UPDATE 2-Beam considers price increases as economy recovers

Tue Mar 13, 2012 8:36pm GMT

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(Adds details, comments on rye)

By Martinne Geller

CHICAGO, March 13 - Beam Inc (BEAM.N) has raised prices on some of its alcoholic drinks this year as the U.S. economy shows signs of improving and the company could have more price increases as opportunities arise, according to a top executive.

There could "possibly" be further price increases on the horizon, Bill Newlands, Beam's president of North America, said on Tuesday at the Reuters Food and Agriculture Summit in Chicago.

"We are watching it very closely and any chance we get to do pricing, we’re doing it. At the moment we’re doing it in targeted ways, places where we feel we have strength and where those opportunities present themselves, or whether there’s cost structures that we’d like to recoup," Newlands said.

Bourbon, which is made mostly from corn, is one category where that is the case. Beam is the top producer of bourbon with brands including Jim Beam, Maker's Mark and Knob Creek. Newlands said the company has raised prices on most of its bourbon brands in most U.S. markets, a move that can help offset higher corn prices.

Beam has also raised some of its Scotch prices, but Newlands said it is more difficult to raise prices on vodka, which is a very competitive category due to the number of brands and the fact that vodka is flavorless and colorless, making it easier for consumers to switch between brands.

"It remains to be seen" whether Beam will be able to raise prices on other products, which range from Sauza tequila to Courvoisier cognac.

“There are some shoots there that suggest (the U.S. economy) is improving, which we're always happy to see,” Newlands said.

LOOKING AT CRAFT DISTILLING, RYE

Newlands, whose company is the world's fourth-biggest spirits maker behind Diageo Plc (DGE.L), Pernod Ricard SA (PERP.PA) and privately held Bacardi Ltd, said he keeps an eye on "craft distillers" making small-batch brands.

"I’m a big fan of craft distilling. I think what it does is it keeps players like us on our toes," Newlands said.

Competition from innovative, smaller producers helped inspire the company to launch Maker's 46, a version of Maker's Mark bourbon that uses a special wood treatment in its aging barrels that gives the drink a different flavor.

Another up-and-coming area is rye whiskey.

"Almost anything that is rye-directed is off to a tear. Our rye business is doing extremely well ... It is a hot category," he said.

When asked if rye can ever be as big as bourbon, whose growth has accelerated in the past several quarters, Newlands said it is possible.

"It's got a long way to go to do that just because it's coming from a much smaller base, but I think so. I think it has potential over time to continue to grow because it's an accessible taste," he said. "Rye tends to be smooth and easy to drink."

Beam is launching a Knob Creek rye whiskey later this year, Newlands added.

In 2011, Maker's Mark's net sales rose 14 percent, while Knob Creek rose 20 percent and Basil Hayden's, one of its own craft bourbon brands, rose 27 percent.

(editing by Gary Hill and Andre Grenon)

((martinne.geller@thomsonreuters.com)(646 223-6023)(Reuters Messaging: martinne.geller.reuters.com@reuters.net)) Keywords: FOOD SUMMIT/BEAM

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