Proof changes

[Chaz7]

There is a considerable amount of discussion on lowering proof of some old standbys, i.e. WTRR 101 down to 90 proof. Some feel it's marketing, but others are adament it's to make more profit. My question is, If production is 100 barrels at 101 proof, how many more barrels will I get diluting down to 90 proof? After we have answered, I'll ask about the two trains travelling east to west and north to south, leaving 18 minutes apart...Ok, seriously I would really like to know the production difference. Chaz

[barturtle]

Let’s say that you have a gallon of Wild Turkey Rare Breed (barrel proof) at 108 proof and want to take it down to 101 proof, you then have 1.07 gallons. If you take that same gallon of 108 proof whiskey and turn it into 90 proof spirit you have 1.2 gallons, an increase of .13 gallons per gallon of aged spirit from 101 proof to 90 proof. This works out to about 2 extra 750's for every 3 gallons of spirit.

[ratcheer]

Seems like fairly simple math, to me. 11/101 = 10.9% weaker whiskey. Would they not, in fact, be getting 11 additional bottles of the weaker whiskey for every 101 bottles of the old, stronger whiskey? Even if this math is not precisely correct, it is going to be close.

But, the additional thing is that you would be paying less tax per bottle. And, remember, they are still selling it for the same old price.

Even if they are not doing it for the money, they will still be making more money.

Tim

[Edward_call_me_Ed]

Hi Tim,

The tax seems where they will stand to make/save the most money, but I don't really know. Does anyone know what the difference is?

My method of calculating was 101/90 which gave me 1.12222 more whisky than before.

Ed

[voigtman]

Tim has it exactly right. The easy way to do the math, without doing any math, is just this: 90 bottles of 101 proof has the same alcohol content as 101 bottles of 90 proof. So they get 11 extra bottles and no price decrease per bottle. Looks like a pure profit decision to me. Cheers, Ed V.

[kbuzbee]

I am sure you are right but you hear quite a bit that the large majority of whiskey drinkers (read - NOT folks here!) prefer a lower proof pour. I find that very odd as you can always dilute a higher proof pour to whatever level you enjoy but it seems to be a more subliminal reaction like - 'Oh, that 101 is SO HARSH, I'll stick with the 90'. It's much smoother.' Totally discounting that they just diluted it to 20 proof with ice and coke! But as the distiller, you do what sells more whiskey for you. There are 200 folks on this forum who would buy 10 more bottles a year if they'd kept the proof high and 100,000 more people who will but 1 more bottle each if you lower the proof. Selling it at the same price is just a freebie.

I get that math.

Ken

[ratcheer]

But, my question is still, why couldn't they have created a new brand instead of messing up one that we already knew and loved? Or, why couldn't they have kept the RR101 and added a RR90? Just like they have the regular WT in 101 and 80-proof versions.

Tim

[Chaz7]

I am sure you are right but you hear quite a bit that the large majority of whiskey drinkers (read - NOT folks here!) prefer a lower proof pour. I find that very odd as you can always dilute a higher proof pour to whatever level you enjoy but it seems to be a more subliminal reaction like - 'Oh, that 101 is SO HARSH, I'll stick with the 90'.

Ken

In most instances I much prefer the higher proof. In fact the only one I have added water to in the past is GTS 138. But I stopped because even a few drops, to me anyway, made it taste watered down. It's like oil and water, they never seem to totally blend. But the WTRR 90 doesn't taste watered down, just different. In other words, the distilleries do a bettter job than I. But I agree with Tim, maybe WT should have introduced an new bottle, as opposed to change (and that's from someone who prefers the 90, albeit ever so slightly). I appreciate all you math wizards out there; but what I did not know of, was the tax issues. I think every one realized I was trying to distiguish between marketing and profiteering. I know, as a lover of microbrews, some markets do well with more adventuresome brews like stouts and Belgian styles (Colorado)while others make not much more than Coors light, because that's what sells. Thanks, Chaz

[kbuzbee]

I think that's a great solution but I'm sure there is some target number of labels they want to maintain (1 duty free, KS, RB, RR, 101, 80, rye). To use my previous example. If once there exists a 90 proof, they only sell those 2000 bottles of the 101, would it be cost effective to produce the 101?? I don't know the answer but I would guess the answer is 'no'. That may have been the answer even before the 90 was released. Just for example, if they need 10000 bottles to break even on production/marketing costs and without the 90 they sell 9000(101), with both proofs they sell 2000(101) +12000(90) and with only the 90 proof they sell 12000 (okay, those are ALL made up but you see what I'm thinking). Regardless of why, I wish the RR101 would continue forward!

Ken

[NorCalBoozer]

from a business standpoint it makes sense to change an existing brand because you don't have to get a new UPC and then have it authorized thru distributors and retail outlets.

If they produced a new product, they would first have to get all the new UPC stuff done, then get each distributor to add(approve) it to their lineup, then each retail store that buys from that distributor would have to add a new item.

It's hard to get new items approved, because it takes up store space.

By using the old product, they do none of this and the new version gets into the stores much quicker and into a lot more retail outlets w/o much problem or work or convinicing.

one of the tricks of the trade.

But, my question is still, why couldn't they have created a new brand instead of messing up one that we already knew and loved? Or, why couldn't they have kept the RR101 and added a RR90? Just like they have the regular WT in 101 and 80-proof versions.

Tim

[Chaz7]

It's hard to get new items approved, because it takes up store space.

By using the old product, they do none of this and the new version gets into the stores much quicker and into a lot more retail outlets w/o much problem or work or convinicing.

one of the tricks of the trade.

Tim

[barturtle]

No, the UPC hasn't changed, there is apparently no need to get a new UPC every time you change label designs or proof, but probably only for a new product, ie. the old product is staying and a new product will join it on the shelf. I haven't checked (someone do this for me) but I'm guessing that there is no need for a new UPC for every vintage of EWSB as the old one should be off the shelf and a new one replacing it.

As far as the labels are concerned the label applications have become quite automated. They can apply for and check the progress of all new labels online.

The bottles, artwork, promotional materials and such are most likely handled by the advertizing department (or a separate agency). This department is most likely paid on an annual basis to cover a large range of duties and having them do one more job probably costs little if any more. Of course the new bottles wil replace the old bottles and probably cost about the same, they probably stopped printing the old promotional materials and artwork long before the change and had already run out.

As far as the retailer (and the customer) go they pretty much get the shaft. The retailer orders the same stock number as before, gets some strange bottle that they didn't want, calls the distributor and gets told that it is now in a new bottle and at a new proof and that they can't get the old one any more, if they don't want it they can send it back. The customer hopefully gets to at least see both botles side-by-side and can ask the retailer what is going on and can grab up all of the remaining old stock as well as a bottle of the new stuff to try (that's what happened to me).

Of course the retailer may not have gotten such a nasty shock, the sales rep may have let them know about it in advance (hoping to get a big sale from a store afraid to run out of a popular bottling).

I'm really trying hard not to sound too angry here. It's a business and they are doing their best to make both their customers and their accountants happy. It could be much worse there could be no more 10yo whiskey coming out of WT, and that would be much more of a shame than a reduction of proof.

[NorCalBoozer]

you have costs for a reformulated item wether it is considered "new" or "reformulated"

there is limited shelf space, so there is a huge difference (and cost) between changing an existing product and asking to add a new product.

there are high costs for new products. things like "slotting" and "new item" fees.

Then you still have to get the item approved to be sold thru distributors and retail chains. You're sales people have to go get it approved all over again.

why take the risk to do all this if you have a product that is not selling quite well but has a large distribution base?

Saves time and $$$ to repackage it and see if you can increase sales.

If you had to change the UPC everytime the label or formula changed, it would be a nightmare.

But in many instances, they are relabeling, designing new bottles, new artwork, new marketing material, new "point of purchase" material for the distributors to pass on to the retailers, and reeducating the distributor. This isn't necessarily easier, or inexpensive. And, wouldn't the UPC change as well, (maybe not) to reflect the difference? Some stores do have proof listed on their shelf pricing.

[cowdery]

WTRR is a pretty new brand. I don't remember exactly when it was introduced, but it was only a few years ago. I think they looked at the marketplace, looked at the brands that were having success in the premium segment and adjusted accordingly. The proof change accompanied a complete package overall and my conclusion is that they were repositioning the product to compete more directly with Woodford Reserve. Although Knob Creek is 100 proof, most of the products in that segment are lower than 101, yet higher than 80, so in the vicinity of 90.

Since WTRR is so new, and hence small, I don't think taxes were a consideration. That's the same reason they didn't add a 90 proof to the line rather than eliminating the 101 proof.

When Jack Daniel's lowered its proof a year or so ago, that was all about taxes. Unlike WTRR, JD is a mature brand and big. The proof cut saved the company more than $13 million a year in Federal Excise Tax alone.

The Federal Excise Tax on spirits is $13.50 per proof gallon. A "proof gallon" is one gallon of 100 proof whiskey. Since the tax rate is tied to proof, lowering the proof lowers the amount of tax you have to pay. Eighty proof is the minium allowed for a whiskey. You can make a lower proof product but you have to label it "diluted."

[NorCalBoozer]

I agree with you about why they repackaged.

the back of the RR bottle does call it a limited release or something like that. It is a great product that may have been lost on the shelf. The bottle text is hard to read, and the Turkey is almost invisible.

The bottle is also more like the 80/101 proof, as opposed to RB and KS, lending itself to present a 'cheaper' presence on the shelf. It may have been lost between the cheaper 80/101 and the more expensive RB and KS.

as a side thought, how do you see increase in demand for spirits and current inventories affecting present and future products?

[cowdery]

Assuming even steady growth, supply will remain tight because producers aren't rushing to increase production by more than modest amounts. They overproduced 30 years ago and won't make that mistake again if they can help it. Since supply will remain tight even with modest growth, an unexpectedly big burst of growth could create real scarcity, but most people don't expect that to happen.

[NorCalBoozer]

I was just reading some interesting export reports at the discus site, which is the Distilled Spirits Council of the United States.

http://www.discus.org

If I am reading them correctly, in Jan-June '04 vs. Jan-Jun '05

Bourbon export volume fell by 8.7% but the bourbon export value($) grew by 13.5% so they sold less but made a lot more .anyways I find this stuff interesting.