Corporate America Management Marketing

Dickel staggers out of “shortage”

You can’t imagine how difficult it is to avoid using a locker room rated headline for a post involving a company named Dickel being caught short of product. You should be so proud:)

Tennessee-based, British-owned George Dickel Distillery felt there was a glut of their Dickel #8 whiskey (they spell it “whisky”) on the shelves, so they shut down production from 1999 to 2003. I’m not sure why this is just becoming news, but looking back is always educational, so I’ll go with it.

I can’t imagine anyone in their right mind doing something quite this dumb – at least to this extreme – but this article in Yahoo lays it out in plain language.

This quote from the Yahoo/AP story is what is particularly interesting:

Dickel has taken out ads in several newspapers, apologizing for the shortage. The ad blames the situation on “an incredible surge in demand for George Dickel No. 8,” but it’s been known for years that the shortage was coming.

So rather than explain the situation and apologize, they lie about it? How Fortune 500 of them.

I wonder if it wasn’t really a way to Xbox360 their clients. IE: artificially introduce product scarcity, generate a run on their products, and get a bunch of free PR. Wii would never do that, would Wii?

If that’s the real explanation, at least they were thinking. Not necessarily long-term clever, but thinking.

If it isn’t the real explanation, how badly do you have to be ignoring your business to “suddenly” have 3-5 years of inventory on store shelves? I can understand a bad year of in-store sales resulting in overstock, and maybe you cut production a little if all the info you have says that is the wise choice. But, given their long product to market cycle, cutting back a little is a far different thing from shutting down for 4 years and then waking up to realize there’s a shortage of a product that takes 8 years to make.

A real product shortage is a great time for a competitor to take your market. In the case of Dickel (pun intended), it’s an opportunity for Jack Daniels to stretch their lead.

Speaking of JD, look at all the places that you’ll find their product. There isn’t a glut of JD because despite being #1 in their market, they find a way to work it into products in a pile of markets, including menu items in franchise restaurants. Maybe that’s why they remain #1 in their market. But not Dickel. Despite the so-called glut (and now the shortage), the only place you saw it was at the traditional sources. Maybe that’s by choice, but does that make sense?

Note that this isn’t the same as Starbucks having pallets of gift packs in Costco, Staples and elsewhere. Coffee is perishable. Introducing someone to your product for the first time by having them open a gift pack that sat on a pallet in a Costco or Staples for months seems unwise for the long term. You might sell a pile of gift packs, but one of three things is bound to happen.

  1. A coffee geek receives a Starbucks gift pack and finds the usually-overroasted beans far less fresh than what they get from their favorite bean source. In this case, the long rest on the pallet is unwise for the short term as well.
  2. Someone without a “refined taste for coffee” gets the same package, uses it and goes back to Folgers or whatever.
  3. Whatever Starbucks really wants to happen, does so after the gift package is opened.

Dickel has none of those problems because their product is far less perishable. I think they simply dropped the ball.

Maybe they needed to taste test just a little less often?