Over the past three years, Knob Creek bourbon has reinstated nine-year aging on its bottles, redesigned the label, and began selling 12- and 15-year-old versions of its whisky. Prices used to range from $25 to $50 per bottle, but now a bottle can cost customers anywhere from $36 to nearly $200.
This is all part of Beam Suntory’s strategy to shift to more expensive spirits. This is paying off for the company, whose sales are up 11% in 2021. And because customers pay more for their liquor, they are less sensitive to price increases to offset inflation.
In the United States, the company’s 2021 sales rose by multi-digit numbers, driven by demand for its premium spirits. The company also said that sales from wholesalers to retailers, indicating real-time consumer demand, rose by double digits during the year.
One example of the success of the company’s luxury goods strategy is Bowmore Scotch Whiskey, which saw a 16% increase in volumes and an increase of about 50%. To boost its prestige, the brand has collaborated with luxury car maker Aston Martin on several occasions, including jointly releasing one of the rarest single malts in 2020. A bottle of Bowmore sold for a record $532,340. charitable organization Distillers One of One auction in December, demonstrating the perceived value of a rare whiskey from the brand.
Globally, Beam Suntory sales are up 11% in 2021 year-over-year and two-year. Because the company is privately owned, it is not required to disclose its financial results like many of its public competitors.
“Two years ago, in 2020, we weren’t hit as hard as a lot of companies, so the recovery isn’t as strong as some of the other numbers you are still seeing, but still I think double digits against 2019 would be pretty powerful,” Beam Suntory CEO Albert Baladi said in an interview.
By comparison, competitor Diageo reported 20 percent organic sales growth in the first half of fiscal 2022 compared to the same period last year.
Despite strong sales figures, Beam Suntory has not been immune to many of the challenges faced by the liquor industry as a whole. Sales in Japan rose by mid-single digits, but government restrictions have weighed on demand. Glass supply restrictions have hurt supplies of Jim Beam bottles in some sizes. And inflation cut profits.
Baladi said some of his brands raised prices twice in 2021 to make up for higher costs, and his portfolio of American whiskey led the industry thanks to price hikes.
“The fact that we are premiumizing our business and increasingly playing at the premium end of price tiers provides a shield of sorts,” Baladi said. “These price brackets are less sensitive to pricing than others.”
So far, the company hasn’t noticed any change in consumer demand for more expensive bottles, though Baladi noted that the spirits industry is performing well in most economic conditions. The price increase also encourages the company to continue its efforts to improve its sentiment, Baladi said.
Looking to 2022, Baladi said the company is once again considering raising prices. The January CPI rose 7.5% year-over-year, beating the company’s inflation forecast.
While Beam Suntory is investing in modernizing its spirits, it is also trying to meet consumer demand for ready-to-drink beverages, which has an unexpected positive effect on its business.
“Premiumizing a business, especially spirits, is cash and capital intensive, and ready-to-drink drinks bring in cash,” Baladi said. “So the ready-to-drink beverage is not only fully in line with consumer trends, but at the same time brings in money that can be invested in capacity, warehouses, aged liquid and everything else we have to do to fuel the premiumization strategy.”
According to the U.S. Distilled Liquor Council, the ready-to-drink industry saw the fastest growth of any spirits category last year.
As part of its effort to expand its ready-to-drink range, Beam Suntory has partnered with Boston Beer, Sam Adams’ brewer, to bring each company’s brands into new categories. Beam Suntory’s ready-to-drink Sauza-branded cocktails will go on sale in March, while Truly Vodka is expected to hit store shelves in March and April.