Making a Market for Maker's Mark

Can the Loretto, Ky.-based bourbon maker hold onto its quality-intensive formula in the face of rapid growth?

"If it ain't broke, don't fix it," is an appropriate characterization of the Maker's Mark approach to whiskey making, a distilling process that has remained largely unchanged since Bill Samuels, Sr. founded the company in 1952. Their time-tested recipe for high quality bourbon is followed to a T each day in the original Loretto, Ky., distillery, and millions of loyal customers the world over provide overwhelming evidence that nothing needs fixing.

The bourbon business has boomed in recent years. In 2005, more than 14 million nine-liter cases of bourbon were sold in the U.S., generating more than $1.5 billion in revenue for distillers, according to the Distilled Spirits Council of the U.S. Since 2002, the market for high-end premium and super premium bourbon has grown 6.9% and 11.9%, respectively, while demand in the least expensive category fell 3.8%.

But the proliferation of these customers—helping Maker's post double-digit growth over several consecutive years—has put the company in a pickle. How do you embrace a massive new market without sacrificing the traditional methods and high quality standards that made your brand famous to begin with?

Museum Quality

To visit the Maker's Mark distillery, a National Historic Landmark since 1980, is to go back in time to an era when barrels were handmade by coopers, when whiskey fermented in huge wooden vats and distilled in giant copper columns, and when a tasting panel sipped, smelled, poked, and prodded each batch that came down the line.

Indeed, many of the machines used to produce Maker's Mark bourbon today are either 100-year-old antiques or custom recreations of retired equipment. Rather than modern hammer mills, Maker's Mark uses roller mills which are less efficient but have much less chance of scorching the grain and thereby creating a bitter taste.

Using wheat in the Maker's recipe forces them to use slower, open cooking mash tubs rather than pressure cookers. Neighboring bourbon distilleries such as Jim Beam and Wild Turkey abandoned such practices long ago in favor of cheaper, more efficient production. But Maker's Mark has remained committed to the consistency of its formula.

Tried and True

Like Jim Beam, Maker's Mark is owned by Lincolnshire (Ill.)-based Fortune Brands (FO), which acquired it from distillery giant British Allied Domecq in 2005 (as well as Courvoisier cognac, Sauza tequila, Canadian Club whisky, Laphroaig single-malt Scotch, and Clos du Bois wines). Wild Turkey is part of French rival Pernod Ricard, which now owns Allied-Domecq.

Expansion of production, therefore, is a convoluted task. "Most of the time, when people think about expansion, they go to the textbooks—bigger, better, faster, more modern," says Dave Pickerell, master distiller and vice-president of operations. "We go to the archives. We pull out the drawings for the still set, go to [a custom maker], and say, 'Build us another one.' And we go back to Cleveland Welding and say, 'Build us another mash tub.' We're not trying to be technologically innovative. We're trying to do the same thing over and over again."

Maker's Mark did exactly that in 2000, when it built a complete duplicate of its original distillery. This action doubled production capacity and encouraged the company to grow even faster. Six years later, demand tempts them to expand facilities further.

What's in the Water?

Access to natural resources also imposes limitations. A select group of local farmers is responsible for growing all of the corn, wheat, and barley which has to meet the company's exacting standards. If they can't meet growing needs, Maker's Mark can't grow.

In addition, all of the water which goes into the whiskey comes from a limestone spring-fed lake on the distillery's premises, and the supply is certainly finite. Master distiller Pickerell claims that most loyal customers would notice a slight difference should any other water be used, a risk he's not eager to take.

As any growing business knows, more revenues will also require more employees—a measure which would detract from the company's family-like group of 75 employees, many of whom have worked in the distillery at Star Hill Farm for a good chunk of their lives.

A Growing Audience

Maker's Mark is at a major disadvantage to most other surging companies because each batch of bourbon takes about six years to produce, including the tedious aging process. This means they have to anticipate the amount of demand they will experience six years down the road.

Pickerell explains that a mathematical projection helps them make a good estimate of future demand. "We run the 'Oh no version' of a reality where everything goes wrong, then the 'Oh my' version where everything goes right. From those, we try to chart a course right down the middle." He says Maker's Mark's current middle course sees them growing by about 50% before 2012.

A blanket solution to most of Maker's Marks growing pains would be to raise their price. Currently, a one-liter bottle costs around $30 to $35, which is competitive with other small-batch bourbons such as Woodford Reserve, Basil Hayden's, and Knob Creek. Maker's Mark President and CEO Bill Samuels, Jr., son of the company's founder, refuses to budge on this matter.

Family Friendly Feeling

"The way we consider our market is customers, not competition," he says. "We have never thought about competition. We build relationships with customers one at a time." Even a slight rise in price, he has repeatedly declared, would undoubtedly sever the trust Samuels and his father worked to build with their customers over several decades.

Following the Fortune Brands acquisition, there was some concern that since Maker's Mark, Jim Beam, and Knob Creek—three of the leading brands of small-batch bourbon—would now be under the same umbrella, competition and quality would be threatened.

But this is only a boon to business and a fitting alliance, as far as Bill Samuels, Jr. is concerned. "The Beams and the Samuels were neighbors for more than 100 years. I grew up next door to Jim Beam and his son Jay. We're great pals, and we've never competed with each other," he says.

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