Maker’s Mark: Seeing the Forest for the Trees
Given the negative impact of climate change on society, everyone must play his/her part in reducing greenhouse gas emissions. With this, it’s important to consider the environmental implications of all of our purchases, even our alcohol! We are living in the age of the “bourbon renaissance” where bourbon sales in the US has grown by $1.8B in the last 2 years and licensed distilling companies have tripled in the same time. So before you order that Old Fashioned at your next HBS mixer, I urge you to consider, “which is the most ‘green’ bourbon?” (The answer is, “Maker’s Mark,” and I’ll tell you why.)
“Conserving our natural resources is the right thing to do to. We will pursue continual improvement opportunities, especially in the areas of water, energy and waste, to reduce the impact of our business on the environment.”
–Matthew Shattock, President & CEO, Beam (Maker’s Mark’s holding company)
Climate Change’s Mark on Maker’s
Climate change has led to serious weather conditions across the US including increased rainfall, drought, and extreme warming depending on geography. Beyond the larger societal implications, this has also impacted the bourbon production process. For example, lower yields from rye grain harvests across the US have forced bourbon producers to seek out new rye suppliers, and the rise of carbon emissions scrutiny has forced bourbon producers to reconsider the highly energy-intensive process of distillation and byproduct (waste) management.
Maker’s Mark, a nationally distributed Kentucky bourbon, is located in Loretto, Kentucky where their distillery sits on 620 acres of land. Maker’s has been setting the standard for sustainable whiskey production for years, and in growing the company’s production to meet demand, leadership has remained committed to keeping their carbon footprint to a minimum, while building value for the Maker’s Mark brand.
In the past 6 years, Maker’s Mark has developed an incredible system that manages the distillation process waste by converting it into “biogas”, a renewable energy source that they then use to fuel a portion of their plant, in replacement of natural gas consumption. On top of this, they are able to sell an additional byproduct of the new process, “wet cake,” on the cattle feed market at enough profit to offset the cost of running the new facility, thus making the whole system a self-sustaining innovation. It is the only distillery of its kind in North America.
“What we do is take the byproduct and squeeze out a good portion of the water. We will take the solids, or wet cake, and sell it on the local market as a grain feed for cattle. The water that gets squeezed out is processed through an anaerobic reactor. The bacteria in the reactor naturally break down the organics in the water and convert them to biogas. We then capture the biogas off the reactor and pipe it back to our boilers. The biogas is then used as a fuel for the boilers to help displace some of the natural gas that we currently use. We save 15-30% on our natural gas consumption.”
–Kevin Smith, Plant Manager, Maker’s Mark Distillery
Given the groundbreaking sustainability work coming out of Maker’s Mark distillery, could it be the case that they are still at risk for operational failure in the next 100 years due to climate change; that they are somehow missing the bigger picture? Let’s explore.
Bourbon Background: A legally-defined American Whiskey
As alluded to above, producing a proper bourbon requires many steps including fermentation of the mash (a mixture of grains consisting of corn, rye, and barley), distillation, and several years of aging in a freshly-charred, new oak barrel before being bottled and shipped. The staves used to make the barrels are most closely linked to the color and flavor of the final bourbon. This comes from the release of chemical compounds in the wood during charring that infuse with the aging liquid through the process of diffusion. It’s important to note that wood is a highly variable and complex raw material. When you taste the bourbon you are getting a taste of the wood’s history: the type of tree, where it was grown, and how the tree was grown (or what it experienced over its life) are all critical factors in the final flavor. White oak is the only permitted wood to be used in the bourbon aging process.
The Maker’s Sustainable Forest: Is it enough?
Despite the rapidly growing demand for bourbon, estimates say that there is sufficient supply of the naturally abundant white oak tree to keep up with demand for the near to midterm future. For example, Kentucky, where Maker’s Mark distillery is located, is ~50% forested, mostly with white oaks. However, the issue for Maker’s Mark, who aim to be sustainable in all aspects of their production, is that individual wood stave suppliers (cooperages) have ultimate control over the sustainability practices deployed in the harvesting of the wood. The land owners often don’t follow the US Forest Service’s forest management standards and procedures for certified sustainable wood, making sourcing staves back to certified production a difficult thing to do.
Destruction of forests accelerates the pace of climate change by reducing carbon extraction from the atmosphere. Harvesting trees is a necessary step in the bourbon process, but practices can allow for reducing tree rotation periods and CO2 retention by utilizing sustainable harvesting methods (no waste burning, no commercial clear-cutting, prioritizing tree regeneration when cutting, etc). To ensure control over sustainable deforesting practices, Maker’s Mark decided to vertically integrate, and own and manage its own white oak forests and cooperage alongside its distillery. With this, Maker’s is able to produce its own high-quality staves, ensure the long-term supply of these staves, and also reduce its carbon footprint and once again benefit the overall good of the environment.
However, as demand for bourbon continues to grow, can Maker’s Mark’s local, sustainable forests keep up? I believe that in its current form the answer is “no”. Rather than continue to build innovative solutions and integrate them strictly into its own practices, it might behoove Maker’s to consider ways to influence the larger conversation around sustainable wood harvesting and shift consumers to demand sustainable-only practices and products from brands and suppliers around the country. Long-term access to sustainably managed wood, at an affordable price, at scale, might only be possible if Maker’s can help motivate and empower suppliers to deliver just that, rather than rely on producing it themselves.
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Sources used throughout:
- “Is It Green? Maker’s Mark Bourbon Whiskey” by Adrianne Jeffries, http://inhabitat.com/is-it-green-makers-mark/
- “Beam Building Brands and Protecting the Environment Yesterday, Today and Tomorrow”, https://www.beamsuntory.com/pdf/2011_Sustainability_Guide.pdf
- “Bourbon, Barrels and Climate” by Tom Kimmerer, http://www.gobourbon.com/bourbon-barrels-climate/
- “The Results Are In: New Study Proves Kentucky Bourbon On Cusp Of Golden Age”, http://kybourbon.com/the_bourbon_renaissance_new_study_presents_proof_of_signature_industrys_res/
- “A Maker’s Mark: Climate Politics Change” by Alison Winfield Burns, http://www.huffingtonpost.com/alison-winfield-burns/makers-mark_b_3717495.html
- “Alcoholic drinks makers lead way on climate change adaptation” by Jane Wardell, http://www.reuters.com/article/us-climatechange-summit-alcohol-idUSKCN0I52RP20141016
- “Climate Change Claims Yet Another Victim: Kentucky Bourbon” by Erin Courtenay, http://www.treehugger.com/green-food/climate-change-claims-yet-another-victim-kentucky-bourbon.html
- “Kentucky Bourbon and Bourbon Barrels”, http://www.kentuckybarrels.com/KentuckyBourbon.html
- “Sustainable Harvest Practices”, http://forestandrange.org/modules/visualguide/360/introduction/Sustainability.htm
- “Forest Finance 1: Sustainable Forest Harvesting: An Economic Perspective”, http://extension.psu.edu/natural-resources/forests/finance/forest-tax-info/publications/forest-finance-1-sustainable-forest-harvesting-an-economic-perspective
- “Climate Change in 2016: Implications for Business”, Harvard Business School
- “IKEA Gets Deeper Into the Woods” by Saabira Chaudhuri, http://www.wsj.com/articles/ikea-gets-deeper-into-the-woods-1438310691
Student comments on Maker’s Mark: Seeing the Forest for the Trees
I was surprised to learn that Makers Mark was so distinct in its sustainability practices. It prompted two questions in my mind: why have others not replicated the Makers Mark model, and what motivated Makers Mark to invest in sustainable practices so early, relative to competition. Thank you for the post!
The issues related to climate change and distillation were all very straight forward and known by me, until I got to the point around white oaks being used for the barrels. It’s easy to forget this part of the storage and maturation process. While reading, I fully expected Makers Mark to do little in this area, but was impressed by their decision to vertically integrate and buy forest land. Given the capital expenditures of this process, I find it to be an impressive move and commitment by Makers Mark to do this. If demand increases, I see no reason why they wouldn’t purchase more forest land. Overall, they seem very committed to being a green and sustainable company.
Another strategy to reduce the amount of new oak needed for making bourbon barrels would be to further increase the proportion of bourbon maturated in previously used port, wine, and rum barrels (http://whiskeyreviewer.com/2013/06/bourbon-scotch-and-the-port-finish/). This would not only reduce overall waste across the spirits industry, but also reduce costs: new barrels can cost up to a few thousand dollars, while recycled ones cost in the hundreds. The key might also lie in educating consumers about the value of more complex flavors seeping into the bourbon fire water when using old barrels. Now I’m going back to my Old Fashioned, over and out…
Like some of the others posting here, I was surprised by the company’s decision to move into the business of owning white oak timberland. I was impressed by the article below, which provided some additional insight into the sustainability of white oak. It appears that a) Makers is well-regarded in the industry for its leadership in the field of sustainable bourbon production and b) white oak should continue to grow in enough supply to meet demand for another century despite climate change.
I was really pleasantly surprised to read that Maker’s is making such great strides in the industry and setting an example for other producers. That is great that they are trying to improve sustainability along the entire value chain and not just during distilling. However, owning a whole forest seems to be a solution only a large, profitable producer can afford to do and even then it is risky. In the event of a downturn in bourbon demand, in a scenario where Maker’s won’t be using all of the wood for its own production, maybe the company can begin to sell the barrels to smaller producers. This way, Maker’s can lead the industry towards its own sustainability goals while still turning a profit and not allowing its resources go to waste. The only concern there is the amount of influence the barrel will have on the flavor and whether all the distilleries that join the network want new white oak but it is worth a try!
Agreed with your view that Maker’s Mark should be admired as an industry leader in the spirits sector in terms of sustainability (as well as taste!). I had never previously considered the environmental impact of alcohol until reading this post. I appreciate their initiative in controlling the supply chain by purchasing forests. However, this post left me wondering how much strain Maker’s Mark (and other spirits producers) is placing on the environment and how much is alleviated by them owning the forests? Is the cost worth it? Understanding this dynamic would be helpful for other spirits products to know as it may encourage others to follow their example.
Thank you so much for this insight. I never fully appreciated the environmental impact of alcohol production until reading this and I am pleased to see that Maker’s Mark is an industry leader. I am surprised that it is the only distillery to implement this type of self-sustainable system. I wonder if the technology is applicable across other types of alcohol production. If other bourbon or alcohol producers do not implement this strategy, I wonder if Maker’s Mark will be able to retain its competitive position in the market.
I also think it is interesting that Maker’s Mark decided to vertically integrate. While they now have much more control over their supply chain, I wonder how capital intensive this was and what the opportunity cost was.
Thanks for sharing this information on Makers’ Mark–as a bourbon connoisseur it’s great to know that they are a socially responsible company. While Makers’ Mark’s efforts are to be applauded, I think there is much more they can do to be “green,” such as:
1. I am not sure that if bourbon production continues to increase these white oak forests will be able to meet demand, particularly if Makers’ Mark only uses local trees from Kentucky. To stay environmentally responsible, they would need to continue sourcing locally and keep transportation costs down, which is a huge problem if demand increases. Perhaps they could look into finding ways to recycle barrels or use stainless steel barrels like some competitors, namely Eagle Rare. Stainless steel barrels are being used more and more in bourbon production and while they yield a different taste profile they are much more environmentally sustainable.
2. They should look into using recycled glass for their bottles and recycled paper for the labels. This seems less significant than using sustainable wood but given their high production levels this would have a large impact on sustainability.
3. Managing forests and harvesting in a sustainable way is a step in the right direction, but to balance out their constant use of wood they could also manage forests for the sake of sustainability and not harvest them. Being a conservationist would be a wonderful PR move on their part and earn them great publicity as a sustainable company that cares about the environment.
Such an interesting article! Like Mary, I hadn’t previously considered the environmental impact of the spirits industry. I was surprised to see that they decided to invest in making their casks sustainable, vs. investing to ensure that they have a long-term, consistent and affordable supply of raw materials (corn, rye, barley). I wonder how much of this is driven by their COGS breakdown? I would be interested to see if they are pursuing any initiatives with their raw material suppliers to help them combat the effects of climate change, thus making their entire supply chain truly sustainable.
This is a very interesting topic, Angelo! How does maker’s mark bourbon compare in sustainability to other forms of liquor or wine that has to be held in casks? Do you think there is an opportunity to create reusable casks that still maintain the flavor profile or a liquor stored in oak? Many wines bottlers have moved to using screw caps instead of cork due to a cork shortage and customers’ preferences have changed to no longer mind this switch.. Maybe the same can happen for bourbon and other liquors! Thanks!
Curious to know if Beam’s Japanese parent company Suntory Holdings Ltd. has had any influence on Beam (and by extension Maker’s Mark) from a CSR standpoint? In Japan, Suntory Holdings Ltd has created a lot of long-term initiatives for preserving the environment and reducing the environmental impact of its business activities. Since the deal between the two companies closed in 2014, there have been some growing pains (mainly cultural in nature) in the post-merger integration, but the environment and sustainability seems like something the two companies could agree on. Incidentally, the current CEO of Suntory Holdings Ltd is an HBS alum (Class of 1991, Section B), so perhaps there is some potential for a case study in the future…
Very interesting post. It’s also interesting to consider if someday environmentally conscious people will curtail their drinking (of alcohol). Given that producing alcoholic beverages uses water (especially producing beer), and drinking alcohol typically has a dehydrating effect, it’s not unreasonable to think that the environmentally conscious thing to do would be to drink less alcohol. This may be difficult for us, but maybe it’s something we should consider in the future.
Thanks for helping teasing out all the ways in which Maker’s Mark is pursuing sustainable initiatives. Even though I frequently find myself imbibing their delicious concoctions, I had no idea they supported any sustainability related causes.
To get economic value from their investments in sustainability, how do you think they can better market these initiatives of theirs to consumers?
Angelo – Thank you very much for this post. I had never thought about the sustainability initiatives that bourbon producers might be taking. When I first started reading your post, I expected that Maker’s Mark would have substantially figured out how to be a fully sustainable producer, given that they are the leader in sustainable bourbon production. As you pointed out, there is quite a lot left to be done with closing this environmental gap. Do you know if Maker’s Mark intends to get to a net-zero environmental footprint, and if so how? Thanks.
Thanks for teasing out all the ways in which Maker’s Mark is pursuing sustainable initiatives. Even though I frequently find myself imbibing their delicious concoctions, I had no idea they supported any sustainability related causes.
To get economic value from their investments in sustainability, how do you think they can better market these initiatives of theirs to consumers?