Thursday, July 2, 2009

Will You Survive the Knob Creek Drought?

This is part two of a three part series examining recent moves by Deerfield-based Beam Global Spirits and Wine. (Part one is here.) In this installment, we find the company, unable to meet consumer demand for one of its key products, bragging about that fact.

The Knob Creek brand is less than two decades old. It always has been a 100° proof, 9-year-old, Kentucky Straight Bourbon Whiskey. The only way to make 9-year-old whiskey is to put it in barrels and wait 9 years. This obvious fact makes it possible to run out, which Beam has done.

That doesn’t mean we have to wait 9 years for more. In November, the next batch will be of-age and ready. It won’t take very long to dump, bottle and ship a bunch of it just in time for Christmas.

Beam makes a lot of whiskey but sells nothing older than Knob Creek, so it doesn’t have extra stocks of old whiskey sitting around that it can divert. There will be no more Knob Creek shipments until November.

A shortage like this is to some extent a choice, in that Beam saw this coming and might have managed it differently, such as through allocation. In that sense you can say the shortage was manufactured, but that doesn't mean it's not a real shortage. It's just that having it happen in this particular way was a choice.

Some other brands in recent years, faced with a similar challenge, have gone NAS (no age statement). Beam chose to keep the age and accept the shortage. If all goes well, Knob shortages will become a regular occurrence.

One thing they are doing that may undermine their positioning is this idea that the currently-aging whiskey magically becomes Knob Creek precisely on its 9th birthday. In whiskey as in people, maturity isn't just a number.

None of this means you can’t go out today and buy a bottle of Knob Creek Bourbon. Beam hopes you will. Retailers and distributors still have inventory, just no way to replace it. This happens with products all the time, though usually it’s just a production planning hiccup and the shortage doesn’t last six months. This shortage is caused by the implacability of the whiskey aging process combined with better-than-expected success for Knob Creek.

Beam hopes attention generated by the shortage will cause people to rush out, snag the rare remaining bottles, empty the pipeline, and then queue up to ensure that the next batch sells out even faster than this one did. If that sort of marketplace manipulation offends you, grow up.

To fan the flames, Beam is sending “I survived the drought” t-shirts to consumers, while trade audiences are receiving an empty, sealed Knob Creek bottle with the message, “thanks for nothing,” a backhanded way to say “thank you for helping make Knob Creek so successful.”

While the Red Stag introduction and the Knob Creek campaign are both potential winners, the future for Effen Vodka may not be so rosy, but this is Beam so hedge your bets. Learn why tomorrow.

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