Just recently, Maker’s Mark Whiskey became the latest beverage company to misjudge its customers, or its product, and backpedal to protect its brand. Thousands of customers told Maker’s Mark that the company had made a huge mistake when it reduced the alcohol content in its signature whiskey from 90 proof to 84 proof. The company originally stated that their reason for lowering the proof was that the demand for the product outstripped supply, and that by reducing the alcohol content, the company could “stretch” its bourbon supply by six percent. Within a week, the outpouring elicited a promise to return the alcohol content to 90 proof. The consumers spoke. The company listened.
Consumers skewered Coca-Cola in 1985 when Coke introduced a new recipe. Within three months, the company revived the old formula as Coca-Cola Classic. “New Coke” eventually disappeared in the US, except as a worst-case marketing study.
Cynics suggest that such moves could be clever marketing ploys to keep product names in the news and foremost in customers’ minds. Really?
At Harvard, the MBA program has a case study on how to kill a billion dollar company. It’s called the demise of the Jos. Schlitz Brewing Co. By the early 1970’s, Schlitz was trying to reduce costs and looked at building new, state-of-the art breweries. The Schlitz shareholders, however, refused to approve the change. The production department was then forced to create a new cost-cutting scheme: “accelerated-batch fermentation.” The process added air to stimulate the yeast’s growth, and reduced fermentation from twelve days, to less than four days, and allowed the brewmaster to cut the brewing cycle from 25 days, to two weeks. Corn syrup replaced corn grits; hop extract replaced hop pellets. Then the finance department raised prices in a high inflation market. By the mid 70’s, with sales in a decline, an accountant took charge of running the brewery, and the marketing/sales executive, Fred Haviland, cleaned out his office and left. Finally, Schlitz ordered their brewmasters to put Chill-garde into the beer. Chill-garde is a stabilizer and was added to improve shelf-life, but it interfered with the beer’s foam stabilizer. The chemical reaction spawned a flake-laden haze. Not dangerous to the taste of the product, but it gave the beer an unattractive look. Six months elapsed before the brewmasters stopped using Chill-garde, but the damage was done.
Bob Uihlein, who ran the brewery, died in 1976, with no clear leader named. Schlitz drifted for years. In the late 70’s, a Coke executive, Alan Proudfoot, was hired to over-see the sales department. He wasn’t able to make the transition to beer, and was gone in a short time. Then Frank Sellinger, a brewer from AB, was hired to run the brewery. Sellinger changed the packaging, cans, bottles, and all the advertising. Then he went on TV and announced he had come to Schlitz “to make the best,” giving the consumer cause to wonder why the beer had changed! Almost overnight sales dropped like a rock.
Interestingly, even with all the quality problems across the country, the Longview, Texas brewery never changed its brewing process. Consequently, the beer in Texas and Louisiana never suffered the problems of the other Schlitz breweries in the US. Sales in these two states, slid slightly, but still remained high.
Unlike Maker’s Mark or Coke, Schlitz didn’t acknowledge the damage it had done causing the iconic brand’s demise. Nothing changed, so by 1981, the brewery was sold to the Stroh Brewing Co. The rest is history. During this 5-year period, I went from selling 2 million cases of Schlitz to a mere 100K cases of Schlitz.
The CEO’s of Coke and Marker’s Mark should have studied what happened to Schlitz. Had they done so, they probably would not have made the changes they did. Until then, the details of their incompetence do not interest me.
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