Behind the Maker's meltdown and recovery: A passion for bourbon in Kentucky
I asked the governor of Kentucky today whether he drank bourbon, and the phone went quiet. With the kind of patience you reserve for special cases, he replied: “You can’t be Kentucky governor and not be a bourbon drinker.”
In that moment Gov. Steve Beshear, in his second term after a landslide re-election in 2011, crystallized exactly why the dilution debacle, as some are calling it, involving Maker’s Mark distillery has been such big news in Kentucky.
Maker's Mark found itself in the center of a crisis of its own making last week, after it announced Feb. 9 that it would begin watering down the Samuels family’s famously smooth-tasting, handcrafted bourbon. “I saw it in the newspaper and then I saw it on national news,” Beshear recalled. “And I knew that this was going to grow as an issue very quickly.”
Maker’s Mark has been selling its bourbon the same way since 1958, when Bill Samuels Sr., replaced the family recipe with a new bourbon that would take longer to make and appeal to a wider audience – and fetch a higher price. Its success helped create a whole new category of spirits called premium bourbons. Despite scores of competitors, Maker’s Mark has hung onto an intensely loyal cadre of customers – too many, in fact, to have enough of the slow-aged bourbon to go around.
To get around the classic supply-and-demand mismatch, the son of the company’s founder had developed a solution he thought would boost supply without losing any of the taste. All it would require is adding about 7 percent more water – and that much less booze -- to each bottle. He swore most customers would never taste a difference.
Customers, and bartenders who the company relies on to be tastemakers, cried foul and took to Facebook, email and Twitter to announce plans to abandon the brand or fight to have the decision reversed. (For a Kentucky lament, see here.)
I began asking Maker’s Mark chairman emeritus Bill Samuels Jr., and his son, chief operator officer Rob Samuels, whether they were going to change their mind last Wednesday. The answer came Sunday, when they announced online that the plans to water down the bourbon that made their family famous were being scrapped immediately.
The turnabout was lightning fast, a credit to social media, to the early national exposure provided by a few major media outlets, and to the Samuels’ deep connection with their customers. The anguished appeals from so-called 'ambassadors' of the brand helped get the attention of the Samuels. Accompanying the reversal was a disarmingly direct mea culpa on Sunday, in a statement signed by both Bill Jr. and Rob Samuels. “You spoke. We listened. And we’re sincerely sorry we let you down.”
Reflecting on the turnabout Monday from his office in the Kentucky Capitol in Frankfort, Beshear said the reversal and the apology were so fast, and so effective, he thinks the company will end up in an even stronger position. “I am certain they were sincere in the approach they were taking, but the truth is that at the end of all this the Maker’s Mark brand is only going to be better known than it was before,” he said.
Others were more skeptical. Writers have asked whether the whole debacle had been a clever, if risky, marketing ploy all along. Rejecting such speculation, the elder Samuels said there was no way he’d have gone through the past week on purpose. “This was about the worst four or five days of my life, and you wouldn't impose that on yourself unless you were really stupid,” he told Louisville Courier-Journal reporter Mark Boxley in a piece widely distributed on the web.
The formula for Maker’s Mark’s wild success has always been two parts marketing and one part quality product. It’s a story that has sold Maker’s Mark across the world. Sure it’s a story rooted in fact and claims that have stood up against scrutiny. But the romance people have with their square-bottled bourbon has as much to do with their love affair with the idea of Maker’s Mark as it is about the taste the liquor leaves in their mouths.
By suddenly suggesting to Maker’s Mark fans that the bourbon they’d been drinking all these years could just as easily be made with more or less water, that the 90 proof had been arbitrary all along, the company had courted disaster. The message was there was something flexible, impermanent about the elixir in your glass.
Forty years ago that might not have mattered. But in 2013, with dozens of competitors who can easily claim as good or better taste profiles, that romance with the idea of Maker’s Mark – the newfangled formula, the red bottles, the family stewardship, the slow aging process, in other words the exaltation of the inefficiency of the whole operation – is the product that sells. In that sense, the whisky is almost incidental.
Beshear seemed to understand that when we spoke Monday.
“Bourbon is very special to Kentucky and Kentuckians,” he said. “Bourbon is a Kentucky spirit. We have owned that spirit since it was invented. And it is very uniquely Kentucky. Ninety five percent of all bourbon is made right here – and to me the other 5 percent is just counterfeit. Bourbon occupies a special place in hearts and minds of Kentuckians, among both people who like it and those who don’t drink alcohol at all.”
The bourbon-drinking governor said he’s traveled all over the world talking to companies about opening facilities in Kentucky. Almost all of them want to talk about bourbon, he said. “I have traveled a lot of places in the world – China, India, Europe, Japan, Taiwan – and it’s amazing just since I’ve been governor how well known Kentucky bourbon has become. I can hardly think of a single restaurant I’ve been to anywhere in the world that doesn’t have some type of Kentucky bourbon or bourbons on their drink menu. I always look for that when I go. I want to see how far-reaching the industry has become. And around the world, Kentucky is known for a number of things: The Kentucky Derby, its horses and its bourbon.”
Of course with that increased recognition comes more demand for bourbon, the very development that had put the squeeze on Maker’s Mark in the first place. Its parent company, Beam Inc. of Illinois, asked the distillery if there were options they hadn't considered that would allow it to produce more bourbon to sell.
Now that the company has decided to keep the bourbon at 90 proof it will have to decide how to address the shortage. It began by sending a message over the weekend: Our customers, said Rob Samuels, have told us they would rather deal with shortages than see their whisky tinkered with.
Maker's may find themselves under pressure to raise their prices. Bill Samuels Jr. told me over the weekend that he doesn’t expect the company to do that, though he noted he no longer calls the shots as he once did. “Now, I am retired,” he said. “But we do have a culture around here. And that culture has always been ‘Don’t abuse your customers.’”
But the worry for Maker’s Mark isn’t that customers will feel squeezed by a price increase. The risk in upping the price is that it could give Maker’s loyalists permission, or a reason anyway, to shop around. What they will find on the shelves of their local liquor stores is a set of choices radically different from what was there just 5 years or 10 ago. (More in thie vein here.)
Beshear said he thinks Maker’s and its corporate owners understand the care they must take with how they present, and produce, their bourbon. “I think Beam understands what a special brand they have in Maker’s Mark and do want to make sure they take care of it, and treat it appropriately,” he said.
There is a lot more at stake than just the standing Maker’s has with bartenders in chic outposts, the governor suggested. “Bourbon in Kentucky is in its largest expansion since prohibition days,” he said. “Just this last year, there was more than $225 million invested in new distilleries, warehouses and visitors’ centers. Right now there are about 4.9 million barrels of bourbon aging in Kentucky – that’s more than the population of Kentucky, which 4.3 million.”
So he said there’s good reason to root for wisdom among the state’s bourbon industry leaders. There’s a lot riding on the way the companies grow.
All together, it’s enough to make a man want a drink. I asked him how he drank his own bourbon. Turns out he favors a mixed drink: bourbon mixed with ice. “There is only one way to drink a fine Kentucky bourbon.” he said. “And that’s on the rocks.”
And his choice of brands? He’s not saying.
“You also can’t be governor of Kentucky and take sides,” he said.