Beam Inc. (BEAM) is an alcohol sin stock that makes a variety of spirits, most famously Canadian Club whiskey, Jim Beam bourbon and Maker’s Mark bourbon.
Maker’s Mark bourbon is a higher price-point bourbon and is marketed with a flavor of exclusivity, exacting standards, and tradition.
Well earlier this week, that marketing promise was broken when the company announced that it was going to be watering down its exclusive bourbon.
It turns out that demand has outstripped the company’s supply of Maker’s Mark lately that the company feels its best course of action is to water down its bourbon to (presumably) wring more bourbon from every barrel.
Admittedly, it takes years to age a batch of Maker’s Mark and the company’s crystal ball was apparently unable to see 5 to 7 years into the future when demand has turned out to be higher than supply. But what is puzzling is why the company decided not to raise prices to edge out some of its lower-rent customers. Heck, if customers love it so much, they should love it even more if it’s more expensive, right? But instead of using price to adjust supply and demand, they did what we all did in high school and they just watered down the bourbon stockpile.
The backlash was predictable. People are skeptical and angry, people are shocked and say it’s ‘insane’, people are outraged. The company insists that taste won’t be affected but customers aren’t sure. I haven’t heard anyone except for the company say that this is a good thing.
Bartenders trust it as a go-to brand. Customers are loyal fans. Even the slightest change (even the slightest perceived change) will seem to be a massive affront to loyal consumers.
So what is likely to happen? Well in the next 2 weeks to a month (or so) existing stocks of the higher proof Maker’s Mark are going to disappear from shelves. Presumably, fans of the current Maker’s Mark will buy up stocks faster than expected to savor every last drop of the higher alcohol percentage. Meanwhile, the company will be churning out its “
New Coke” err… New Maker’s Mark.
At the time of this writing, there hasn’t been a substantial impact on the stock price (the green arrow in the upper left corner of this screenshot is the day first trading day after the announcement was made) and certainly the stock has a long way to drop for it to risk the lows of last year.
But we at SinStocksReport are expecting to see a decline in stock price, particularly driven by negative news. Eventually, this news story will burn itself out and the stock will get propped up again on other good things that Beam is doing. But for now, I’m watching and wary.
(Image courtesy of FreeStockCharts.com)
Check out the company’s website here