter how much care goes into making a bourbon, if it tastes unpleasant, it's a low-quality bourbon because it has unpleasant flavor qualities. Is that a purely subjective finding? No, because a consensus can be formed on the matter.

Edited February 19, 2014 by MauiSon

[393foureyedfox]

No matter how much care goes into making a bourbon, if it tastes unpleasant, it's a low-quality bourbon because it has unpleasant flavor qualities. Is that a purely subjective finding? No, because a consensus can be formed on the matter.

[squire]

I like Bourbon which is a position from which I shall not retreat.

[sailor22]

I like Bourbon which is a position from which I shall not retreat.

[squire]

Yes, regularly, it's ongoing research in the furtherance of knowledge.