As I wrote last week, Makers Mark announced that they will be reducing the alcohol level of their bourbon whiskey due to supply shortages. Today, they announced that they have reversed that decision and will keep selling 90-proof bourbon whiskey.

Here’s the news release:

Since we announced our decision last week to reduce the alcohol content (ABV) of Maker’s Mark in response to supply constraints, we have heard many concerns and questions from our ambassadors and brand fans. We’re humbled by your overwhelming response and passion for Maker’s Mark. While we thought we were doing what’s right, this is your brand – and you told us in large numbers to change our decision.

You spoke. We listened. And we’re sincerely sorry we let you down.

So effective immediately, we are reversing our decision to lower the ABV of Maker’s Mark, and resuming production at 45% alcohol by volume (90 proof). Just like we’ve made it since the very beginning.

The unanticipated dramatic growth rate of Maker’s Mark is a good problem to have, and we appreciate some of you telling us you’d even put up with occasional shortages. We promise we’ll deal with them as best we can, as we work to expand capacity at the distillery.

Your trust, loyalty and passion are what’s most important. We realize we can’t lose sight of that. Thanks for your honesty and for reminding us what makes Maker’s Mark, and its fans, so special.

We’ll set about getting back to bottling the handcrafted bourbon that our father/grandfather, Bill Samuels, Sr. created. Same recipe. Same production process. Same product.

As always, we will continue to let you know first about developments at the distillery. In the meantime please keep telling us what’s on your mind and come down and visit us at the distillery. It means a lot to us.

While they say that they will maintain the alcohol level, they make no mention about how they will “deal with” anticipated shortages. The release also does not mention anything with regard to price, which I think will be higher.

There has been a great deal of noise since Maker’s Mark announced that they were going to reduce the alcohol-by-volume (ABV). It was enough that the company had to publicly respond and even reverse its decision. However, the irony is that very few people drink bourbon whiskey neat. Almost everyone “waters” it down with something. The only way that Maker’s Mark would taste much different would be if it they were changing the ratios of corn, wheat, barley, and rye. But unless you’re drinking barrel-proof whiskey, it’s already watered down, and it’s still whiskey.

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.