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HighInTheMtns
02-12-2013, 18:10
Rather than derailing the MM proof cut thread...

Considering the circumstance that demand for bourbon is higher now than it was a few years back, and seems to be increasing, I'm wondering how people would prefer the distillers handle the situation, obviously operating under the assumption that they wish to maximize profit. I'm also assuming the continued availability of the super high end bottles which are helping to create the demand.

Eliminate labels to support others? Weller Centennial is no more, but we all know that 10 year old juice has found a good home after sleeping all those years in the wood. No one was happy about this and plenty of us are fretting over the fate of the rest of the line.

Degrade age? The forum's Old Overholt drinkers were sad to find that it is now a three year old. Wild Turkey is a sadder tale. Weller, Evan Williams, and more. Never a popular decision.

Degrade proof? Maker's Mark's decision sure isn't popular but I don't think it has upstaged the demise of Wild Turkey 101 Rye. Jack Daniel's, Eagle Rare, more examples of this too. None popular.

Just increase the price? No one would be happy but at least it's free of subterfuge.

All of them have their drawbacks. I'm up in the air over which of these I think is the least worst.

c2walker
02-12-2013, 18:40
The silver lining of all of this is that everyone reading this board is aware of these changes and has ample opportunity go bunker as much bourbon as they can afford. I don't like that MM is switching to 84 proof, but at least plenty of 90 proof is still available.

smokinjoe
02-12-2013, 19:01
Jim, this is a great thread, even though I'm not sure I can give an articulate response, now. I find myself going in so many directions on this topic, I can't be definitive. I hope to come back later. But, you have put forth the great conundrum to us "enthusiasts".
:toast:

portwood
02-12-2013, 19:38
Strategy depends on the brand.

For a mass market brand with high volume the first step is to lower proof. You can take the high road of "keeping same taste" and most of your existing consumers won't notice. If that isn't enough, lower age. Again, at high levels of sales, most people won't notice. The buyers that notice and leave the brand are easily replaced by new customers that are attracted by the "smoother" taste of lower proof alcohol. Price is a last resort because at the mass market level customers are more likely to be price sensitive. (Think mass market consumer goods - ex Tide - where prices are kept stable but package size gets progressively smaller.)

For low volume brands messing with the product itself is dangerous since their customer base is most likely enthusiasts that are most bothered by changes to their little undiscovered secret. For these premium brands, price is almost irrelevant, therefore price increases are the best strategy. In some cases the higher the price goes the higher the demand - the old gentleman with the cigar on the label comes to mind.

Pieface
02-12-2013, 20:38
You forgot to add in "Expand Capacity to meet Demand"

The options Jim has brought up are all low-risk strategies which suits the producer. Expansion is fraught with risk and the majors have likely all been burned before as evidenced by the whiskey glut of legend. I can see why the producer can be reluctant to pursue this method...

but then I look at Wild Turkey and you can see the end result of this mindset.

Their flagship product is just awful, sorry to the folks that offends but it is a poor product IMO. It is a shadow of it's former self that no "it tastes the same" fanboy could credibly deny.
They play a marketing game with 81 proof bourbon and rye offerings. I'm not sure how they taste but the 86.8 here is just about unsippable and fit only for mixing with soda.
The rarebreed label has been good but is being modified so we'll find out if it is a step forward, sideways or backward soon enough.
The Russells reserve lines are in the process of rebranding and dissociating from the wild turkey brand and have already suffered proof cuts.

Gambling on brand loyalty by discarding the qualitative properties of your product seems an equally big risk in the longer term to me. All it takes is for someone to take a sip of something else that is half decent and poof, there goes another one. I consider myself a bit of a Turkey fanboy but I just can't seem to put my hand in my wallet for their product anymore and that makes me sad.

petrel800
02-12-2013, 20:39
Strategy depends on the brand.

For a mass market brand with high volume the first step is to lower proof. You can take the high road of "keeping same taste" and most of your existing consumers won't notice. If that isn't enough, lower age. Again, at high levels of sales, most people won't notice. The buyers that notice and leave the brand are easily replaced by new customers that are attracted by the "smoother" taste of lower proof alcohol. Price is a last resort because at the mass market level customers are more likely to be price sensitive. (Think mass market consumer goods - ex Tide - where prices are kept stable but package size gets progressively smaller.)

For low volume brands messing with the product itself is dangerous since their customer base is most likely enthusiasts that are most bothered by changes to their little undiscovered secret. For these premium brands, price is almost irrelevant, therefore price increases are the best strategy. In some cases the higher the price goes the higher the demand - the old gentleman with the cigar on the label comes to mind.

This mirrors my thoughts exactly. Raising the price of BT, Makers Mark, WT and other mass market brands pushes them into competition with more premium brands and they will lose market share with that approach. They also appeal to folks who probably won't notice the difference in proof.

As for the premium brands, their price is out of whack, as much as I hate to say it, at 70 a bottle for BTAC, I'll clear the shelf with no pain, until there is pain, people will continue to clear the shelves. Personally, I wouldn't mind seeing a decrease in bottle size for the BTAC and other high end releases. With a moderate increase in the price, this means more bottles in the market and the price increase will slow them just a bit from flying off the shelves. Maybe 375s at 50 a piece.

kickert
02-13-2013, 02:36
I will play along. Obviously we all would prefer no change, but if I had to choose, I would say distilleries should focus their cuts (proof and age) to the mass market bourbons (usually those under $25) and leave the higher proof / higher age ones along. They will see a great return on dilution with those and still keep whiskey lovers happy. Let's face it... most people buying the super popular brands care less about flavor and proof than "smoothness" or brand appeal. Of course that might mean we see some cuts to the cheaper higher proof brands that we love (OGD114, OWA, etc.), but if you have to cut somewhere, cut with the cheap stuff.

MauiSon
02-13-2013, 02:46
I would prefer cyclical product shortages to product dilution. Look, Ritt100, Weller12 and other products are sometimes missing from the shelves and that's okay because a prudent man can stock up when available. Why should a producer want retail shelves full of unsold product? To catch some spur-of-the-moment buyers? To prevent losing sales to their competitors? If all of one's production is periodically sold-out, that's a good thing in my book.

Who really wants more water in their whiskey bottle?

Here's the real question in the MM case - Why should buyers suffer a diminished product due to failure in distribution logistics? (Common experience suggests there's MM sitting on retailer shelves in most locations all the time.)

ThirstyinOhio
02-13-2013, 03:34
I don't know why they can only have one option when they can do multiple things and keep their base mostly happy. Maker's could easily dilute 80% of their stocks, giving them their room for growth, and leave 20% of it at the original proof with a 10% price hike. While the current customers won't like the price hike, it will give them options. Another upside to increasing the price is the illusion of an even more premium product, if its expensive it MUST be good. On top of all that, they need to increase production. The worlds population is growing and these Asian markets love their whiskey. Outside of a complete world financial crash, the demand is not likely to shrink any time soon. This also allows them to take even more advantage of scales of efficiency.

1) lower proof for most stocks = more profits
2) raise price for remaining stocks = more profits
3) increase productivity to meet market demand = more profits

Pieface
02-13-2013, 04:25
I will play along. Obviously we all would prefer no change, but if I had to choose, I would say distilleries should focus their cuts (proof and age) to the mass market bourbons (usually those under $25) and leave the higher proof / higher age ones along. They will see a great return on dilution with those and still keep whiskey lovers happy. Let's face it... most people buying the super popular brands care less about flavor and proof than "smoothness" or brand appeal. Of course that might mean we see some cuts to the cheaper higher proof brands that we love (OGD114, OWA, etc.), but if you have to cut somewhere, cut with the cheap stuff.

Do you work for a distillery Ben? I figure this is exactly the model most of the distillers bean counters would like them to head toward. A large supply of low proof young whiskey to underpin volume and a healthy premium on anything with a bit of age or proof. Just got to kill off those pesky historical value brands like OGD114, OWA etc that anchor the prices they can demand on "the good stuff".

Maybe I'm overly cynical, I sure hope so.

kickert
02-13-2013, 04:59
Do you work for a distillery Ben? I figure this is exactly the model most of the distillers bean counters would like them to head toward. A large supply of low proof young whiskey to underpin volume and a healthy premium on anything with a bit of age or proof. Just got to kill off those pesky historical value brands like OGD114, OWA etc that anchor the prices they can demand on "the good stuff".

Maybe I'm overly cynical, I sure hope so.

I used to work for a micro distillery, but I doubt that changes my view in any way. If you look at it from a business stand point (which all distilleries are), then high proof, high age, low price and constant stock can't co-exist as long as there is a market for the product. The same reason we like OWA and OGD114 is the same reasons they would be logical targets for "market adjustment" -- we know they are a great value.

The simplest option and the one most beneficial to the distilleries is just to raise prices until demand matches supply. Rather than see that across the board, I personally would like to see distilleries make quality cuts to the low end stuff while preserving the good stuff at lower rates. Just my opinion and it is worth what you paid for it.

squire
02-13-2013, 06:03
Or go to 700 mil bottles and claim "international" standards.

zillah
02-13-2013, 08:37
Tastes change. I am sure fans will be hurt, but I would rather have supply shortages that force me to check out other whiskeys. There are a lot of bourbon producers. Someone is bound to put out good product for a given season/year. Not every distiller is feeling the weight of increased demand, are they? The question would change from "What is a good bourbon?" to "What is a good bourbon right now?"

squire
02-13-2013, 08:41
That is a good question. When I present to the the local later today (weather permitting) I'm confident there will be something on the shelf right now that will suit my palate fine.

kickert
02-13-2013, 08:52
Tastes change. I am sure fans will be hurt, but I would rather have supply shortages that force me to check out other whiskeys. There are a lot of bourbon producers. Someone is bound to put out good product for a given season/year. Not every distiller is feeling the weight of increased demand, are they? The question would change from "What is a good bourbon?" to "What is a good bourbon right now?"

Now that I have reflected on it, I think this is probably the best option. There are many many good bourbons out there for a great price. I can stand to have some of them intermittently off the shelf. Of course when you are like Maker's that really isn't as viable an option because they have put their whole weight behind their standard bottle. I would think the same would be true for the "big name bottles" like Jack and Jim.

I can go without access to hopslam for most of the year, but people wouldn't put up with coors light being out of stock if that was your daily drinker.

Trey Manthey
02-13-2013, 09:09
Or go to 700 mil bottles and claim "international" standards.

I think you are being cheeky, but I would support this. The silver lining is that more international products would make it to the US. There might even be a price drop for imported stuff as they wouldn't have to create an extra 750 bottle anymore. I know that legislation would have to change for this to be possible, but it would be a welcome boon to the free market.

VAGentleman
02-13-2013, 09:20
Speaking of dropping the amount in the bottle, does anyone know when we went from the pint and half pint to the now ubiquitous 375 ml. I remember getting the 500 ml and 250 ml bottles of everything back in the day. Now we have a lot less (500 vs 375) for the same price

HighInTheMtns
02-13-2013, 10:59
I would prefer cyclical product shortages to product dilution. Look, Ritt100, Weller12 and other products are sometimes missing from the shelves and that's okay because a prudent man can stock up when available. Why should a producer want retail shelves full of unsold product? To catch some spur-of-the-moment buyers? To prevent losing sales to their competitors? If all of one's production is periodically sold-out, that's a good thing in my book.

Who really wants more water in their whiskey bottle?

Here's the real question in the MM case - Why should buyers suffer a diminished product due to failure in distribution logistics? (Common experience suggests there's MM sitting on retailer shelves in most locations all the time.)
I would prefer cyclical shortages as well but I don't see them as feasible from the perspective of the distillers (except for the limited-by-design stuff, of course). This is the reason:

Tastes change. I am sure fans will be hurt, but I would rather have supply shortages that force me to check out other whiskeys. There are a lot of bourbon producers. Someone is bound to put out good product for a given season/year. Not every distiller is feeling the weight of increased demand, are they? The question would change from "What is a good bourbon?" to "What is a good bourbon right now?"

Those of us here who are out trying to taste every whiskey under the sun aren't typical. If Maker's Mark, for example, allowed cyclical shortages to happen, the loyal MM drinkers would be forced to try something else. Maybe Larceny, maybe Weller, maybe not even a wheater at all. Some of them might like what they try better and switch brands. That being said, a couple days ago I picked up a bottle of Baby Saz which I see on shelves even less frequently than BTAC bottles. Cyclical shortages seem to be working fine for that brand.

I hope that the long-term solution to this is to increase production, but I realize that is a slow process at best. I'd take cyclical shortages over price increases, but ultimately, the more I think about this, I'd prefer outright price increases to increasing the price by lessening the product. Maker's Mark in particular doesn't hurt my feelings, but if the next one to get worse is a Weller bottle, I'll be very sad. It comes down to this: I'd much rather say "I wish I could get Eagle Rare 10/101 for what it used to cost" than "I hope that someday I am lucky enough to stumble upon a dusty bottle of Eagle Rare 10/101."

Lazer
02-13-2013, 11:11
Raise prices, cut bottle size so it won't hurt as badly.
700ml - good
500ml - good
375 - acceptable
250 - too small.

HighHorse
02-13-2013, 11:46
Great thread and a lot of good discussion. I'm a bit curious about the "shortage". Is there one? Here we are in financial hard times and US outlets are, for the most part, struggling to meet last year's numbers. There is, no doubt, a giant sucking sound heard on the barrel stocks coming from the Asian markets and the big boys are certainly turning their heads that way. The glut (and bastardizing) will be in the mass appeal popular brands and I can see these guys stretching out as far as they can get away with to grab as much of that low hanging fruit as possible.
We may be seeing these producers jockeying for position to hang on to that very small (5 percent?) of the market that we represent .. the premium market. Maker's did that with the 46 .. Beam .. HH .. BT .. are all on board with their more premium brands. We should be safe until they start tinkering with those.
The corporatization of this business won't be without consequences. I haven't met a corporation yet that didn't have a room full of bean-counters and bonus-inspired executives who couldn't figure out how to screw up a product and company in the chase for the holy grail.
We have left to cheer the private distillers and those new ones coming on board. The byword will be to buy them while they got 'em because they are all subject to being bought up by the corporations in time. It also makes it clearer to me why the distillers seem so eager to please when folks come their way to select barrels. That's still the pure stuff .. and it gives the MD a chance to show his/her talents.

Brisko
02-14-2013, 10:27
Bottle sizes are set and regulated by the TTB, so a producer couldn't just start using 700 mL bottles. And to answer VAGentleman's question, 500 mL was dropped in 1989.

As far as handling shortages, different producers have taken varied approaches. Sazerac has taken a balanced approach: eliminate some products, drop age statements on some, and drop proof on others while maintaining age statements. Heaven Hill is a little more targeted, changing the Evan Williams line but not Elijah Craig, for instance. Wild Turkey... well, they're still trying to recover from the 1990s. A lot depends on how diverse your lines are. Sazerac has a lot products and thus a lot more options than say, JD. Maker's is the most extreme example, with only two expressions to work with.

Up until last week, Beam was largely immune to this problem, with the exception of Knob Creek a few years ago, which they managed to turn into a successful PR campaign. And really, they probably don't have a choice with Maker's, although I'll bet they're wishing they'd started that 3rd expansion.

Lazer
02-14-2013, 11:17
...Heaven Hill is a little more targeted, changing the Evan Williams line but not Elijah Craig, for instance...

Yeah, good ole EC18 as dependable as always. Still 18 years, still $45. :rolleyes:

Brisko
02-14-2013, 11:40
Yeah, good ole EC18 as dependable as always. Still 18 years, still $45. :rolleyes:

Wow, it's been a long week:blush:.

squire
02-15-2013, 09:28
I'll bet they're wishing they'd dropped the proof sooner.

Bourbon Boiler
02-15-2013, 20:20
As much as I'd love to see it, increasing production just isn't that likely. Figuring 6 months for approvals, 18 months for construction, 3 for testing/hiring, and then 6-10 years for aging, We'd be looking at the 2020's before we saw a real increase on the shelf. Also, I don't think we're looking at the micros through the correct lens. While most of then aren't making premium products right now, in aggregate, they still represent a lot of idle still capacity that could be turned on instantly. I don't know which brands they will be, but a handful probably will take off. A big producer could buy that brand, purchase some idle capacity to increase distirubtion of their new brand (after aging), and improve their sales much faster than through factory expansion.

HighInTheMtns
02-15-2013, 23:29
As much as I'd love to see it, increasing production just isn't that likely. Figuring 6 months for approvals, 18 months for construction, 3 for testing/hiring, and then 6-10 years for aging, We'd be looking at the 2020's before we saw a real increase on the shelf. Also, I don't think we're looking at the micros through the correct lens. While most of then aren't making premium products right now, in aggregate, they still represent a lot of idle still capacity that could be turned on instantly. I don't know which brands they will be, but a handful probably will take off. A big producer could buy that brand, purchase some idle capacity to increase distirubtion of their new brand (after aging), and improve their sales much faster than through factory expansion.
Someone who knows more than me could confirm or refute this, but I think in general, still capacity is not the issue in Kentucky. Warehouse space is.

Bourbon Boiler
02-16-2013, 04:16
I'd be interested in knowing that. Warehouse space would seem to be a little easier to deal with. I know there are fire concerns behind the spacing, and the bourbon fungus is making too many headlines these days, but I'd think another couple of rickhouses for the big boys would be simple.

p_elliott
02-16-2013, 06:58
A lot of the distilleries are building about one new rickhouse a year. But it takes years to see the benefits from a new rick house.

squire
02-16-2013, 17:47
Beam could fill a warehouse in short order with same recipe wheat whisky.

ILLfarmboy
02-16-2013, 20:33
I'd rather have distilleries raise prices and perhaps use cyclical shortages to take some of the pressure off than reduce proof ore age.
I understand with Maker's they can't really have cyclical shortages of their flagship bottling without hurting themselves. But I shop for whiskey the way I shop for any other grocery item; I don't shop every day or even every week, I keep lots of supplies on hand and rotate the most recently purchased stock to the back of the cupboards/the freezer, I shop the sales and though I have my favorite brands/bottlings I'm not 100% loyal to any of them. I rarely run out of anything/ or any of my favorite bottlings I just drink something else when supplies get low and re-up on those bottlings when I catch a good deal or when they are released (for those things like ORVW 10 107)

I'd venture to guess most of us are like that, at least when it comes to bourbon. I'd also venture to guess the average consumer is not that way. We are not only different in what bottlings we buy the most of, but I think we're also different in our whole approach.

cowdery
02-17-2013, 12:25
The posts in this thread have identified most of the relevant factors. Here's another: stability. You don't want to be constantly raising and lowering prices, like a commodity, or making lots of changes to the product itself, because the consumer wants stability. They want a consistent product at a stable price. You need to respond to market forces, of course, but as much as possible without sacrificing consistency of product, message, and price.

MauiSon
02-18-2013, 16:03
I think I won with regard to identifying the problem with MM - distribution logistics. Didn't they say as much?

Gillman
02-18-2013, 16:42
What about simple allocation? I.e. you honor all existing contracts and for uncontracted sales, you allocate amongst the customers as fairly as possible, e.g. regionally in proportion to the full market, and perhaps (although I'm not sure here) favoring the domestic market since it is the oldest and least likely to change with the trends.

This way, while not maximizing profits short-term that commercial logic would normally justify by raising price, people will feel fairly treated and retain brand loyalty when the supply can be increased. Whereas if you raise prices, that will put some people off and they may not return later. Or even if they would return, higher prices may leave some product on the shelves for too long, i.e., couldn't price increasing backfire? I'm no economist but this seems logical to me, given too we are dealing with products in which there is a certain emotional investment i.e. relatively high brand loyalty, but also a point at which people will switch, elasticity I think they call it.

Gary

squire
02-18-2013, 17:39
Elasticity in pricing, aye, there's the rub, whisky may be the water of life but high tone whiskys command a premium and brand loyalty stretches thin if a customer starts to believe they're no longer getting their money's worth.

CoMobourbon
02-23-2013, 12:40
I feel like this question depends on the million dollar whiskey industry question: are we in a price bubble of some kind, or are increased demand and correspondingly increased prices here to stay?

If the latter, then definitely increased production would benefit customer and distiller alike - especially for the low and mid shelf brands. If the former, then I can hardly blame all of these big distilleries for getting it while the getting is good (raising prices, degrading quality via lowered age or proof, etc.).

Overall, if I could pick my poison, I too would come down on the side of cyclic shortages. But really, anything other than increasing production (except for a bubble pop) is not a solution.

cowdery
02-25-2013, 10:43
I think we're going to see, over the long haul, continuous pressure on supply resulting in steadily rising prices. However, so much of the growth is export-dependent, which can be unpredictible, that we also will see periodic blips of excess supply, which result in short-term bargains. This is a pattern we're already seeing and I believe it will continue. Also possible is a bust in one of the major projected export markets, such as India or China, resulting in a price collapse, but the odds of this happening appear to be small.

mark fleetwood
02-25-2013, 19:03
I think we're going to see, over the long haul, continuous pressure on supply resulting in steadily rising prices. However, so much of the growth is export-dependent, which can be unpredictible, that we also will see periodic blips of excess supply, which result in short-term bargains. This is a pattern we're already seeing and I believe it will continue. Also possible is a bust in one of the major projected export markets, such as India or China, resulting in a price collapse, but the odds of this happening appear to be small.
Perhaps sequestration can start a worldwide recession. Prices drop and the juice tastes better since we're all depressed.

Cjen
03-11-2013, 12:20
Whereas if you raise prices, that will put some people off and they may not return later.

Problem is that distilleries can't (legally) ditate the end prices consumers pay. Even if they charge distributors the same price per case as before, those distributors have an incentive to raise the price they sell each case to liquor stores for.

For example, say a case costs distributors $100 and they typically sell a single case to each of their 10 customers for $150. If all of a sudden that distributor can only get 5 cases, even if still purchased at just $100, they have a big incentive to raise the price to determine which 5 of their 10 customers is the most "serious about" or "committed to" the product. Some of those customers will likely pay $200/case, others maybe even $300. But the mom and pop store who only carries a product because one or two customers asks for it would probably drop out pretty quick. So the distributor, seeing the potential profit opportunity, will raise prices on their customers, which trickles down to the end price we pay. A profit-maximizing distributor will try and figure out the what the maximum price the (soon to be) 5th highest paying customer will bear, then price each case at that price.

Price elasticity from a consumers perspective plays a part (as that informs the liquor store as to what the maximum price per case they can afford is), but the real price increase would come from the main distributor or first "middle man" to touch the product.

I believe in some states there is no extra layer between the liquor store and the producer, in which case the liquor store will raise prices, following a similar thought process.

By the way, products that can bear large price increases are said to have "inelastic" demand (think insulin, AIDS drugs, or other life saving medicines/necessities), where those that have lots of substitutes (and thus price increases really impact demand) have "elastic" demand.

The demand for certain brands may be inelastic to many on these boards but, as prices go up in the bourbon market, I would predict the general public will quickly find their demand to be relatively elastic. At least for those who buy bottles on a regular basis.

Cjen
03-11-2013, 12:25
Also, I did some posting/research here a while back on new distilleries in KY. While doing that, I also saw a (relatively) new distillery in SC that focused on using technology to "refine" spirits. One of the benefits was said to be rapid 'aging' of bourbon. I remember looking them up briefly and hearing good things, but you never know what to believe without sampling for yourself! Company was called Terrassentia.

cowdery
03-11-2013, 12:44
People pushing rapid aging schemes are either fools or crooks. Pay them no mind.

All 50 states have a 3-tier system, i.e., a layer between the producer and the retailer.

Your point, I think, though you never quite get there, is if the market will support a higher price on something and the producer doesn't take it, those further down the chain (distributor, retailer) surely will.

ThirstyinOhio
03-11-2013, 12:45
Also, I did some posting/research here a while back on new distilleries in KY. While doing that, I also saw a (relatively) new distillery in SC that focused on using technology to "refine" spirits. One of the benefits was said to be rapid 'aging' of bourbon. I remember looking them up briefly and hearing good things, but you never know what to believe without sampling for yourself! Company was called Terrassentia.

Cjen, I recommend reading the threads regarding Cleveland Whiskey who is also using a process to quickly "age" bourbon and have already released their first batch to the market.

squire
03-11-2013, 15:09
Methods to artificially age or speed aging of whisky have been published for over two centuries now and the only thing that has been proven is none of them work.

Cjen
03-12-2013, 09:23
All 50 states have a 3-tier system, i.e., a layer between the producer and the retailer.

Not necessarily. All states have tiers, but not necessarily 3. For example, control states could be said to really only have 2, as the producer sends product to the state liquor store, where people can buy it. And I think some states allow direct shipments now as well--but I'm not sure, as I have never lived in any state that (potentially) does. But you also have many states with "tasting room" laws, which allow a producer to sample and sell direct to the consumer at their facility. But I agree that these are exceptions, not the rule.

But you are correct cowdery: the point is that the market will figure itself out in terms of pricing. And since spirit producers can't add an "msrp" or print a price right on the bottle like other industries (think potato chips), we will see the highest price consumers will bear (for mass market brands).

Competition drives price down, but supply shortages force it up--hence my comment that, during this bourbon shortage, I bet many end consumers will explore alternative brands..

callmeox
03-12-2013, 09:51
Ohio is as controlled as it gets and there are 3 tiers here.

The producers may ship liquor to the state warehouse, but the transaction is brokered by a distributor.

Cjen
03-12-2013, 09:55
Methods to artificially age or speed aging of whisky have been published for over two centuries now and the only thing that has been proven is none of them work.

True. But distillation has been going on for millennia and hasn't really changed much. Yes, I realize that there are hundreds of significant variables involved and everything from still shape and size to vapor pressures and running length to mash bills and barrel char make a difference in the final product, but the core concept is the same now as it was back in the day. After 2,000+ years of distilling and aging, I'd say someone ought to figure out how to do it more efficiently. Not necessarily better, but more efficiently. That way the mass market brands can stabilize their supply and the micros can garner more interest and get more creative without having to worry about achieving a certain scale to survive.

I'd personally love to see more places like Corsair, where almost everything they make is "experimental." The downside to these types of micros is that they often can't afford to play around and have a great everyday bourbon (at least not in reasonable supply/circulation). But I know Corsair uses small barrels to "age" faster (which apparently works pretty well?), but "faster" still means a couple years. They can't keep up with demand as is, and I'd hate to see them slow their experimentation in favor of lots of traditional product because I think the industry needs more of the experimental stuff. So you have to take the lesser of two evils in cases like this, balancing innovation for extra supply of a more traditional product.


In any case, I'm open to new ideas in this industry and will try anything once. Be it now or a hundred years from now, someone will probably look back on some of the things we do with bourbon today and compare it to the clay pot "stills" used in the earliest years of distillation. Will they still be honoring traditional distillation methods and barrel aging as they look back and reminiscence? Absolutely. That will never drop away--we won't let it! But will the bourbon most people drink everyday be produced the same way as today? Probably not. No clue how it will be made, but you've got to believe that in today's world of "disruption" and bourbon both being trendy, something going to happen sooner or later.

squire
03-12-2013, 10:37
Actually, I don't "got to believe" anything.

Cjen
03-12-2013, 10:47
Actually, I don't "got to believe" anything.

Just a playful expression.

I'm not making a case or asking you to do anything. I'm just intrigued.

cowdery
03-12-2013, 10:48
Historically in Ohio, the state was both distributor and retailer, and actually performed both functions, though separately (so two, not one). Now the retailers are private owners who act as agents for the state; and even though the state is still technically the distributor, the actual work is done by a private, commercial distribution company. Since the state occupies two of the three tiers, you could argue that it's a two-tier system, but functionally it is a three-tier system, in that producers do not ship directly to retailers.

The producers wish they could sell direct to major chains, both on- and off-premise. They do in a way, in that they can do everything except actually write the order. The order must go through a distributor.

The system has broken down in the sense that prohibitions against the same person having ownership interest in more than one tier are easily gotten around, and the local companies distributors were supposed to be are now legal fictions, since most distribution is done by national or large regional companies. The idea was that a producer could be remote and hard to touch legally, but a distributor would be local and thus more readily brought before the law. It's still true in the sense that distributors are required to have in market assets. Therefore, a distributor who has business in both Ohio and Indiana can't supply Ohio entirely from its Indiana warehouse. At least, I don't think they've gotten around that one yet.

Like a lot of Prohibition vestiges, the problems these systems were meant to solve don't seem like problems anymore, but the system doesn't change because there are people who have a powerful financial interest in keeping things the same.

callmeox
03-12-2013, 11:13
If you consider the state to be a distributor due to the regional warehouses, then Ohio has a 4th tier as the state buys through traditional distributors like Glazers and Southern Wine and Spirits.

Also, Ohio DLC is the only liquor retailer as the local shop does not own the booze on their shelves. It belongs to the DLC until it is sold on a consignment basis by a retail permit holder. This is only true for liquor over 21% ABV and not other alcoholic beverages.

Regardless, there are quite a few profit minded folks who touch the liquor between the distillery and the consumer.