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Thursday
Sep252014

Focus on the Positive — Part II

It might be confusing for those of you who don't work in the booze business to understand what's going on with pricing sometimes. Many of you are reading about price increases on a site like this blog, but are shopping at different retailers around the country, applying things I'm talking about locally to what's happening elsewhere outside the state. You'll walk into a store on the East Coast, see Lagavulin 16 for $90 and say, "What the hell? That's $25 more per bottle than what K&L is offering!" When you see such a discrepancy in pricing from coast to coast, it's not always a sure thing that the producer themself is to blame. Why is Lagavulin 16 cheaper at K&L and who's behind the variance in pricing? Diageo? The importer? The distributor? Or the retailer? The answer: it could be any of the four, or a combination of more than one party. There are so many permutations that go into the final sticker price of a whisky bottle that it's tough to know for sure. Here's a little breakdown of how things work to help you understand:

The producer (distiller) sells to one national domestic importer.

The one national domestic importer sells to one distributor in each state (not necessarily every state).

Each single state distributor sells to various retailers and restaurants/bars.

Private customers (like you) buy from retailers.

While you all have a choice as to which retailers you purchase from and the freedom to look around for the best price, we as retailers do not. We have one choice and one choice only. If we don't like the price being offered for Lagavulin 16 we can choose either to buy it and be unhappy, or choose not to buy it and explain to our customers why. I can only purchase Buffalo Trace whiskies from their one chosen California distributor. I can only buy Diageo products from their one chosen California distributor. The same goes for Four Roses and Springbank, and every other distillery with whisky on the market, who all have their own chosen distributors as well. Some distributors like to make deals, which is one way a retailer can get an edge in pricing. We buy more, we get a better price—just like when you buy five limes for a dollar at the grocery store. Some distributors do not, however. If a supplier is happy with their sales rate they may not see any need to cut a deal (or they may not have enough product anyway, a la Buffalo Trace). Why offer a volume discount when there's no volume?

These scenarios can vary around the country as well. The distributor for Lagavulin in California might be willing to trade profits for case numbers, whereas the distributor in New Jersey might not see any reason to offer a discount. The ultimate sticker price depends on how willing each distributor in each state is to make a deal, and how willing the retailer is to pass that deal on to its customers. If you happen to live in a state with a stingy distributor, you might want to look out of state for a good deal (but of course this is why many states don't allow interstate shipping from retailers—they want to prevent you from looking elsewhere).

All in all, it's a very complicated pipeline. You won't ever know who's ultimately jacking up the price, or taking the hit unless you know what's going on behind the scenes. And you'll never know what's going on behind the scenes unless you're working in the supply chain. Maybe you think Diageo raised their prices, but really it was the importer in your state. Or maybe one retailer has it cheaper than another because they're willing to make less money per unit in the hope of selling more bottles. Pricing is a sensitive issue for everyone—from the producer all the way down to the customer, and all the parties in between. What I want to make clear, however is this: there are four possible parties at work who can all affect pricing. When you see a sticker price go up or down, it's not necessarily the producer who decided to raise or lower it.

We are very lucky here in California because we're working with a number of importers and distributors who are all located within the state. When the goods themselves are imported into the same state as they're being distributed in, it makes everything much, much easier because you can form a relationship with the people working throughout the entire process. One example would be Anchor Distilling in San Francisco, both a distiller and an importer who has partnered up with some of the best producers in the business to create a stunning portfolio of spirits. They merged with Preiss Imports a few years back and have never looked back since. Today, they're one of the strongest partners we have at K&L and they're very helpful in making sure we're able to stay up to speed with pricing. If you asked me what the best deals were at K&L for a number of different pricepoints, there's a good chance I would be handing you an Anchor product. 

Let me show you what I mean:

Best Single Malt Under $50 - In my own personal opinion, there's nothing better than Benriach 12 or Glendronach 12 for less than $50. You can either get the rich vanilla, the creamy barley, and the supple character of the Benriach, or go with the heavier, sherried Glendronach 12. These are two staples of my home bar and I'd say I personally sell at least three to four bottles of each per day. We've converted so many in-store shoppers to one of the two expressions that they're quickly becoming two of the top whiskies we sell in general.

Best K&L Exclusive Single Barrel Single Malt Selections - The new 19 year old peated Benriach is an absolute dream, as is the 18 year old PX barrel of Glendronach we purchased in 2013. Both are the perfect selections for people looking to splurge on something a bit nicer than usual. The fact that we can go directly to either distillery and hand-select our own casks is huge

Best Japanese Whiskies - Anchor is the importer for Nikka, so take your pick: Nikka 12, Nikka 15 Yoichi, Nikka Coffey Still, Nikka 17, or Nikka 21. With both the price increases and the lack of availability for the Suntory whiskies right now, we're selling Nikka like crazy. They are whiskies of amazing depth and quality.

Best New Whisky in 2014 - The Kavalan King Car Conductor is one of my favorite whiskies to be released this year in the U.S. I'm a big fan of what they're doing in Taiwan right now and I hope to see more sherry-aged selections like this in the future.

Best Rum Ever - I still think the Berry Bros & Rudd St. Lucia 11 Year Old is the best rum I've ever tasted. I don't have any in stock right now, and it's a tough sell when I do, but I have to admire their determination to bottle the best—even if it's going to be expensive and esoteric.

Best Gin(s) - Ask me what my favorite gin is (not counting the Monkey 47 because that's in its own category entirely), and I'm going to invariably say the Berry Bros & Rudd No. 3. It's the gin that changed my life and my mother's as well. We drink that stuff like it's water. Ask Gary Westby, our other gin-swilling fiend here at K&L, what his favorite gin is and he'll tell you the Anchor Junipero every time. 

Who else is under the Anchor banner? Luxardo, Tempus Fugit, Glenrothes, Old Potrero, Hine Cognac, A.H. Hirsch Bourbon; all products of extreme quality and reasonable pricing. When a spirit is imported or supplied (or even distilled) by Anchor, I know that I'm getting a great product for the best possible price because I know how these guys do business. That makes a huge difference. I can't tell you how many times I'll see a list of price increases, contact the distillery about the issue, and find out that there hasn't been an increase in price on the producer's end. The importer and the distributor are often the key-holders when it comes to deciding what bottles cost, so a bad one can really put a cramp in your efforts.

Working with great suppliers makes all the difference when you're trying to offer great value to your customers. Anchor is right at the top of my list when to comes to professional, honest, caring, and hard-working importers. It also helps that they have great booze!

-David Driscoll