Juan Monroy

Last week, the distillers of Maker’s Mark announced that they will begin bringing down the alcohol in (watering down) their very popular whiskey as a way to meet demand. Premium whiskies, such as most bourbon, Scotch, and Irish varieties, take a long time to reach the market because they have to age. (That’s how whiskies get their color and acquire a less fiery flavor.) By definition, bourbon has to age at least two years, but most premium bourbon ages much longer than that. Maker’s Mark, for example, ages their whiskey seven years, if I remember correctly. Knob Creek famously ages theirs for nine years, and it’s not uncommon for Pappy van Winkle’s to age their whiskey long enough that their bottles can apply for learners’ permits. The longer a whiskey ages, the more expensive it is, not because it is inherently better, but because it is inherently rarer.

Distilling bourbon is like investing in whiskey futures. You distill some whiskey one day and about a decade later, you finally have some bourbon to sell. What the demand will be then is, of course, anyone’s guess. Also, factor in the usual spoilage and evaporation (the so-called “angel’s share”) to figure out that you better be patient if you’re going to sell bourbon whiskey. It’s possible that in 2005–2006, when what is being sold today was being distilled, Maker’s Mark miscalculated the demand for their whiskey, and the bourbon-loving public has nearly drunk them dry. If that’s the case, they will have to either raise the price of their whiskey, or they can add more water in the bottle to keep the yield about the same.

Maker’s Mark miscalculating its demand for bourbon in 2005–2006 does not seem plausible to me. A large corporation, such as the one that owns Maker’s Mark, usually has a team of bean counters that are pretty good at forecasting demand. And even if they’re not that good, they probably wouldn’t curry favor with their bosses if they show them a sales projection chart with a line pointing down. Moreover, Maker’s has been a consistently popular brand for as long as I can remember, and although I don’t have sales figures for their whiskey, I can’t imagine they bet against the steady or even rising popularity of their own bourbon.

If Maker’s Mark was not feeling bullish about their sales prospects, why would they be running low on the good stuff? It’s probably because around 2005–2006, corn prices were really low and in fact were at their lowest since the end of the Clinton Administration. I won’t get into the specific prices, but you can see in this chart of corn futures that the price has gone up since 2006 when they reach stratospheric highs around 2008. I think all of us in New York remember the high price of grain when we started to see more expensive pizza slices in early 2008. According to the linked chart, the price of corn plummeted around 2008–2009, when the global financial crisis hits, but then recovers back to around its decade-high price after the recovery begins.

It is unlikely that Maker’s Mark bought less corn and other grains, and was making less whiskey. Doing so would have put a huge strain on their supplies, in the face of increasing demand, and forced them to significantly raise their prices. This also would have jeopardized their place as a mass-market premium whiskey.

The other option would be to use a different “mash bill”[1] for the batches we’ll have for the foreseeable future. This would allow Maker Maker’s Mark to produce about the same amount of whiskey as before 2006, and it allows them to recover the increased cost of grains by increasing available inventory. The latter makes a lot of sense because as far as I can tell, the bourbon craze is far from fading and you don’t want to run out when the party is just getting started.