Whisky Advocate

Whiskey Shortages? Not at Beam (Suntory)

June 6th, 2014

Author - Fred MinnickWhy did the world suddenly start to care about the whiskey shortages?

On May 8, Buffalo Trace sent a media-wide press release that detailed looming bourbon shortages. From there, serious journalists covered these tragic circumstances and whiskey shortage stories became a trendy subject on slow news days. So, if you’ve been wondering where all these stories came from, now you know.

With that said, the shortage is real, to some extent. The industry is feeling heavy demand with no end in sight.

But the world’s largest bourbon maker, Jim Beam, has been relatively quiet in these doom-and-gloom whiskey stories. There’s good reason. Suntory purchased the company in January, and it’s been quietly adding to its Kentucky distilleries, had the acquisition pass through regulatory bodies, and developed a new Beam-Suntory logo that offers a subtle contrast in American creativity and Japanese efficiency.

BeamSuntoryLogoJust how is Beam doing in this whiskey shortage? According to Clarkson Hine, Beam-Suntory’s senior vice president of corporate communications and public affairs, Beam was ready for the demand.

“We have been investing substantially over the past several years to increase our bourbon capacity, including the recently announced third still at Maker’s Mark and construction of new rackhouses,” Hine says. “Given the laydown decisions made years ago, we currently have supplies across our bourbon brands to support consistent healthy growth.”

But not all bourbons are created equal. According to Beam’s financial 2013 results, Maker’s Mark grew 17% and Knob Creek 14%, while Jim Beam paced at 4% growth and Basil Hayden’s threw a party with 29% growth.

Hine says Australia’s market softness impacted Jim Beam’s growth rate and the company’s marketing strategy for Basil Hayden’s led to consumers discovering the 80-proof whiskey for the first time.

BH750_06“We made a strategic decision last year to boost investment behind Basil Hayden’s, particularly in the on-premise and in social media,” Hine says. “We believe the brand has the potential to be the next break-out star from the Small Batch Collection, building on the ongoing success of Knob Creek.”

Basil Hayden’s is certainly poised to capture the beginner’s market. People tend to find this lower-proof bourbon to be subtle and with a couple ice cubes, it offers the newbie little to no bite. In social media, the bourbon appears in photos set in places of relaxation, from a park bench to a bathtub, appealing to one’s inner tranquility, a refreshing attempt at presenting to new consumers.

Meanwhile, Beam-Suntory finds its new company in change. Starting July 1, Hine says, the company begins to transition distribution for the legacy Suntory brands into the old Beam routes to market in the U.S. and Germany.

“We expect that management of Suntory’s international spirits business outside of Japan will integrate into Beam Suntory in stages by the fourth quarter, with the Japan business to merge into Beam Suntory by the end of 2014,” Hine says. “Given the size and importance of the Japan business, Japan will become Beam Suntory’s fourth operating region.”

As for the American whiskey, well, Beam Suntory seems to be business as usual. Expect to see two new editions in the Jim Beam Signature Craft Harvest Bourbon collection this fall; one will add brown rice to the mashbill in place of rye, the other will replace rye with red winter wheat. Meanwhile, the trucks keep moving in and out of the Clermont and Boston, Kentucky, facilities with tankers of whiskey and barrels to stack. Beam seems to be perfectly under control.

The reason I tell you this: the next time you hear your buddy talk about the whiskey shortage, you can tell them to calm down. If Jim Beam—excuse me, if Beam Suntory runs out of whiskey, then it’s time to panic.

18 Responses to “Whiskey Shortages? Not at Beam (Suntory)”

  1. Jim W. says:

    Not sure how anyone can say Maker’s Mark is on top of demand with a straight face, since they were about to cut the proof down to eek out the supply only last year. Their expansion plan is finally moving, but only after several years of delay.

  2. Chad C. says:

    I think it just goes to show that the lower proof was just a stunt to explain there price increases.

  3. Josh says:

    It’s water, corn, grain and wood plus time. Not that big a deal. Far from it. There will probably be a glut 10 years from now because people are over-loading future inventory during this bubble. The production potential of Bourbon is infinite, as long as water, corn and grain are available. The rest is marketing fear-mongering.

    • Danny Maguire says:

      concur. We’re heading for a glut in all whisk(e)y types. Good for the independent bottlers but not for the distillers.

      • Mr. Manhattan says:

        Don’t be so sure about this: American whiskey is now a product with global demand and there’s concerted effort to expand into non-US markets aggressively. Don’t think Suntory didn’t have this in mind when it purchased Beam. The US market may or may not soften over time but that’s never going to be the whole story ever again. And the growth of flavored whiskies only adds more complexity to the picture: why wait for a barrel to age 6 or more years when it can be used to make a flavored product much sooner.

        • Danny Maguire says:

          I stick by what I said, sooner or later there is going to be more product than consumers. Good for the consumer, not the distiller.

  4. Austinite says:

    The biggest issues that I see are time and barrels. The grains/water are obviously not a problem, but the need for the barrels to support the growth is a challenge.

    • Lew Bryson says:

      Don’t bet on water being no problem. Depends on the source. Some distillers have plenty; others have to watch every gallon. And the droughts that have become common in Kentucky don’t help the situation.

      • Austinite says:

        Very good point, Lew. Being in Texas, I know all too well that water is no longer to be taken for granted. Not to say that it ever was.

  5. howard yagerman says:

    I was at my local liquor store and they were selling Pappy 23 year old for 2000USD a bottle.Oh to have a case!!!

    • Your local liquor store should be ashamed. I too get a thin supply(at our shop) of the winkles, antique collection, black maple hills and many other in demand bourbons, and to gouge customers like that is a disgrace. I use my regular, very fair markup and no more. You should find a better place to shop.

  6. bpbleus says:

    As any engineer or other mathematically educated person can tell you, a system with a delayed feedback (i.e. demand) on production is intrinsically prone to show cyclical behavior. If feedback works on a relatively short-term scale, as one would expect with products from companies with publicly traded stock, those cycles are pretty volatile. In other words, future whisk(e)y glut is built into the system.

    Then, who cares much about Jim Beam anyway?

  7. Danny Maguire says:

    And I don’t think it will be too long before the next one.

  8. BourbonCounty says:

    If all Bourbon was just water, corn, grain, plus time everyone would make it and be rich. ingredients are the easy part, but the right quality of ingredients and mixture, plus the right timing and of course cooperation by mother nature is what truly matters. People said Vodka would die out and look at it now, still booming. Having planned out for this will allow them to continue to expand their brands and footprint as well as offer you and me better prices, so we should all be happy they planned for this. when you go reach for your Buffalo Trace in a year and its $50, you’ll be happy they thought ahead and you can get a bottle of Makers or Beam for half that.

  9. Mike Dski says:

    Water,corn ,grain,plus time. One more thing,Bourbon doesn’t come out of a tap,there’s a thing called a Bourbon barrel. How much time,including Mother Natures is required for the wood in the barrel and remember Bourbon doesn’t come from used barrels.

  10. Danny Maguire says:

    At the moment, there are moves to change that, don’t know if it will come off. Can but wait and see.

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