Maker’s Mark President in High Spirits Over Company's Premium BourbonPublished: February 09, 2003 in Knowledge@Wharton
It was 6 a.m. on January 28, 2003, and Bill Samuels, Jr., was on a flight to Philadelphia to give a guest lecture at Wharton. President of bourbon producer Maker’s Mark, Samuels opened his Wall Street Journal to the editorial page and there it was – a piece by Wharton professor Eric Clemons on what goes into the distinctive branding around companies like Starbucks.
The Journal article mentioned fantastic coffee, neighborhood loyalty and ambiance. “Wow,” Samuels thought. “That’s Maker’s Mark. The company is a perfect example of this approach.”
Indeed, Maker’s Mark’s current marketing strategy works well for this distiller of premium, small-batch whisky headquartered in Louisville, Ky. In a growing bourbon market, Maker’s Mark is deliberately a small company, producing only 500,000 of the industry’s 13.1 million cases of bourbon each year. But according to Samuels, it will post a gross margin of 73% on $60 million in sales this year, has experienced 31 years of double-digit growth and claims a 70% market share in the category of fine bourbons.
The marketing strategy that helps the company post these numbers is based on one driving belief. “You must have a taste worth talking about,” Samuels says. “That’s what gives the brand that ‘wowee’ quality,” whether it’s coffee or bourbon.
Samuels comes from a seven-generation line of bourbon distillers who trace their legacy in this country back to 1750 when the family emigrated to Pennsylvania from Scotland. (“You know what we did there,” he says). In 1784 the Samuels moved to Kentucky and set up a distillery.
Today 95% of the bourbon production in the U.S. comes from Kentucky. To earn the name bourbon, it must be made in the U.S., contain at least 51% corn in the mash, be distilled at 160 proof or less and age at least two years in new charred white oak barrels.
The Samuels have been doing that in Kentucky for generations, but the turning point in the company’s current success may have been when Bill Samuels, Sr., Samuels’ father, took over the business in the 1950s. He had one passion – the craft itself. “He wanted to create a bourbon that actually tasted good,” Samuels says, “one that had a level of sophistication without being snooty, one that could sit well on tables in fine homes and restaurants – something bourbon had never done.”
Unfortunately, back then the brown spirits market was slumping by about 5% a year. The question became, how does one buck that trend? The answer, according to the elder Samuels, was to start over. The family burned the traditional formula and Samuels experimented with inventing a new one. The trouble is, when you do that with bourbon, you have to wait at least six years to see if you have a successful product or not, Samuels says. His father, however, hit it right the first time. But then passion number two of the elder Samuels surfaced: He hated marketing.
Yet today, 50 years later, Maker’s Mark has scaled what may be the ultimate in successful promotion. The distinctive, red-wax-capped bottle of Maker’s Mark got a full-screen shot in last year’s blockbuster movie Spiderman in a scene where the Green Goblin sips a drink and plots his strategy. “We don’t go out and buy that kind of marketing,” says Samuels, noting that the producer came to them, “but we sure like it when it’s free.”
Today the brand is gaining icon status in its class of premium bourbon, which includes, for example, lines of Jim Beam, Wild Turkey and Four Roses. How did a market-shy company get here? That’s where Bill Samuels, Jr., enters. Raised in what might be called the bourbon belt, Samuels grew up around neighbors that included Jim Beam and Col. Harlan Sanders of fried chicken fame. In fact, Samuels for a short time was Col. Sanders' chauffeur.
After a brief career in aerospace engineering, Samuels joined his father in the family business in 1967. While Maker’s Mark was highly respected by Kentuckians, no one outside of the state had heard of it. Bill, Jr., had to do some inventive thinking about how to market the company, yet keep its “commercial footprint” pretty much hidden from view, since Bill, Sr., didn’t believe in an “in-your-face” approach to the consumer. Let them come to us, he figured. So Bill Samuels, Jr., has been working for 37 years on how to get those customers to come to them.
In the late ’70s, he saw the first wedge of opportunity. “We had to get consumers talking to us. That kind of marketing my dad did believe in. But we had no distributors. Who would want to deal with a little guy with no marketing budget in an industry declining by 5% every year? Almost 100% of our business was in Kentucky, though we had double-digit growth.” What the company needed was credibility in the trade. At the time a lot of tastings were going on around the world. Maker’s Mark entered four – in Tokyo, Paris, San Francisco and New York. It won three of the four.
The buzz was on. Now the company needed to find a way to cultivate it. They focused on their distillery in Loretto, Ky., the world’s oldest operating bourbon whisky distillery. It was dedicated as a national landmark in 1980 and the company managed to get itself front-page Wall Street Journal coverage. According to Samuels, it was the first time the Journal ever did a front-page feature on a privately-held company.
The floodgates opened for Maker’s Mark. “We stopped everything we were doing at the distillery. We put in 10 phone lines and answered phones and mail for the next three months. People wanted to know where to get a bottle. Well, there weren’t any bottles unless you came to Kentucky. We had no distributors.”
Soon the distributors started seeking out Maker’s Mark. “We convinced Dad to do some marketing – and remarkably he agreed. As long as it was ‘people talking to us,’” not Maker’s Mark hammering them.
In the early 1980s Maker’s Mark sold the company to Allied Domecq Spirits because of estate concerns. But that didn’t change the autonomy with which the Samuels family operated. “The parent company spent a lot of time keeping the smart people away from us until we were ready – and crossing their fingers that we’d ask for help when we needed it,” says today’s president.
About six years ago, Bill Samuels decided he needed it. Growth was burgeoning on a national basis and inventory became an issue. By now the competition had started to catch on to the ultra-bourbon market potential, and could rely on far bigger marketing budgets and more savvy than Maker’s Mark. Samuels went asking for help from the parent company.
Marketing began full-bore, but still with one Samuels imperative: It must leave no commercial fingerprints. It must come “uphill” from the customer – not “downhill” from the company.
Some soul searching started things off. What did the company want to be? “We wanted to be the leading small volume specialty whisky brand,” Samuels knew. Based on what? Samuels keeps coming back to the three basics. First, a fabulous product. Second, “customer loyalty. When we think of a customer, we think of individuals, multiplied.” And third, ambiance. “That’s all about our irreverence, and the authenticity and classiness of the distillery. We have about 70,000 people coming to this mecca every year.
“Bang, bang, bang. That’s it,” says Samuels. “But it took me the longest time to figure out the role of these three things. And you can’t divorce the three from one another,” he believes. “We identified our position as ‘Jack Plus.’ It’s simple. It’s for people who grow up out of Jack Daniels.”
The company’s communications strategy revolves around talking to people who want to talk to you and developing personal relationships with them. One vehicle, started nearly two years ago, is the Ambassador program. Customers who enroll get a “passport” making them an official ambassador for Maker’s Mark – and the company names a barrel of whisky for them. The company spent $3.5 million to launch it and now has 70,000 people registered.
“We don’t ask them to buy anything. But it keeps them connected to the product in a personal way. It lets us have the same relationship with customers outside of Kentucky that we have inside Kentucky,” says Samuels. Always, the commercial fingerprint stays invisible. “The easiest thing is to want to show off … to show the world what great marketers we were. And the minute the marketer’s fingerprint appears, it doesn’t have any credibility,” Samuels states.
Good as things are today, tomorrow has its special problems for a bourbon distiller. “We have to anticipate demand in six years, the length of time it takes to produce a barrel of bourbon. It’s about looking for early indicators of ‘buzz.’ It’s intuitive stuff, trying to stay ahead of the curve, and realizing that what we’ve got is perishable,” says Samuels. “If [the bouron] gets over seven years, it’s too old, too woody and doesn’t taste like Maker’s Mark.”
Even today, allocation is an issue. With bourbon’s burgeoning popularity, demand for Maker’s Mark is up 25% this year – but only 15% more supply is available. Here again, the company’s customer relationship bias will prevail; existing customers will get first dibs.
To help increase supply, the company is doubling its 34,000-barrel capacity distillery with a $13.5 million expansion program in Loretto. Over the next six or seven years the company hopes to increase production by about 12% a year, but they plan to do it by replicating the exact process and ingredients that go into its present distilling operation. “It’s the hardest thing we’ve ever done,” says Samuels. Phenomenal taste, after all, has always been the company’s cornerstone asset.
Bourbon is “in” again, and Maker’s Mark is taking advantage of it, he added. With seven generations behind him, he feels especially mindful of continuing the product’s future. That means always listening to the buzz – always looking for ways to keep making magical margins on those premium barrels of bourbon.