Why Did Suntory Botch Its Jim Beam Announcement?

 

Major brands in the portfolio of Suntory Global Spirits.

Whiskey is unlike most manufactured products in a way that even close watchers of the business have trouble grasping. Unlike most things we buy, whiskey made today will not be sold next week, next month, or even next year. Hardly any of it will be sold before 2030. Some of it will go unsold, deliberately, until 2034 or later. That's the nature of the whiskey aging cycle.

That's just for American whiskey, which usually sells after four to five years of maturation. For scotch it's longer, more like eight to ten years. Irish and Japanese whiskies are more like scotch. Canadian whisky is more like bourbon with regard to how long it's aged.

So, when distillery production planners decide how much they will distill today, tomorrow, and next year, they're not thinking about market conditions in 2026. They're trying to imagine market conditions in 2030 and beyond. A lot can change. Taylor Swift may be president by then. 

In their data pile is evidence that bourbon's long "boom" has ended. Sales have declined for the last few years and inventories, both in barrels in maturation warehouses, and in bottles in the warehouses of distributors and retailers, are too high. Many household inventories are too high too.

But the bourbon industry is not collapsing, it is adjusting. Across the board, production cuts are ranging from 25 to 30 percent. Unofficially, Vendome's business making stills and other distillery equipment also is off about 25 percent. 

Remember, you're trying to compensate for two things, about five years of overproduction and about three years of declining sales. 

So, considering that all this is pretty much normal business, why did Suntory Global Spirits botch its announcement so badly, giving the impression that Jim Beam has paused production altogether?

I've often felt Diageo, despite its size and broad portfolio, is just Guinness and Johnnie Walker at heart and that's how they think. They fundamentally misunderstand American whiskey.

Suntory may be in the same boat. They sure were caught flat-footed when announcing their decision to significantly reduce production of Jim Beam Bourbon. 

It appears Suntory was forced to make the announcement, on the Saturday before Christmas, because reporters at Louisville Business First heard chatter from distillery folks that the shutdown was coming.

It's a small world down there. Clermont is in Bullitt County. The top government official in Bullitt County, Jerry Summers, was Director of Community Relations at the Beam distillery for 39 years. He's a member of the Kentucky Bourbon Hall of Fame. I'm not saying Summers talked to reporters before the announcement was made, but I guarantee he knew what was coming. Plenty of other people did too.

Suntory's statement made it clear the decision came from New York and was conveyed to the Kentucky teams in recent days. It said nothing about layoffs, which led to speculation about pre-Christmas firings. Today the company said, "employees in our distillery department are being reassigned within the company, and as of now, there are no layoffs." That should have been in Saturday's announcement.

So, Suntory rushed out a statement that made it sound like no Jim Beam Bourbon would be made in 2026. You had to read it carefully to realize that, in fact, only the smaller of Beam's two plants would not produce in 2026, which would reduce production of Beam whiskey by about 25 percent. A former Beam insider pointed out to me that the distillery they're "pausing" is about 50 years old and due for either a major overhaul or retirement. 

One of the best articles on the subject so far is in the New York Times, written by Clay Risen. Although Risen's primary beat is obits, he is a serious student of American whiskey and, like any good journalist, strives to provide perspective. For example: "The sudden, steep decline in bourbon sales comes after more than 20 years of expansion in American whiskey, which regularly reached 5 percent in annual growth. It went from about $1.4 billion in sales in 2004 to about $5.2 billion in 2024, according to data from the Distilled Spirits Council of the United States, a trade group."

Most stories have not been so balanced. Many attribute the shutdown to Trump's tariffs. Uncertainty about future sales in non-U.S. markets is certainly one of the factors production planners are considering, but it's far from dispositive or even the most important factor. It's probably fourth or fifth on the list.

It also should be noted that while Clermont is Beam's "main" distillery, that term suggests it is where all, or at least most, of the whiskey is produced but that's not true. The Booker Noe Distillery in Boston, Kentucky, makes all the same products and has about double the capacity of Clermont.

So, why did Suntory flop? Maybe the scandal involving the CEO of their parent company has their PR department distracted. Maybe they thought they could wait and make the announcement after the holidays. Without evidence to the contrary, it looks like they made the decision and transmitted it to staff at the affected facilities without a messaging plan of any kind. That seems incompetent.

Prove me wrong.