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« Ardbog | Main | One Day.... »
Tuesday
Apr302013

End of the Quarter Scramble

As you saw from David OG's depressing post yesterday, we're at the end of another financial quarter here in the booze industry and now is the time of the year when we're notified by the liquor companies about price changes. My box is currently full of emails that say things like:

David, just wanted to let you know that ______ will be taking an increase starting tomorrow. If you want to get the old price I need an order today. Please buy what you think you will need.

Guess what? EVERYTHING is going up in price. Then, as David OG pointed out, you'll send them an order for twenty cases of booze to buy in against that increase and protect your old retail price. However, that's when this email shows up:

David, it looks like we're out of _______ right now. ETA is 5/12. Sorry about that.

So you just sent me an email telling me that if I don't buy more of _______ today then I'll be faced with a price increase starting tomorrow. However, when I try to buy more of _______ from you there isn't any to buy. What we're dealing with here is brands covering their asses.

We told you about the increase. That's all we can do. It's not our fault that you didn't buy more earlier.

Everything from Macallan will be taking price tomorrow. Highland Park too. Fernet Branca is going up in price. I just got word that Louis XIII will be adding an extra $200 to its bottle cost. Basically, we either have to raise our prices or make less money.

And you wonder why we go to Scotland and France in search of different brands to sell?

Again, I'm fine with gradual inflation. It's a necessary part of the economy. However, this is happening four times a year in some cases. Like David said, there comes a point when a store like K&L will simply say "Enough" and start dumping brands. If you don't see your favorite single malt on our shelves it probably has something to do with price increases (Glenrothes, Talisker 18, Old Pulteney, cough, cough).

Part of the reason this is happening is the lack of supply and the huge demand. We all know that so let's not rehash a tired conversation. The other problem, however, is the lack of competition. Where's the motivation for brands to compete? The craft whiskey scene is only offering more expensive bottles of lesser quality. It's only giving brands an excuse to charge you more, rather than fight hard for your business. When brands see $60 for a one year old whiskey their eyes light up and their pulses start racing.

Until any craft distillery can make a 12 year old single malt for less than $50 there's no reason for the big boys to bring prices down. That's not to say that craft distilleries can't make a difference because they can. Competition with white spirits like gin has been fierce. Craft distilleries have totally forced the brands out of K&L. We don't sell Tanqueray anymore. We don't sell Bombay. We don't sell Gordons. Those guys are history and the brands are still scrambling to make up that market share. The same thing goes for tequila. Don Julio who? We don't sell that. Patron? What's that? Craft beer is doing the exact same thing to Budweiser.

Smaller whiskey distilleries, however, are unable to apply the necessary pressure. There's too much overhead and too much advance planning required. By the time any of these craft whiskies are 12 years old many small distillers will have spent so much money that the owners will be begging to sell. Please, Proximo, buy my distillery in Colorado and help me get out from under all this debt. Craft distilleries are popping up all over the place because the time to sell booze is NOW. If we can get this to market fast enough we can strike it rich! How many whiskey-focused craft distilleries do you know of that are biding their time, waiting for the right moment to release something tasty and affordable?

I can think of one. High West. When David Perkins finally releases a mature rye, Bourbon, and single malt I think he'll be ready to offer steady pricing, but that's only because of his incredible blending skills and his access to mature whiskey in the meantime. Not everyone was as early to the party as David, however.

Again, I find parallels to the world of professional wresting. Wrestling's golden era was from 1996 until 2001 - the time when three top-class companies were driving to outdo one another. Two of those three couldn't keep up with the top brand, however, and they were eventually co-opted by the WWE. Now we're right back where we started. For those of you looking forward to another renaissance, a time when all of these craft whiskies are finally mature, I envy you. I don't share that same optimism. I forsee a future of smart brands. Brands that made deals to buyout their competition. Brands that used their power and scale-of-production to squeeze out the little guys. Brands that used the high-prices and questionable quality of craft whiskey to double their own prices and triple their own profits. Brands that got so rich off of the rebirth of whisky drinking that they're now invincible.

Who's gonna stop them?

-David Driscoll