Our ongoing observations about whether the boom has peaked

[smokinjoe]

Limited Editions are by definition...well...limited. They aren't meant for everyone to have, availability should be scarce, and pricing should reflect that. Every major producer has, and is, making significant investments to increase supply as quickly as possible. But, the time-table from planning the necessary capital investments, to having additional salable bourbon available, is not a speedy one.

[atbat82]

Anyone know if any producers are holding back on new production for fear of a collapse/glut? I know there's an argument about new normal vs bubble, but I'm sure they are weary about being left in state with way too much supply sitting in warehouses.

Obviously given the long time frame for aging, etc, production gets planned well in advance. So I'm just wondering if they are being rightly cautious or if we should expect some GREAT cheap bourbon in 8-10 years. Haha.

[smokinjoe]

I can't answer that, AB. I'm not sure any of us can. My guess is that they are producing as quickly as they can, but with a wary eye on the past glut. Those were hard earned lessons. FWIW, I believe I have heard that the big bottleneck for them is having enough rickhouse space to handle all the distillate that they can pump out. Thus you see new rickhouses going up as quickly as they can get them built.

[atbat82]

That makes sense. I'd love to work on the business side of a distiller (hell, I'd love to be a distiller, but don't have the palette for it). It must be an interesting challenge to plan a product with a 4-23 year lead time!

[b1gcountry]

I'm pretty sure one of the major bottle necks to storing more barrels is getting the actual barrels. The trees take even longer to grow than the juice takes to age, and I don't think there are many barrel and stave producers.

[smokinjoe]

I'm pretty sure one of the major bottle necks to storing more barrels is getting the actual barrels. The trees take even longer to grow than the juice takes to age, and I don't think there are many barrel and stave producers.

Procuring an adequate supply of barrels is only a major bottle neck for some smaller/craft distilleries. The major distilleries, on the other hand, have not reported major sourcing issues. They are paying more for sure, and supply is definitely tight, but their demand is being met. In addition, the major cooperages have all increased their capacity throughout the process from additional oak forest land acquisitions to opening new saw mills in order to keep up with the increased demand.

[b1gcountry]

I've always wondered why they don't offer the limited releases in smaller 375 or 200ml bottles so they could distribute the same amount of product to more people. I know it would sell either way, and they can't make much money on these compared to their regular sales.

[squire]

If prices continue to rise (no indication they won't) and supply gradually increases (increased production indicates it will) then we may well see more of the smaller bottles offered in the future. That's as close as I'm willing to go on making a prediction.

[johnnyflake45]

LOL! I just had a sobering thought, is it possible that the boom will collapse and liquor will be plentiful, but illegal! When all or most of the states legalizing Marijuana, they may decide to make liquor illegal! That "Do Good" group of people, will have to have something to ban!

[smokinjoe]

I've always wondered why they don't offer the limited releases in smaller 375 or 200ml bottles so they could distribute the same amount of product to more people. I know it would sell either way, and they can't make much money on these compared to their regular sales.

I think 375's for limiteds is a great idea, Bigs. Several good reasons to support it, IMO.

[b1gcountry]

How does legalizing pot lead to illegalizing hooch?

Nevermind, that kinda happened after prohibition when they started the National firearms act of 1934...if I remember my American history class right, they had to find jobs for everyone.

Edited November 29, 2015 by b1gcountry

[dmarkle]

Just my freeflowing train of thought. Probably completely wrong.

I think things get really strange when it comes to price in certain areas of the country. In San Fran, DC, New York, &c, you have a group of people for whom spending over $1000 on a bottle of liquor is really no big thing. They just want "the best" and they equate "the best" with "the most expensive." There's a place near Dupont Circle that's willing to sell you a bottle of bourbon for thousands. He gets the money because SOMEWHERE in town there's an ambassador or senator or prince to impress or drink with, and they'll spend anything for that purpose...

I think Highland Park, Remy Martin, Macallan and the others have a good idea with making a ridiculously expensive "halo" liquor and selling that to those people. IMO these really, really old liquors in very fancy bottles don't taste "better" than younger spirit, but they're there to show a top end and give the brand some cache and desirability.

I think our current problem with the limiteds is that they're seen as bargain versions of these kinds of spirits. There's nothing at the truly "high end" of bourbon that's made to attract these people, so they go driving up the price of what would otherwise be somewhat obtainable. I kind of wish someone would come out with a PVW or WLW "special edition" (it could probably only really be good and marketable if it was NAS) in some sort of hand-blown glass gold thingy or something. I wonder if they marked that at say $5 or $10k if that would satiate this market for stupidly high priced whiskey and maybe bring the price of the next tier (the stuff I like to drink) down. I don't know. Sometimes when I think of Weller drying up because people hear it's "Just Like teh Pappiez" I think that they just aren't making enough spirit...

[squire]

I question whether stupidity can ever be satiated.

[bmajazz]

Exactly right. In L.A., I frequently go past a store in a very exclusive neighborhood on my way to work. They had the Pappy 10, 12, and 15. I forget the prices but I think the PVW10 was something like $400. They have been sitting for months, but someone just bought one of the two 10 year bottles they had. The folks up there don't blink at this sort of purchase.

Until the trendiness of LE bourbons fades, this isn't going away. There's way too little supply, and a lot of the buyers seem relatively immune to economic downturns.

Just my freeflowing train of thought. Probably completely wrong.

I think things get really strange when it comes to price in certain areas of the country. In San Fran, DC, New York, &c, you have a group of people for whom spending over $1000 on a bottle of liquor is really no big thing. They just want "the best" and they equate "the best" with "the most expensive." There's a place near Dupont Circle that's willing to sell you a bottle of bourbon for thousands. He gets the money because SOMEWHERE in town there's an ambassador or senator or prince to impress or drink with, and they'll spend anything for that purpose...

[b1gcountry]

There is an economic term for goods that increase in demand as price increases. I can't remember what it is, but it applies to many investment sector products with limited supply, such as precious metals. We've also seen it in firearms, and I think you could also apply it to bourbon.

[johnnyflake45]

There is an economic term for goods that increase in demand as price increases. I can't remember what it is, but it applies to many investment sector products with limited supply, such as precious metals. We've also seen it in firearms, and I think you could also apply it to bourbon.

I believe the term you are seeking is "Supply & Demand".

There is another that applies as well "Stupidity".

[atbat82]

There is an economic term for goods that increase in demand as price increases. I can't remember what it is, but it applies to many investment sector products with limited supply, such as precious metals. We've also seen it in firearms, and I think you could also apply it to bourbon.

The term is elasticity.

[squire]

Which rhymes with stupidity.

[b1gcountry]

No. There is a special term for goods when price increase causes an increase in demand, and a price drop causes a decrease in demand.

It is counter to the traditional supply-demand curve. I can't remember what it's called though.

[Louisiana]

The term is "Luxury Goods". My father-in-law is an economist!

[B.B. Babington]

...that kinda happened after prohibition when they started the National firearms act of 1934...if I remember my American history class right, they had to find jobs for everyone.

lots of people found good jobs with prohibition, moonshining and bootlegging.

[b1gcountry]

No. There is a special term for goods when price increase causes an increase in demand, and a price drop causes a decrease in demand.

It is counter to the traditional supply-demand curve. I can't remember what it's called though.

The term i was trying to remember was "Geffen goods". It is when prices begin to rise to the point a consumer might not be able to afford it in the future, so they stock up in case prices rise more. When prices fall, they feel more secure, and begin to use their reserve supplies, and demand diminishes when price falls. This is why you can't find ETL.

The real exclusive limited releases would probably be considered "Veblen goods", also referred to as the phenomenon of conspicuous consumption. Pretty much a fancy way of saying luxury goods as stated earlier. This is why you can't find BTAC.

[Sean Bond]

If prices continue to rise (no indication they won't) and supply gradually increases (increased production indicates it will) then we may well see more of the smaller bottles offered in the future. That's as close as I'm willing to go on making a prediction.

To make a craft beer parallel that I think is decently apt:

Goose Island's Bourbon County Stout (a stout aged in bourbon barrels, for those who don't drink beer)is one of the most in-demand yearly beer releases, and while they have ramped up production in the last couple years (they expanded their barrel-aging warehouse), they also have responded to availability issues by switching from 22 oz. bottles to 16.9 oz. bottles (and they got rid of 12 oz. 4-packs as well), while keeping pricing pretty close to what it was last year (meaning slightly more expensive per ounce). As far as I can tell so far (it was just released Friday), this has at least ensured that more people are able to get the beer, although the big collectors are either getting less now, or spending way more money to get the same amount as last year. If bourbon goes this route, I'm fine with it, because 1) I get shut out of most limited releases, so perhaps this will help me slightly, and 2) even at a higher cost per oz., if the cost of the bottle is less than it currently is, I'll be able to experiment more (instead of shelling out $80 for a bottle of 6 yr. Willett Rye, maybe I can get a half bottle for $50 or 60, and decide whether or not I love it).

The big issue, though, is the time involved in making bourbon (which I know has been covered before). Even a beer like Bourbon County only takes a year to make, so Goose Island can adjust for demand at least somewhat within that same year. But the bourbon boom is still younger than a lot of the limited bourbons being rolled out, so HOPEFULLY in the next few years we'll start to get some of the availability issues ironed-out. Or just got to 375ml bottles...

[Sluffo]

On 11/30/2015, 11:59:38, Sean Bond said:

To make a craft beer parallel that I think is decently apt:

Goose Island's Bourbon County Stout (a stout aged in bourbon barrels, for those who don't drink beer)is one of the most in-demand yearly beer releases, and while they have ramped up production in the last couple years (they expanded their barrel-aging warehouse), they also have responded to availability issues by switching from 22 oz. bottles to 16.9 oz. bottles (and they got rid of 12 oz. 4-packs as well), while keeping pricing pretty close to what it was last year (meaning slightly more expensive per ounce). As far as I can tell so far (it was just released Friday), this has at least ensured that more people are able to get the beer, although the big collectors are either getting less now, or spending way more money to get the same amount as last year. If bourbon goes this route, I'm fine with it, because 1) I get shut out of most limited releases, so perhaps this will help me slightly, and 2) even at a higher cost per oz., if the cost of the bottle is less than it currently is, I'll be able to experiment more (instead of shelling out $80 for a bottle of 6 yr. Willett Rye, maybe I can get a half bottle for $50 or 60, and decide whether or not I love it).

The big issue, though, is the time involved in making bourbon (which I know has been covered before). Even a beer like Bourbon County only takes a year to make, so Goose Island can adjust for demand at least somewhat within that same year. But the bourbon boom is still younger than a lot of the limited bourbons being rolled out, so HOPEFULLY in the next few years we'll start to get some of the availability issues ironed-out. Or just got to 375ml bottles...

This is a great comparison.  Particularly to BTAC.  There were six varieties of BCS this year, one of which (the Rare @ $65/bottle) was aged for two years in barrels that had contained 35 year old Heaven Hill.  People start standing in line Thanksgiving day, or earlier, for the Friday morning release.  Lines are ridiculously long and supplies are low for the varietals.  Even with limits of one of each variety per person most stores sold out before everyone in line got any.  Within hours the flippers were listing them for triple or quadruple the MSRP.  Much like some of the rare bourbons, you'd see people that had entire cases of the extremely limited versions.  There's really only one way that happens.  I remember when you could walk into a store and buy this beer almost year round.  Those days are long gone.

So even beer lovers are suffering effects just like us bourbon lovers.  For the record, I did sit in line for 2 1/2 hours in 31 degree weather and then drove all over and only managed to get a few bottles of the regular and a couple of the easier to get varieties.

[The Black Tot]

Well, I've gone on record before saying I resent the 375 or 500mL bottles, but I remember being surprised that I seemed to be in the minority.

Anyway, bring on the boom. I honestly thought we'd be flat vs. last year, that we'd hit high water.

This year as the year progressed the limiteds got markedly more reachy/less substantial and yet more expensive. I suppose we'll be seeing a repeat of this in 2016, and we'll see how much more people will want to pay for how much less, until they finally get turned off somehow.

It's hitting everywhere though. Malts are up, good tequilas are up, even rums and wines are up.

Burn, Rome, BURN!!!

My plan is now to work on making classic cocktails for a while, and enjoy the fine drinks of yesteryear out of the bunker.

I'm really licking my lips thinking about 2026... get them warehouses built and fill 'em up, boys!!!