Over the last three years, Knob Creek bourbon has reinstated the nine-year age statement on its bottles, updated the label design, and began selling versions of its 12-year and 15-year whiskeys. Prices used to range from $25 to $50 a bottle, but now a bottle can set customers back anywhere from $36 to almost $200.
It’s all part of Beam Suntory’s strategy to switch to more premium spirits. That benefits the company, which has seen sales grow 11% in 2021. And as customers pay more for their morale, they’re less sensitive to increases prices to offset inflation.
In the United States, the company’s 2021 sales surged in single digits, fueled by demand for the company’s premium spirits. The company also said that wholesaler-to-retailer sales, which show real-time consumer demand, were up double-digit for the year.
One success story for the company’s high-profile strategy is Bowmore Scotch whiskey, which saw a 16% increase in production and a roughly 50% increase in sales. To enhance its credibility, the brand has partnered with luxury carmaker Aston Martin on several occasions, including the launch of one of the rarest single malts in 2020. A bottle of Bowmore sold for a record $532,340 at Distillers’ One of One charity auction in December, demonstrating the perceived value for a rare whiskey of the brand.
Worldwide, Beam Suntory sales are up 11% in 2021 compared to the same period last year and on a two-year basis. Because the company is privately owned, it is not required to disclose its financial results like many of its publicly traded competitors.
“Two years ago, in 2020, we weren’t impacted as much as many companies, so the bounce back wasn’t as strong as some of the other numbers you see, but I still think double digits against Five.” 2019 is pretty strong,” Beam Suntory CEO Albert Baladi said in an interview.
For comparison, competitors Diageo reported 20% organic sales growth in the first half of fiscal 2022 compared to the same period a year earlier.
Despite its strong sales performance, Beam Suntory is not immune to the many challenges facing the broader spirits industry. Sales in Japan rose moderately, but government restrictions weighed on demand. Glass supply constraints affect the supply of some Jim Beam bottle sizes. And inflation cuts profits.
Baladi says some of its brands have raised prices twice in 2021 to offset higher costs, and that their American whiskey portfolio has led the industry with its price increases.
“The fact that we’re elevating the quality of our business and we’re increasingly playing at the premium end of the prices provides a bit of a shield,” Baladi said. “These prices are less price-sensitive than others.”
So far, the company hasn’t seen any changes to consumer demand for its more expensive bottles, although Baladi points out that the spirits industry does well for most of the time. economic conditions. According to Baladi, the price increase is also an incentive for the company to continue its efforts to upgrade its morale.
Looking to 2022, Baladi said the company is looking at raising prices again. January’s consumer price index rose 7.5% from a year ago, beating the company’s expectations for inflation.
As Beam Suntory invests in upgrading its spirits, Beam Suntory is also trying to meet consumer demand for ready-to-drink products, which has had an unexpected impact on its operations. its business.
“The high end business, especially spirits, is cash and capital intensive, and ready-to-drink drinks generate cash,” says Baladi. “So ready-to-drink not only fits with consumer trends, but at the same time, it generates cash that can be invested in capacity, storage, aged fluids, and everything else we can afford.” I have to do to provide superior strategic power.”
Last year, across the industry, sell ready-made cocktails witness the fastest growth of any spirit, according to the Distilled Spirits Council of America
As part of an effort to expand ready-to-drink service, Beam Suntory collaborates with Sam Adams brewer Boston Beer to include each company’s brand in new categories. Beam Suntory’s Sauza-branded ready-to-drink cocktails will begin shipping in March, while Truly Vodka is expected to hit shelves in March and April.
