Is Maker’s Mark (Literally) Diluting Its Brand?

When asked by a bartender as to whether he wanted his vodka martini shaken or stirred, James Bond, the character played by Daniel Craig in Casino Royale replies: “Do I look like I give a damn?” Loyal drinkers of Maker’s Mark, though, did certainly seem to give a damn when the venerable American whisky Maker’s Mark (note the absence of the e, a la Scotch and unlike typical American brands of whiskey) announced that they were lowering the alcohol content of the tipple from 90 proof (45 percent alcohol by volume) to 84 proof (42 percent alcohol by volume).

The main reason provided by the company was that the demand for Maker’s Mark, one of Beam Suntory Inc.’s signature brands, has been skyrocketing, especially in overseas markets. Several factors have contributed to this rise in popularity of this and other products, from favorable exchange rates to explicit overseas marketing by US companies facing declining demand in the domestic market. According to Maker’s Mark’s current COO, Rob Samuels, who in a previous role was in charge of forecasting, he did not foresee the rapid increase in demand. This led to the company’s predicament of possibly having to disappoint its many current and potential customers.

How does a company deal with such a situation? The most obvious solution (no pun intended) is for it to raise prices. However, this did not seem to appeal to the marketers of Maker’s Mark. After all, a company may be reluctant to raise prices in the presence of reference prices in the market. Notice how tuna cans have shrunk from 6 oz. to 5 oz. to stay close to the reference price of $1, or how orange juice cartons have downsized from 64 oz. to 59 oz., or how diaper boxes are no longer quite filled to the brim.

In the case of Maker’s Mark, the company also needs to keep in mind two types of customers: the end consumer who purchases liquor for at-home consumption and the bartender who resells the product to the bar’s patrons. Strong reference prices for either of these groups would make a price increase, for want of a better word, unpalatable.

Another option is to tinker with the product itself. The canonical example etched into the American psyche is that of Coke’s reformulation. That situation has been interpreted by some as a marketing fiasco and by others as a brilliant marketing ploy owing to the successful reintroduction of the original Coke formula as Coca-Cola Classic.

Closer to the Maker’s Mark example is that of Jack Daniel’s, the other famous whiskey from the South that twice lowered its alcohol content—once from 90 proof to 86 proof in 1987 and again from 86 proof to 80 proof in 2002. The argument in this case was that consumers preferred the lower-proof version. Granted, there was some resistance from the drinking population, most notably from the Modern Drunkard magazine. (To which Phil Lynch, a spokesperson for Brown-Forman, the maker of Jack Daniel’s, is known to have famously retorted, “We don’t think it’s appropriate to have a magazine called Modern Drunkard dictate how we make our whiskey.”)

The reasoning by Maker’s Mark seems along the same lines: discerning drinkers in their tests could not distinguish between the two versions of the product. This is perhaps the strongest justification for the company’s actions, although it does raise the specter, literally, of brand dilution.

Loyal customers who know of the dilution are likely to perceive the product as being watered down even if they might not be able to tell the products apart in a blind taste test. Those who remember Intel’s defense of the flaw in the Pentium chip—in which users would have encountered the flaw once in 9 billion or so operations—would also recall something else: a buyer of a Pentium chip only needed a single operation, not 9 billion, to actually encounter it. Although Intel finally recalled all the defective chips, considerable damage was done to the brand’s name.

There are two other justifications for the move by Maker’s Mark. If the brand expects to bring in new customers who have never tasted Maker’s Mark, it might argue that those new customers will not have any expectations about how the whisky previously tasted. As long as these drinkers like the taste of the whisky, they will continue to consume it. In other words, existing consumers will matter less in the long run. This, of course, will depend on the relative sizes of the two groups—and on the ability of existing customers to rally against the company’s move. Early indications are that these customers have vociferously expressed their displeasure.

Another justification is based on product-line considerations. If the feeling in the company is that Maker’s Mark is cannibalizing the higher-proof Maker’s Mark 46 (which has a 46 percent alcohol content), lowering the alcohol content for the flagship brand will enable the company to better differentiate its products and lessen cannibalization. Further, as the company is part of the Jim Beam stable of brands, it needs to take into account the Jim Beam product line, which includes 80, 86, and 90 proof brands. The Maker’s Mark product needs to fit into this lineup.

Taken together, there are a number of factors driving a decision such as the one taken by Maker’s Mark. From a marketing perspective, success will stem from whether the move keeps customers happy and loyal to the brand. In Raiders of the Lost Ark, when Marion Ravenwood (the character played by Karen Allen) is captured, her first question to her captors is, “Whatcha got to drink around here?” To that question, from her and from others around the world, if the answer is and continues to be “Maker’s Mark,” it would indeed be music to the company’s ears.

Pradeep K. Chintagunta is the Joseph T. and Bernice S. Lewis Distinguished Professor of Marketing at Chicago Booth.