Wednesday, March 14, 2012

Higher Bourbon Prices Are Coming.

Shanken today reported that Beam Inc. has raised prices on its bourbon brands and could take a second round of U. S. price hikes this year. The announcement was made by Beam North America president Bill Newlands. The Beam bourbons (Jim Beam, Maker’s Mark, Knob Creek, etc.) will probably go up the most. Newlands cited rising corn prices in the U. S. as the primary reason.

Beam’s Scotch, Tequila, and Cognac prices could also rise, in response to improving economic conditions. Newlands expects vodka prices to remain unchanged, given the category’s competitive and crowded nature.

Commodity prices notwithstanding, products are always priced based primarily on what the market will bear. Bourbon will continue to represent a great value for American drinkers as compared to scotch and other imports. Beam's higher prices may shuffle the deck a little, if consumers who resist the price increase on their favorite brand shop for an alternative. When a big company takes a price increase, that gives smaller companies an opportunity to grab any alienated consumers. It's all part of the market dynamic.

If past history is any indication, we probably can count on Beam taking some of the sting out by promoting heavily, giving the more price-sensitive shoppers an opportunity to stock up at a discounted rate.

The other difference between vodka and whiskey, of course, is that you can always make as much vodka as you can sell, whereas the aging cycle means the supply of ready-to-sell whiskey is always finite.

Nobody likes to pay more but this is further evidence that the whiskey category, and the American whiskey segment in particular, continues to enjoy robust good health, and that's good for everybody.

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