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Q&A with Daniel Korschun: The Maker’s Mark Bourbon Crisis

February 20, 2013

Maker's Mark

Daniel KorschunThere aren’t a lot of corporate crises in the world of whiskey, but last week, the distillers of Maker’s Mark found themselves facing a firestorm of criticism for their decision to “water down” their popular high-end bourbon.

The decision to dilute the product—a decision that would have reduced its alcohol content from 90 proof to 84 proof—was originally made to help Beam Inc., owners of the brand, keep up with soaring demand. But once Makers Mark customers found out about the plan, they revolted. A social media blitz followed, and within days, the company reversed course. In a statement posted on the Maker’s Mark Facebook page, executives apologized to their customers, saying simply: “You spoke. We listened. And we’re sincerely sorry we let you down.”

To help put this unique whiskey crisis in perspective—and to explore how Beam Inc. responded to customer discontent—DrexelNow spoke with Daniel Korschun, an assistant professor of marketing at the LeBow College of Business and an expert in corporate strategy.

What seems to have motivated Maker’s Mark’s decision to “water down” its product?

The Whiskey category has shown tremendous growth over the past decade. It wasn’t long ago that whiskey was a relatively minor player in most bars and liquor cabinets. With the recent growth of the market, it’s not a surprise that Maker’s Mark saw a once-in-a-generation opportunity to become a major player in the category. The key was to broaden their distribution. To do this, they needed to keep pace with strong demand for their fine product. Lowering the alcohol content from 90 to 84 proof seemed completely logical because it enabled them to increase their output without a big sacrifice in taste.

So where did they go wrong?

Maker’s Mark seems to have relied very heavily on the fact that the difference in taste between the 90 and 84 proof versions was not perceptible to most people. I imagine they probably put this through a battery of taste tests as well. What they overlooked initially was the strong perception of uncompromising quality among their most loyal customers. In some ways, the taste element is irrelevant here. Loyal customers who had staked their identity on a fine whiskey suddenly found that their beloved brand had been tampered with. This is reminiscent of the classic case where Coca-Cola launched New Coke in the 1980s. They sweetened the flavor of the original formula to match Pepsi. Customers preferred the new formula in blind taste tests, but they revolted when Coke announced a change in its formula. Maker’s Mark may have fallen into a similar trap of underestimating the emotional connection that people have with a brand.

Customers don’t tend to hold a grudge as long as they believe that the company is trying to do the right thing. - Dr. Daniel Korschun

Are there lessons that other companies can take away from this?

The number one lesson, of course, is to pay attention to your most loyal customers. Making changes is fine, and often necessary to keep pace with the market. But making changes that cut to the essence of what a brand stands for can be a recipe for disaster. What does Marker’s Mark promise to its core customer base? Quality and flavor. The dilution was a direct affront to that promise.

We live in such an interconnected world. Whiskey aficionados have formed pretty tight-knit communities, both online and offline. It was a matter of hours before news of the Maker’s Mark announcement shot through these networks of enthusiasts. Fortunately, Maker’s Mark was able to sense the disproval of its customers and respond very quickly. So in a sense, it was the same communities of customers that fueled this crisis that enabled the company to realize very quickly that something was wrong. So another lesson is that online communities present some dangers, but they can also be very powerful tools to learn what customers are thinking.

How do you assess the response by Maker’s Mark to this crisis?

In my view, they’ve handled the aftermath quite well. They admitted the mistake and pledged to correct it. This may have averted a larger crisis. Granted, some customers may be lost forever, but others may appreciate the gesture of the company admitting its mistake. Customers don’t tend to hold a grudge as long as they believe that the company is trying to do the right thing. So surprisingly, when failures like this are handled well, they can even turn into an opportunity to strengthen the relationship with customers.