Maker’s Mark mistake fuels big Beam profit

Workers at White Rock Distilleries in Lewiston, now operated by Beam Inc., inspect some of their product. The company said sales of Maker’s Mark, one of Beam’s high-end bourbons, soared 44 percent after people rushed to buy bottles because of worries the company would lower its alcohol content.
Courtesy White Rock Distilleries
Workers at White Rock Distilleries in Lewiston, now operated by Beam Inc., inspect some of their product. The company said sales of Maker’s Mark, one of Beam’s high-end bourbons, soared 44 percent after people rushed to buy bottles because of worries the company would lower its alcohol content.
By Martinne Geller, Reuters
Posted May 02, 2013, at 5:39 p.m.

A public relations disaster pumped up Beam Inc.’s first-quarter profit.

Sales of Maker’s Mark, one of Beam’s high-end bourbons, soared 44 percent after the company announced it would lower the alcohol content in its bourbon because of a limited supply of whiskey.

A consumer outcry led Beam to quickly reverse that decision, but not before die-hard fans stocked up.

“As you know, we heard our consumers loud and clear, responded quickly and maintained Maker’s at 90 proof,” said Beam Chief Executive Matt Shattock.

He said that kind of growth was not sustainable and that Beam would control the supply of Maker’s by managing bottle sizes, prices and promotions.

Maker’s, one of several higher-end bourbons in the Beam portfolio, is made in Loretto, Ky., with red winter wheat meant to stimulate taste buds in the front of the mouth.

Beam operates a plant in Lewiston, where 160 employees produce Pinnacle Vodka and Calico Jack Rum. However, Beam announced in January that it would layoff its Maine workforce and shift production to a facility in Frankfort, Ky.

Beam on Thursday said net income rose to $114.5 million, or 71 cents per share, in the first quarter, from $79.1 million, or 49 cents per share, a year earlier.

Excluding items, Beam earned 64 cents per share, or 10 cents per share more than analysts were expecting on average, according to Thomson Reuters data.

Sales rose 8 percent to $577.7 million, as the strength in Maker’s Mark was partially offset by declines in Sauza tequila, Courvoisier cognac and Kilbeggan Irish whiskey.

Still, Beam stood by its full-year outlook, saying that some of the factors that helped results earlier in the year will reverse themselves later.

The company said it had benefited from the timing of ingredient costs, selling a higher proportion of more-expensive products, price increases and a shift in advertising spending to the second and third quarters from the first quarter.

The company affirmed its full-year forecast, which called for earnings before one-time items to grow at a high single-digit percentage rate from the $2.40 per share it earned in 2012. It said it still expected 2013 free cash flow of $300 million to $350 million.

Beam shares ended regular trading on Thursday up $1.82, or 2.8 percent, at $66.11.

BDN Business Editor Whit Richardson contributed to this report

 

http://bangordailynews.com/2013/05/02/business/makers-mark-mistake-fuels-big-beam-profit/ printed on July 28, 2014