Saturday, March 1, 2014

Suntory Sale Puts Maker's Expansion Back on Front Burner

It was just a little over a year ago that Maker's Mark put us all through the proof cut fiasco. You remember that, don't you? My question at the time was, "Why Is Maker's Watering Its Whiskey Instead of Expanding?"

The people who run Maker's Mark have known for ten years or more that the Maker's Mark Distillery needs more capacity if they are going to meet demand while keeping their pledge to make every drop at the beloved distillery in Loretto. The expansion plan was completed and announced in 2005, when Maker's Mark was still owned by Allied-Domecq. Then the sale to Beam happened, but everyone assumed that after evaluating the plan Beam would pull the trigger.

The sale went through, Beam took over, and indeed it did appear that the trigger had been pulled. By 2008, the necessary infrastructure improvements were completed. The lake had been enlarged to increase the water supply and the facility's waste handling capacity had been increased too. The numbers said there was no time to lose. The current facility can produce a maximum of 1.5 million cases a year and sales were closing in on that number.

Still, the expansion was postponed.

Last year, during the proof cut fiasco, all I got in response to my question was a lot of double-talk. Although no one at Maker's or Beam is likely to confirm this, it is apparent now that Beam didn't want to spend the money because it was trying to make itself an attractive takeover target so it could finally get activist investor Bill Ackman (Pershing Square) off its back. With the Suntory deal all but sealed, and no doubt with Suntory's approval, everyone is finally able to exhale and move forward.

The gist of the plan is the same as it was in 2005, to build a third distillery exactly like the other two, thereby increasing capacity by 50 percent. The Rob Samuels letter to Ambassadors talks primarily about the beer still, and that is the heart of the operation, but they will need another doubler and the necessary compliment of cookers, fermenters, and so on.

Vendome, the Louisville still maker, is backed up with orders right now but that won't be a problem because they always have a spare Maker's Mark beer still on hand just in case.

When they get that third still up and running they can finally start to work on the much more vexing problem, what to do next? By all previous accounts, three stills is as far as they can go without finding a new water supply.

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