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Saturday
Jun162012

Blowing Up the Bubble

I've had some interesting conversations with various whisky industry folk over the past week.  None more interesting than those concerning the price of whisky.  I need to do some more analysis and serious thinking before extrapolating further on this topic, but I thought it would be interesting to leave you all with this thought in the meantime:

We all know how scarce and how sought after Pappy Van Winkle Bourbon is.  Nevertheless, we all know how much they cost (we've generally sold the 15 year for around $70).  At K&L, we know we could put these bottles on our auction site, or charge double that price and make a lot more profit than we currently do.  We choose not to because, as a company, we're more concerned with helping our customers than selling to the highest bidder.  We believe that the goodwill we sustain by selling products for an honest price results in more business down the line.

Now apply this analogy to the whisky producers in Scotland, except this time K&L is the customer.  The American whisky market is an afterthought compared to the other thriving booze regions of the world.  It takes more work to sell us whisky (bottles have to be changed to 750ml from 700ml) and we might not pay as much as businesses in China or Taiwan.  I'm having trouble understanding why producers would sell us a cask when someone else might pay double what we're offering, plus provide an easier path to that actual sale.  My question is: is there any advantage to maintaining business relationships with the American retailers when double or even triple the profit can be made elsewhere?

So far this scenario hasn't been too big of a problem, but it has impacted a few of our deals.  I want to also state clearly that I'm not implying anything about the ethics of any producer either, I'm just pondering out loud here.  If I had a car to sell for $5000 and someone offered me $10,000 for it, I'd probably take the $10,000.  It's not really a question of ethics, as maybe it is with the Van Winkle analogy, but rather a question of actual worth.  Is that three bedroom house in Modesto actually worth $600,000?  I'm hoping that, as a planet, we don't start overpricing our whisky because it could take a long time for the industry to pay off that mortgage.

-David Driscoll