Allocated Inequality

The worst kept secret in the Liquor business has been going on for quite a while now. The decision of who and how a distributor gives special and allocated booze to seems to have been going on since the Egyptians made wine. I don’t mean to pick on the Van Winkle brand but it’s become the poster child of the trend at its worst so for lack of a better example, that’s my focus. Sazerac brands have made it a science. They remind consumers how short supply they are, raise the price over and over and have retailers and on premise chase the carrot. They then claim this game of innocence that no one else seems to replicate while doing it in a horrific, uncustomer friendly way. I’m writing this paragraph almost real time while in a Twitter feud where a guy says I’m a liar and illegal favoritism of allocations, and forced sales don’t exist. Master Distillers, Brand Ambassadors, Distributors, lots of stores bars disagree greatly.

In previous blog posts I’ve mentioned how small stores struggle to get as much as one or two bottles of highly allocated items like Van Winkle where they are forced to take lots of cases of some type of rotgut high profit whiskey like Dr. McGillicuddy’s, Fireball or Rain vodka. This is if they want to or must stick with Sister Brands. Many Sazerac distributers push other non-Sazerac lines especially things that they are stuck with like wine and bottles of many colors people don’t want, have to move, or are getting big bonuses to clear out. You won’t see advertising dependent publications or paid writers bitching about it because they too are greedy bastards that sing the song, play the game and become complicitly silent as ignorant lackeys.

To make matters worse in most states these allocations are going to retail and not on premise accounts i.e. bars and restaurants. Ironically, the on premise accounts are exactly where people will learn, discover, and start drinking a product that will eventually be bought at a retailer. It’s a feeder system where someone tries Wine or Whiskey by the glass or a promotion that might be running where people drink their first glass of something to potentially become lifetime customers. Think of how much money a customer will spend on something like Jack Daniels for the rest of their lives or particular vodka brand? Most likely thousands if not tens of thousands of dollars in future business. So it’s been somewhat a mystery to me how friends that own some of the best Whiskey Bars in the world have to fight tooth and nail for meager allocations of things like Buffalo Trace Antique Collection and Van Winkle. Year after year it only gets worse and worse as more people want it. If you bitch too loudly you get nothing as if you’re living in the Seinfeld Soup Nazi Episode. Many of these places were the same ones keeping the Van Winkle brand/family alive when no one wanted it and now are begging for every drop they can get their hands on. As much as the Van Winkle family complains of how bad the reselling of their brands have gotten, they have actually contributed greatly in creating this monster. Their Sazerac masters are well aware of stores gouging customers at 3X-10X the regular price and do nothing to stop it or insist distributers not allocate them anymore. The game must go on so they play it and as long as they do they can’t complain.

I went out for dinner with a friend and his business associates opening a new whiskey bar and a conversation came up on how they could preserve the Pappy Van Winkle and highly allocated items that they hoped to get as well as what they had no choice but to purchase“on the street”. I explained to them that most good whiskey bars that I know of either are long out of these items by Spring or they had to charge much more for them so they would last. One New York City Whiskey bar told me that they can’t win. They get yelled at as greedy bastards when they charge lots for these pours or they are scoffed at as “sucking” because the items are sold out being damned either way. Others need to pay high prices on the secondary market with no choice but to pass the cost to the customer. When you’re paying $50 for a pour of Pappy 15 that regularly sells for $100 a bottle at retail it’s hard to tell why the price is what it is. With Van Winkle and Buffalo Antique there use to be a spring allocation of these items (which was discontinued) forcing these On Premise accounts to stretch the bottles as far as they will go. It’s really not their fault that they’re forced into this decision. One might say that they can’t mind that much because they’re making such a huge profit on these items but that’s not necessarily the case. They’re making the same profit that they would have if they had three times or four times more and they didn’t have to mark the price up so much so it’s making the best of a problem. More and more stores are selling Van Winkle at 5-10x the suggested price which is becoming more and more common.

It was only a matter of time until something happened to shake this whole system up and it seems that it has. I was told by several sources that the State of Connecticut had gotten so many complaints over the way that the Buffalo Trace Antique collection and Van Winkle were being distributed that they were halted and an investigation delayed distribution for a month. It seems it’s only a matter of time until this expands well beyond one State and it should. I’ve been looking at Sazerac allocations and who gets what. Many distributors and stores have a way of selling the bottles to those that work for them. Several store’s special orders and lists of waiting customers were diverted to the owner’s trunk and owners family. It happens far too frequently and no less that 5-10 employees have told me these stories at different stores. One salesman of a distributer tried to sell me a highly allocated item he bought back from a store. He was selling it for 5x its normal retail price from his trunk.

There are a small handful of locations that seemingly get an endless supply of these highly allocated items and never run out. Just look at the Celebrity chefs partying and Golfing with the Van Winkles and the ones always mentioning it in articles and you can easily figure out who is going to have some. Maybe it’s a coincidence. I know for a fact that certain places in Las Vegas have boxes of the stuff where others get zero. Those places just happen to be the favorites and where certain Distillery honchos hang out.

Elsewhere in Vegas the largest chain, Total Wine’s BTAC/Pappy seems to have vanished. No one has gotten a bottle I spoke to and the stories of them coming out in the spring is odd at best. Keep in mind that it’s a city where Casino hosts make things happen no matter what it costs and Pappy is as hot as it can get there. Such a large allocation in this situation not being openly sold is strange. Many On-Premise accounts get none or so little that they’re left to beg or do without and it’s now has become a form of credibility that could actually hurt their business. It’s not even because it’s not available for sale but because they don’t have it to look cool like the next place down the block.

As the popularity of things like Van Winkle have gone insane, so have the ebay sales of empty bottles. A complete empty bottle of 23 year old with bag and tag is well over $100. A complete set of empties 10-23 year are going for over $700. The listing below had 47 bids for an empty 23. Many of these are ending up on unscrupulous bar’s top shelves. It’s happening more and more. I have seen Pappy at a few places that you wouldn’t expect, I’ve recorded the bottle codes and levels. Three such places have had the same bottles for 1-2 years and the fill levels have gone up and down. Would this change if more bottles were made available to On-Premise? A little, but it would be a start.

http://www.ebay.com/itm/Pappy-Van-Winkles-23-year-old-bottle-with-velvet-sleeve-empty-bottle-/111515993537?pt=LH_DefaultDomain_0&hash=item19f6df05c1

One of my favorite bars that tries to carry Van Winkle since they opened a few years ago hadn’t gotten any in 2014 and had to argue about getting a couple bottles while a large liquor store down the street ended up with 20 or 30 bottles. I was also told by the owner of a state’s largest whiskey bar he had to beg and scream for a couple bottles (of these highly allocated items) this year and that On-Premise accounts only got 7% sold in this mid Atlantic state. He saw some individual stores get 20 to 30 bottles. To add insult to injury one of these stores decided to do a vertical tasting of all the Van Winkle bourbons charging for tickets at a restaurant with the Sazerac Distillery representative doing a seminar. While this was going on he had no customers and a couple allocated bottles he had to fight about getting.

Another Whiskey bar often making “Best” lists in a major city got 3 bottles over 15 year age and 5, 15 and under. One bottle of Buffalo Trace Single Oak and no Buffalo Trace Antique collection. To get these he needed to make a big stink. He was told he got more as an On-Premise account than any other in the area. In a sense, “be happy with what you got, shut up”. In the meantime several stores near him got over 30 bottles and he has one of the highest grossing Whiskey Bars in the World!

I asked four other people to give me information and in one case a Kentucky store (that is part of a larger chain) got approximately 132 bottles while bars surrounding the store had to fight tooth and nail to get any or just a couple. It’s pretty common that the 10 and 12-year-old are used to appease many of these on premise accounts and used to “shut them up” as I was told by one sales Rep.

In a very unscientific study that I’ve done it appears that on premise bars and restaurants are getting at most 10% of the total in the areas I checked. Think of the revenue that’s lost on customers that don’t come in and servers, mixologists, bartenders tips they aren’t getting. The fact that they have to fight every year with an ever increasing problem makes it just as bad. 10 and 12-year-old Van Winkle is now 100% Buffalo Trace made and there’s got to be a lot more of it. If more was released perhaps it wouldn’t be as special. I asked a Buffalo Distillery big wig why certain bottles of 23-year-old and 20-year-old came with a velvet sack and some didn’t? I was told that the ones without the sack are expected to go to On-Premise accounts and the rest to retailers. This would imply that the anticipated allocation to a distributor is that half go to retailers. This isn’t the case at all from what I’ve seen and for what people have told me. If these highly allocated items were equally distributed customers wouldn’t be so crazed about getting their own bottle because it would be more openly available in bars and restaurants at a much more reasonable price. The supply would also last much longer into the year.

I think that the word should spread from retailers not playing the game and On Premise accounts. What’s going on is clearly illegal in most states and these folks should start to notify their Liquor Control Boards of the inequality of the system and ask that it be investigated. Perhaps some states will call in the Distillery Managers, pull sales records and start to bust some heads. Whiskey people need to put the time and effort into getting their fair share. It should be a level playing field because that’s what’s right.

Until greedy brands start to fear being caught, fined big and “discovered”, the system won’t change.

As I’ve said before, the brand has 100% control in telling a Distributer if they don’t control inequality and gouging they will stop or trim allocations. It’s not hard to do. A distributer only need to look at what’s blatantly happening in their back yards and telling salespeople if they want to keep their jobs they MUST control rather than encourage it. The stores are free to do what they want but they can simply say that next year your cut off. I’ve never heard of this happening.

The Van Winkles are on record stating that the “flippers” make them sick but nothing is done. Forced sales to get allocations runs rampant and they all know it. Distributers know that the trickle down of getting more allocated items is very dependent on them selling crap and ultra high profit stuff with endless supplies. Anyone saying different are idiots or liars.

This blame game is so misguided and the diversion of blame is part of the plan. Lots of brands are fair and don’t pull this crap. The worst culprits better not pretend we’re stupid and don’t notice. We do in this allocated inequality.