Maker’s Mark has decided to decrease the alcohol content of their flagship bourbon by a total of 3% by volume from 45% to 42%, which translates to a reduction from 90 proof to 84 proof. This may leave some people wondering what that actually means, while leaving others furious for a whole array of reasons. The controversy has reactions from those with a very little to a great deal of understanding of the complex issues behind it, but in our social media world it is difficult to sift through those opinions and come out with a true understanding of what it will mean in the long run.

Ultimately this will wash out as a great MBA case study in how to adapt to a changing market, how to execute on an opportunity for growth and how to communicate those changes to your customer base, because those are the three key decisions that were made here. The issues in the public eye include the actual physical change to the whiskey (though they don't use the "e", I do when discussing American whiskey) and how that affects the consumer, how it changes how the whiskey works in a cocktail and how it opens and closes doors of opportunity for the brand. This is what the public is consumed with right now, but behind closed rackhouse doors, the real issues are profit related. This story must be understood from the perspective of the Board of Directors of this private company and what it is they expect to gain. Remember that the sole purpose of a for-profit company (and this one is own by the giant Jim Beam Brands) is to generate profit for its owners. As a business owner fighting the realities of inflation and a tough economy, I can sympathize with them. The decisions they make now will effect where the company will go in the coming years, and that issue is not whether or not it will fail, but exactly how much it will grow via this opportunity. For a venerable brand that created the boutique bourbon business and made a name for itself as a maverick in branding and a slew marketing successes, Maker’s Mark has put itself in line to be the next great marketing case study once again.

To hear my radio interview on KCBS San Francisco where I discussed these issues on 2/15/2013, click here.

From the technical side of the liquid it is important to understand how proofing works and that water is used to dilute all kinds of spirits. Most spirits in the United States hover around 40% ABV (Alcohol By Volume; (“proof” equals twice ABV); however, in well-distilled spirits we look for higher ABV in order to deliver more inherent flavor of the product (alcohol acts as a flavor amplifier) and to hold up to dilution and other flavors components when making cocktails. As a professional whiskey seller, educator, judge and (some may say) drinker, I prefer higher proof whiskeys in most instances, because it allows me to be in control of whether or not I want to dilute it and by how much. Some of my favorite products are between 50% and 60% ABV and though I sometimes sip them at those levels, I generally manipulate them in one way or another depending on how I am drinking them. When the producer lowers the proof beyond my control they are limiting me to only a few applications, and essentially that is what Maker’s Mark has done to their whiskey from my perspective.

Years ago, Rob Samuels, the then Director of Global Brand Development and current COO (since his father’s retirement) that initiated this change, told me (while seated in my own bar, Elixir) that Maker’s Mark was about integrity that his grandfather made a commandment. Around that same time I had lunch with then Master Distiller Dave Pickerell who told me they only made one product because it was perfect and they did not want to bastardize that integrity. Well, Dave is gone now, making loads of new whiskey for several distilleries and the next Master Distiller, Kevin Smith, as one of his first acts, created a new product called Maker’s 46. I remember reading an article where he said he wanted to make his mark on the brand, which I saw as arrogant at the time. He’s now gone, as well. And in 2010, the venerable John Hansel of Whiskey Advocate actually called out Maker’s for not being “honest and straight-forward” with their marketing of Maker’s 46. So for a brand that sticks to its marketing guns about integrity and tradition, this is not a sudden about face. It is an unfortunate holding of the company line when it comes to their Public Relations policies. Though they maintain close communications with their most loyal fans via an “Ambassadors” program, it is the Board of Directors that tells the Marketing Department the story they are going to have to spin in order for the profits to be made.

I always introduce Maker’s Mark to customers and students of mine as an “introductory bourbon”, and one of the best at that. By using Red Winter Wheat as the flavoring grain in their bourbon, rather than rye, they allow the sweetness of the corn (the majority ingredient) to come through. Most other bourbons use rye, which is a strong and spicy grain that dominates the corn and takes over. Inexperienced or uneducated whiskey drinkers mistake the powerful rye flavors as alcohol content and declare bourbon “too strong” for them. Makers Mark became the “gateway whiskey” that helped usher in entire generations of new bourbon drinkers. By lowering their proof, they will even further lower the bar to entry and possibly attract new generations, but they will inevitably lose a portion of the newly educated and more experienced drinkers that they helped create. The net effect on their business will be minimal because they are indeed in the catbird seat. After all, a sell-out is a lofty goal of anyone producing anything for a profit.

So the question of how the company will fair is moot. As is the question about how the whiskey will fare. They will continue to make and sell out of a bourbon that has reached the most enviable of sales positions. They sit in the stratosphere of boozy brands like Patron, Grey Goose and Jack Daniels, even if their numbers are not quite the same. Each of these brands has had its growth issues that lead to decisions about production, pricing and quality that they ultimately had to answer to the public for (including Jack Daniels going throw a reduction in proof just under a decade ago). And it seems like they all have had their bouts with brand credibility amongst the bartenders, the consumers and the media. Do you see any of these brands hurting today? Remember that the public forgets quickly. Especially drinkers.

For now, the Communications majors are already writing their Spring 2013 thesis papers on “the blunders and genius of the Maker’s Mark dilution story”, because in the end, any press is good press. Just ask my friend Jon Basso at The Heart Attack Grill. The Board is happy because they will be able to yield more bottles to sell and a better profit margin (lower proof means less excise tax for the producer to pay, and it is doubtful that Maker’s Mark will pass that savings on to the customer). Millions of people around the world are reading about Makers Mark and if they hadn’t tried the product before they are going to now. The bartender in me laments the change of a great whiskey, the business man in me is enthralled by the complex issues at hand in this case and the spirits educator in me is thrilled to see the category getting so much attention. I’ll be in Kentucky in a few weeks to judge the American Distilling Institute’s spirits competition. Dave Pickerell will be there and we’ll talk. I’m going to bring this all up in my Craft Distillation panel discussion at Arizona Cocktail Week this coming Monday. Maybe I’ll drop John Hansell a note in the coming days, when his inbox is not so blown up over the topic. And lastly, I’ll try to swing by Maker’s Mark while I’m in Kentucky and ask Rob Samuels to have a drink with me. Maybe he’ll pour me some of the 90 proof from under the table. The stuff they’ll be reserving for VIPs.

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