Advertising?

[TunnelTiger]

It seems to me that in the past three months Bourbon advertising on TV has definitely picked up with new MM and KC commercials.

Since they are having such great growth it just seems odd that now they spend the money. Obviously they aren't that concerned with shortages and it's obvious that prices are going to continue to increase.

Maybe it's because they have a lot more money to spend.

[Flyfish]

It seems to me that in the past three months Bourbon advertising on TV has definitely picked up with new MM and KC commercials.

Since they are having such great growth it just seems odd that now they spend the money.

In my experience, companies tend to cut advertising expenditures when they hit hard times. Sales then decline. Revenues decline. So they cut again. Sometimes they even get ahead of the ball. In the '80s, I worked in Advertising & PR for such a company. Word spread among the VPs that the CEO was asking everyone to reduce his budget 10%. My boss, trying to anticipate his meeting with the CEO, had me find ways to make the cuts. In their budget meeting, my boss proudly proclaimed that we had already cut 10%. To which the CEO replied, since it was so easy to do, do it again.

Even really smart people sometimes invest in advertising because they think it is cool rather than because they really expect results. Think of smart CEOs who spend millions on Super Bowl ads so they "complain" to other CEOs about the cost of advertising on the Super Bowl. Nobody cares if those ads actually work as long as they are perceived to be clever.

Bourbon advertising is probably on the increase because there is a huge untapped market of uninformed young consumers who might be impressed by the fact that Beam white is...wait for it... a whole four years old. Way older than required by law. Really good advertising can convince a reasonable prospect for your product to try it once. If the product disappoints, you've lost that customer. Unless you can create such a powerful image that it overcomes reality--which is extremely rare. An example, though, is the semi-serious observation of SBers that Benchmark tastes really good to people who think they are drinking Pappy.

With bourbon sales rising, you might think advertising is not even necessary. Unless your objective is maintaining or increasing market share. Just because young consumers are buying more bourbon doesn't mean they are buying your bourbon. Just look at what is happening to the "olds."

[dementedavenger]

It seems to me that in the past three months Bourbon advertising on TV has definitely picked up with new MM and KC commercials.

Since they are having such great growth it just seems odd that now they spend the money. Obviously they aren't that concerned with shortages and it's obvious that prices are going to continue to increase.

Maybe it's because they have a lot more money to spend.

The rise in popularity has forced distillers to come up with brand identities beyond the jargon on the bottles. They otherwise risk losing market share and an opportunity to increase market share by roping in customers and associating bourbon with their brand. This is happening across the spirits industry (in tequila, most notably). The bourbon brands that are advertising are either well-known but indistinguishable to the average drinker beyond the bottle (Maker's Mark and Jim Beam) or luxury/aspirational wannabes (Knob Creek and Woodford Reserve). The ads aren't aimed at us; they're aimed at the general public whose knowledge of bourbon is nil and whose buying decisions are typically based on price and marketing.

[flaminiom]

They're making some big bets on the future, so it's wise to ramp up advertising. I would assume they're positioning their brands for the future more than immediate sales. While Bourbon is expanding rapidly, there's also a gold rush for both new and old players. If you're investing big bucks in capacity, you want to make sure there's going to be a market for it all when it's ready to bottle.

[cowdery]

flaminiom has the answer. Advertising is the perfect complementary investment to production increase investments. Neither will bear fruit for several years.

Image advertising like the whiskey companies are doing takes a long time to work. If you wait until you need advertising like that to buy it, you're too late.

[Thig]

Dilemma, when business was good he didn't need to advertise, when business was bad he couldn't afford to advertise.

[GaryT]

Agree with all of the prior posters. They don't want this to be a fad, and from a media perspective - Jack Daniels has been out there more in the past few years (and it hasn't hurt them one bit). It isn't just that bourbon is doing well, but I'm sure they want to try to pull some JD buyers (not to mention Bud Light, Miller, etc). While it has picked up and is currently trending - its volume is still fairly small compared to other beverages. Hell, WT doubled their production capacity (IIRC) in 2011 - in the days when you could find FRSmBLE on shelves (along with ORVW) Shortly after, they started their "give 'em the bird" campaign, despite the production not really giving them more inventory until 2015 (likely 2016). And having more demand than you can supply isn't a bad thing necessarily - people love something they can't have (see exhibit PVW). Plus, it allows them to raise the price without people complaining because "they understand". The price hikes likely cover the increased ad budget themselves.