The Price Of Cheapness.

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The Price Of Cheapness.

Unread postby bunghole » Sun Feb 11, 2007 2:49 pm

I was just wondering how various brands have faired after proof lowering and/or the removal of age statements.

Wild Turkey did this years ago changing it's 8 year old 101 proof to "#8" and now no number at all.

Jack Daniels recently lowered it's famous black label proof down to 80.

Evan Williams first lowered their proof down to 86, and then removed the age statement.

Early Times is a classic case of cheapness going from a bourbon to a "Kentucky Style Whiskey".

Did sales drop; stay the same, or rise?

Contrast this trend with the opposite approach taken by Buffalo Trace with the release of uncut & unfiltered expressions along with extra-aged brands and more single barrel bottlings than the rest of the bourbon industry put together.

I wonder who is really making the most profit per proof gallon of whiskey produced?
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Unread postby cowdery » Sun Feb 11, 2007 7:25 pm

Wild Turkey doesn't seem to have suffered from its perfidy, and Jack Daniel's certainly has not. The proof cut didn't hurt Evan Williams and it's probably too soon to tell if removing the age statement has.

Early Times was in decline when they made it "Kentucky Whisky" and it has continued to decline, but is still a pretty big brand. However, at the time of the change its sales were only slightly below those of Jack Daniel's and Jim Beam, while the distance between them is much greater now. Whether the change (and simultaneous packaging changes) helped or hurt is purely speculation.
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Unread postby bourbonv » Sun Feb 11, 2007 7:41 pm

Linn,
I suspect it has to do mostly with the market share of the brand. The larger the market share, the less the change in quality is going to hurt the sales. When a brand gets to a certain size (or critical mass, let's say), then a large portion of that market who are buying the product simply because of the name and mixing it with coke so they really don't care what it taste like as long as there is no bad flavors involved that overpower the coke. Lowering proof, reducing age, and used cooperage are probably not even noticed by these drinkers and sales continue as normal since they simply know the price has not gone up.

I suspect that brands with smaller market shares will be hurt by these same practices. For example, the sales of Rebel Yell were down after U D lowered the proof and removed age statements. These figures were offset because they increased its market by taking it worldwide, but it never caught on. If they had left it as a 5 yo 90 proof I do believe they would have done better in the world market and would not have lost sales in the south.
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Unread postby LogicalFrank » Sun Feb 11, 2007 9:24 pm

Well--bourbonv said pretty much what I was gonna add. Something like Jack Daniels is sold on brand name rather than quality (hell--Frank Sinatra drank that stuff, why shouldn't I?) and I really don't think it's gonna make a difference in terms of their market share unless the change is to the design of the label or the shape of the bottle.

The question of how it's gonna affect smaller labels is still up in the air. Personally, I cannot see it hurting the "super-premium" brands all too much. Someone who's spending thirty, forty, fifty dollars on a bottle of bourbon probably isn't buying JD to begin w/ and not who they're trying to sell to anyway. What it very well could potentially hurt is smaller labels that make higher quality whiskey at a lower price.
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Unread postby EllenJ » Sun Feb 11, 2007 10:11 pm

Most of us who follow whiskey-appreciation forums such as this one are not in the "Wow!, This is GREAT whiskey -- just lookat how much alky-haul is in there! Yep! SMOOTH!" category. And we probably don't hang out much with those who are (except for less-educated in-laws, of course).

However, it's easy for most of us to forget that the teeming masses of spirit drinkers, being somewhat less sophisticated than ourselves, are basically looking for something with alcohol in it that doesn't TASTE as if it had alcohol in it.

Because they don't LIKE alcohol.

And eighty proof means they can drink more of it before falling on their face than they could when it was ninety proof.

That's a good thing.

And, considering the implications of such an attitude, I agree that it's a good thing for those people... as well as for anyone driving on the same road as them.

That said, I'd like to go on record as saying that what was done to Russel's Reserve was just WRONG, and whoever really owns the Boulevard Distillery these days should be ashamed of themselves.
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Unread postby gillmang » Sun Feb 11, 2007 10:38 pm

And yet... I have a friend from the U.S. (not a member of this forum or the other board and not a whiskey maven) who liked bourbon and he would buy Knob Creek, brands in that category. He told me when Jack Daniels went from 90 to 86 he bought it reluctantly but when it dropped to 80 he flat out refused to buy it. I am not saying this is a typical reaction, but some people definitely were turned off by the proof drop. Judging by my own and others' reaction to Silver Select and the U.S. Single Barrel, the drop in proof didn't help JD any and some people, not whiskey experts in the sense we would mean it here, noticed and stopped buying it.

Gary
Last edited by gillmang on Mon Feb 12, 2007 5:28 am, edited 1 time in total.
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Unread postby cowdery » Mon Feb 12, 2007 2:42 am

And yet they have five stills in Lynchburg running as much as they dare to run them, and they are expanding their production capacity. If Jack Daniel's is hurting, we should all be hurting like that, anecdotal evidence notwithstanding.

Don't forget that the proof cuts are primarily a way to increase profits by reducing tax liability without taking a price increase, and if U.S. law didn't put the floor at 80 proof, they would go lower still.
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Unread postby gillmang » Mon Feb 12, 2007 5:29 am

Oh sure, and I didn't say they were hurting, just that some people were not pleased with the change.

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Unread postby bunghole » Mon Feb 12, 2007 8:34 pm

Four Roses is another distillery that is bucking the downward cheapness sprial.

Four Roses 'yellow label' is just a bland young 80 proof bourbon and that was all there used to be only a few years ago.

Enter their single barrel at 100 proof, and now their small batch expression at 90 proof. Read what folks that like to drink bourbon are saying about these two. Most are raving over them.

If young 80 proof bourbons with no age statements are the best way to maximize profits, why are Four Roses and Buffalo Trace taking the opposite approach? Don't they realize that they will soon run themselves out of business? :wink:
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Unread postby MikeK » Mon Feb 12, 2007 9:40 pm

Because some people believe there is more to life than maximizing profit. The satisfaction that come from making a quality product is still revered by many, and most of us fall into that group I hope. Running a business to maximize the profit is a cold and souless endevour. Pappy knew this. He'd rather run a small top quality business that was the best it could be, rather than a huge profit making corporation that made a lesser product.

If you talk to the people at BT or 4Roses you know these people love their work. Also, one can make good money by selling a LOT of cheap product, or a lesser amount of high end product. BT probably realizes that they don't need to sell as much volume at a lower margin if they make high quality bourbon and sell less of it at a higher margin. And you can go home each night with pride.
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Unread postby cowdery » Tue Feb 13, 2007 12:28 am

If young 80 proof bourbons with no age statements are the best way to maximize profits...


That's not what I said. Not even remotely.

As for Four Roses, half the whiskey they make gets sold as Seagram's Seven.
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Unread postby bunghole » Tue Feb 13, 2007 8:12 am

cowdery wrote:
If young 80 proof bourbons with no age statements are the best way to maximize profits...


That's not what I said. Not even remotely.



Did anyone say you said that, Chuck?
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Unread postby cowdery » Tue Feb 13, 2007 7:17 pm

Please excuse my haste. I was the one who first used the term "maximize profits."

If you saw today's Louisville Courier-Journal, you can see that I had this particular subject on my mind. I'm sure it will appear in "Industry News" shortly. Some highlights.

Beam Global is investing almost $120 million to upgrade three of its Kentucky facilities. Almost all of that money is being spent to increase production capacity.

The volume of whiskey produced in Kentucky each year has more than doubled since 1999.

My overall point is that growth is good. There will be some changes and adjustments, some short term some long term. Those of us who started to appreciate American whiskey before everybody else got about ten years of really good whiskey at bargain prices. Every indication is that really good whiskey is here to stay, but the bargain prices have played out.

I can live with that.
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Unread postby bunghole » Fri Feb 16, 2007 12:53 am

cowdery wrote:Please excuse my haste. I was the one who first used the term "maximize profits."


You are excused, Chuck. That was in the Old Fitzgerald 1849 thread, and what you really said was "profit maximization".

I started the "Price Of Cheapness" thread in order to keep things focused and to show that it isn't just Heaven Hill or Old Fitzgerald 1849 that has had it's quality lowered and that this trend has been going on for quite some time industry wide.

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Unread postby Bourbon Joe » Fri Feb 16, 2007 10:30 am

MikeK wrote:Because some people believe there is more to life than maximizing profit. The satisfaction that come from making a quality product is still revered by many, and most of us fall into that group I hope. Running a business to maximize the profit is a cold and souless endevour. Pappy knew this. He'd rather run a small top quality business that was the best it could be, rather than a huge profit making corporation that made a lesser product.

If you talk to the people at BT or 4Roses you know these people love their work. Also, one can make good money by selling a LOT of cheap product, or a lesser amount of high end product. BT probably realizes that they don't need to sell as much volume at a lower margin if they make high quality bourbon and sell less of it at a higher margin. And you can go home each night with pride.


Well said Mike. I agree most fervently.
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