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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

Wednesday
Sep242014

Three's a Charm: Another Distiller Joins K&L

Like "Hollywood" Hulk Hogan joining Hall & Nash at WCW's Bash at the Beach '96 (if you don't know what I'm talking about, then watch this clip—it's the most important moment in modern wrestling history), we're adding a third member to our own New World Order here at K&L. Joining Genius Distillers and Cut Spike Distillery in the K&L distribution stable is Beehive Distilling from Salt Lake City, Utah—another rebel causing havoc in unwelcome territory. Like its two predecessors, Beehive has seen the value in simply choosing one outstanding retail outlet in California over multiple middlemen in states across the country to handle its business. 

Hire a distributor, pay their commission fee, pay their sales reps, and pay their marketing fee? It makes sense if you're a big company looking to conquer the spirits world, but not so much when you're a little guy looking to maximize your value. That's why we're here: to help bridge the gap between you and your consumers with as little interference as possible! NWO 4 LIFE. Check out our latest member:

Beehive Distilling Jack Rabbit Utah Gin $29.99 - I'm always amazed what can be accomplished with grain neutral spirit and just a few simple botanicals. In the case of Beehive's Jack Rabbit Gin, the addition of sage and rose petals to the standard juniper recipe creates an absolutely beautiful balance of spicy, savory, and floral. Located in Salt Lake City (not exactly hard liquor country), Erik Ostling and his team at Beehive Distilling have set up shop in one of the least-friendly places in America for alcohol production, yet have managed to thrive in spite of their challenges. The Jack Rabbit Gin stands out immediately with its creaminess and fullness of texture. None of the botanicals jump out (unlike a Jack Rabbit), but rather linger long in a soft wave of flavor that meanders from classic London Dry to a clean and elegant finish. The quality of the base spirit is to be commended, but the ease of the gin is what ultimately grabs you. This isn't like anything else in your liquor cabinet, but it isn't some strange new variation of gin either. The Jack Rabbit makes a stunning Martini, just straight stirred with ice, but mixes wonderfully into just about every drink I've tried so far. K&L is so far the only retailer on the west coast to carry Beehive, as Erik reached out to us directly. It won't be long, however, until other merchants catch on to what's happening out there on the prairie. Jumpin' jack rabbits! That's some good gin. 

-David Driscoll

Wednesday
Sep242014

Focus on the Positive — Part I

There was a point a few years ago when I was really upset with Diageo. I made no sercet about it on this blog, and I made light of several frustrating incidents that went down at that time. It was a message that resonated with others as well, and I've continued to see that rather sardonic mindset carried on via other online commentaries. What I learned over time, however, was that many of these discouraging events were not actually perpetrated by Diageo, but rather by some of their suppliers on the local side. Much of what goes down behind the scenes has to do with importation and distribution, rather than the producer themselves. When cooler heads prevailed, I managed to get acquainted with a number of the guys working the California market and since then it's been nothing but clear sailing. I've had only positive experiences with Diageo since the beginning of 2013, and I appreciate it when a company works hard to mend fences. There seems to be a lot of disgruntled whiskey people out there who love to bitch, but don't like to give credit where credit is due. In my opinion, when a company works hard to address the complaints of its customers, it's a good sign.

Nevertheless, with the announcement of Diageo's upcoming 2014 release of special edition whiskies, the conversation is once again back to the incredible price tags. There are nine new single malt expressions that are going to run you hundreds, if not thousands of dollars; and that's if you're lucky enough to find them. But high prices for luxury items is hardly a Diageo-only condition. LVMH, Edrington, Pernod-Ricard, Campari, Beam/Suntory, and even family-owned distilleries like Glenfarclas are all jumping on the high-priced express; releasing their own ultra-premium releases like the $180 Supernova, the $250 Redbreast 21, and the $1000 1964 Glenfarclas Family Cask. Personally, I don't have a problem with $2000 Brora or $3000 Port Ellen because it's not like I was going to buy them for $500 and $800 a piece anyway. Taxing the ultra rich for their luxury goods isn't something I'm losing sleep over. It's when the 12 year olds start doubling in price that I have a problem. That being said, no company has done more in 2014 to maintain the value and the quality of the mid-range market than Diageo. Considering the price-to-quality ratio is 90% of what drives most whisky buyers, this is nothing to sneeze at.

Pappy 23 sells for at least $250. Elijah Craig 23 is $199. The last time we had a Willett 20 year old in stock it was $200. Hell, our most recent cask of Willett 10 year old sold for $109.99 because they doubled the price on us at the last minute. 20 year old Bourbon is like liquid gold right now, so much so that companies are changing their price points on a bi-monthly basis. So Diageo gets their hands on a mountain of 20 year old Bernheim (and they even told us exactly where they got it from) and decides to sell it for sub-$100? That sounds too good to be true. Yet, it's exactly what they did, and with all the nationwide competition to be the low-price leader among retailers, the prices have dropped even lower. We're now at $72.99 for the Barterhouse and $87.99 for the Rhetoric, and both of those whiskies are solid. I have distillers in here every week buying bottles for themselves after we meet for tasting appointments. They shake their heads and say, "I can't believe they're giving this stuff away for those prices." Michter's, who does not reveal the source of their whiskey, sells their 20 year Bourbon for $450, and personally I don't think it's any better than the Rhetoric. Yet, the Orphan Barrel series has not caught on with many insiders. Let's see: tons of availability, easy to get, total transparency, outstanding value, great packaging. Am I missing something? Is it that they're too easy to get?

Meanwhile we've seen no price increases on Bulleit Bourbon, Bulleit Rye, Bulleit 10 year, or any of the George Dickel products. The single barrels of 9 year old expressions we've been able to sell for $44.99, while Four Roses just recently raised the price of their private single barrel selections to $65. Heaven Hill and Buffalo Trace have since paused their retailer barrel programs due to lack of supply. 

With the exception of LVMH (which is partially owned by Diageo anyway), I can't think of another single malt producer who hasn't significantly raised their prices over the past year besides Diageo. Lagavulin 16, Caol Ila 12, Oban 14, Dalwhinnie 15, Talisker 10, and even the latest release of Oban 18: all right where they've always been. Meanwhile Yamazaki 12 went from $34.99 to $49.99. Laphroaig 10 went from $34.99 to $42.99. Aberlour just took a hit from Pernod-Ricard (so expect an increase there shortly), and Macallan 18 went from $120 to $199. Say what you want about quality, NAS releases, mis-information, shady marketing, or whatever else it is that bothers you about large whisky companies, one thing you can't say about Diageo is that they're gouging you. 

Obviously there are other factors that go into purchasing a whisky: the people, the history, the story, the rarity, and the intrigue. That being said, there's something to consistency as well and dependability. There's a lot to dislike about the corporate whisky structure, but if price is important to you there are few companies holding the line more than Diageo right now. It appears that all our bitching worked, so that's something to be happy about, not frustrated with. 

-David Driscoll

Tuesday
Sep232014

More on Customer Service 

It's amazing how many people read this blog considering how haphazardly I write sometimes. But since I have the audience that I do, let me take advantage of it. All you distillers, producers, company owners, importers, distributors, retailers, and general workers in the name of booze, since I know you're all reading this (because you tell me you do): please listen up.

I had lunch with my friend Andrew Morrison today, who owns A.D. Rattray and the upcoming Glasgow Distillery. We had a long talk about the whisky business and the issues we're both facing. It became pretty clear after only a few minutes of catching up that both of us were in the same boat. If you work in the whisky business in just about any capacity you're definitely dealing with your own version of this sticky situation; the issue of how to handle the plethora of new customers and the lack of available supply. Everyone has to figure out how to dole out their allocations of desirable goods in the most effective, fair, and—yes—profitable way possible. Failing to balance these three branches of whiskey government might not instantly slow your rising tide, but it may come back to haunt you (and maybe all of us) if you don't tread lightly.

When you've got a small allocation of a product in high demand, you can obviously charge a little more than you normally would. In certain instances, the extra work required to fairly divvy up the bottles might justify the extra profit because—let's face it—it's a pain in the ass trying to please everyone. We're all feeling the frustration right now. I hate having to allocate twenty bottles of Pappy to ten thousand screaming whiskey fans. Andrew hates having to decide between which markets to send his A.D. Rattray selections to. Ultimately both of us could simply forget all the stress, jack the prices up to the moon, and cater to the highest bidder, but we care too much—both about our customers and the healthy growth of new markets—to simply cash in on this movement and outsource the world's best whiskies to the wealthiest 1%. We know there's always going to be someone out there willing to pay more, but that doesn't mean we need to gut this market for every penny we can. We need to think about developing young, passionate new drinkers. Pricing them out of everything worth a damn would be both short-sighted and foolish.

The prices at K&L, as well as from A.D. Rattray, have risen over the last year, but—as Andrew and I discussed with one another—our margins are exactly the same, if not less in many cases. We're both taking smaller payouts in some instances to lessen the blow that an egregiously high sticker price can have on consumers. By doing so, however, we're experiencing a higher demand for service from an increase of customers looking to purchase from us. With more demand comes more work, and with more work comes the more difficult task of keeping everyone satisfied and their expectations met. Eventually, if you're not given more time and more resources to do twice as much work, you will crack. I look at it this way: I have less than a third of the supply that I once had for the most popular whiskies we sell, yet I now have five times as many customers who want them. I'm trying my best not to raise prices. I'm simply choosing to do the extra work instead. I answer emails while I eat my cereal instead of waiting until I get to the store, and I place orders while I watch baseball at home in the evenings. I'm making the same salary I've always made, yet I'm working twice as much because I don't want to disappoint people.

I get the concept that time is money. I get that the market is hot and ripe for exploitation. And I get that producers are excited about all of the opportunity out there for expansion. I'm not advocating that prices shouldn't be rising, or that profits shouldn't continue to increase. We've all earned it (well, some of us). The clear and present danger this market presents, however, is not the rising costs, but rather the loss of customer service that will eventually occur once companies start taking this type of market activity for granted. I face this demon every single day. "Fuck it! Why even type up tasting notes, or take pictures of the bottle, or do any work to market this whiskey when I know I can just put it online and it's going to sell out in seconds? Why answer emails from customers when I have more customers than I can deal with anyway? Why do anything extra when I know I don't need to?" I think all of these thoughts to myself in moments of frustration and stress. But then I remember why I do it: because it's my job and I respect my customers too much to give them anything less than my best effort. The moment you start losing your respect for the customer, and the instant you think they'll buy your product no matter what, is the moment you will lose your credibility in this business. Customers are smarter than they ever were before and they're getting smarter every day. Treat them with contempt, and you're through.

If you think you can put out a whiskey that tastes half as good, but costs twice as much, you might be right—for now. Yes, only about .001% of whiskey customers read whiskey blogs. True, most consumers don't care about specifics or collectability. Of course, your products are going to sell like crazy no matter what you end up doing. But, if there's one thing every single person in this world wants, it's respect. I want it. You want it. Whiskey customers want it. 

I can deal with a lot of stress, loads of extra work, and tireless nights pounding away at my keyboard, but I won't continue to do it without respect. I'm not going to keep busting my ass to make lower margins and support your brands just because some corporate head office boss wants to fund that guest house restoration project on his five acre estate. And, I can promise you, customers are not going to keep paying more for less if they feel it's not justified. They'll wait in long lines, deal with ridiculous raffle systems, and pay a bit of a premium if something's really tasty, but they won't do it if they know you don't respect them. In the end, it's more than just a matter of supply and demand. It's about how supply and demand matters to you, and how you treat people in the face of it. 

-David Driscoll

Tuesday
Sep232014

In-Depth Profile: Bruichladdich 21

There are two distinct types of whisky drinkers that I deal with regularly here at K&L: those who just want to drink something good for the money, and those who are in search of the rare, hard-to-find, and distinct. In our first round of 2014 Signatory casks we had plenty of great options for both camps. Those who wanted great bang-for-their-buck whiskies had the outstanding Glenlivet 16 in sherry, the sexy, smokey Bowmore 11, and the rich, fruit-forward Benrinnes 17. Those were slam dunks that anyone could enjoy, regardless of their excitement level concerning single malt. The more-savvy drinkers looking for something special could indulge in the old-school character of the Balmenach 25, the insane quality of the Caol Ila 30, and the rarity of Laphroaig in refill sherry. In total, all six of those whiskies have been selling like wild fire (two are sold out, and another two will be sold out by the end of the week). 

Stuck in the middle, however, was the Bruichladdich 21 year old hogshead. Not inexpensive and worth taking a shot at, like the Dailuaine 16 and the Glen Elgin 18 which both clock in under $90; nor collectable like old Caol Ila, or out of the ordinary like old Balmenach. What we have is a $150 bottle of whisky that isn't a priority to either particular group of drinkers. There's no name, no story, no special flavor, no hurry to buy, and no real selling point. It's just good Scotch from a good distillery, nothing more.

I decided to spend my entire weekend drinking glasses of Bruichladdich 21 to see what I could find to say about this whisky (other than complete drinking satisfaction). Personally, I have a real soft spot in my heart for the Islay distillery because of our close relationship and the time I've spent in Scotland with both Jim McEwan and Simon Coughlin. We're always under some kind of Peter Pan-like spell when we visit the place. But this cask was chosen by David OG, Kyle, and myself while sniffing around the Signatory warehouse in Pitlochry, so there was no localized romanticism at work while we tasted an Islay classic in the dead center of the Scottish mainland. Our thinking was simply this: there's very little mature Bruichladdich left that hasn't either been funkdafied (a term I'm borrowing from Da Brat) in old, stale sherry, or glossed over and reshaped in some sort of first-growth Bordeaux wine cask. So much of what's available (and what's been available) from Bruichladdich has either been vatted into the Black Art series, or moved through into a super-pricey distillery exclusive 375ml (see my old 2012 photo below for a look at the gift shop shelf).

The bottles above are where most of the leftover Bruichladdich stock has ended up. The last bottle of pure, unmanipulated, ultra-mature Bruichladdich whisky I remember tasting from the distillery was the 1985 DNA release and I think we sold the last of that for $400 a bottle. These were the issues the three of us discussed as we stood there with Des, watching our breath freeze in front of us, cupping our hands around the Glencairn glasses in an attempt to warm up the barrel sample. K&L has always been a haven for Bruichladdich fans, an outpost for the distillery that began back with Susan Purnell in 2006. We should try to keep some of that fire alive, shouldn't we?

Speaking in terms of comparative pricing, the Bruichladdich 21 cask from Signatory is pretty well priced. It's a single barrel at 56.2% that comes in at $149.99, which seems more than fair considering the distillery 22 year chimes in at $200, and the 18 year (if you can still find it) sells for about $140. Again, what stands out for me is the purity of the whisky. It seems crazy to be living in an age when plain old hogshead whisky would be something to celebrate, but with Bruichladdich that's where we're at. The 21 year old cask from Signatory is malty on the nose with a faint trace of phenolic action. The Islay character is present in the aroma, even though the bouquet itself is gentle and not at all straightforward. The first sip is all salty biscuit, lemon with sweet grains, and then a hint of earthy peat on the finish. With water, the subtle phenols become more apparent. 

There's something utterly nostalgic about the whisky for me. I used to taste samples like this Bruichladdlich all the time a few years ago. You could get a cask like this whenever you wanted back then, so there was no real reason to get excited about something so omni-present. It's just simple, unpeated Islay whiskey that pleases the palate and goes down easy. As I have less time and less of a capacity to enjoy single malt these days, I find that I'd rather have something like this 21 year when I do get the chance to relax. It's no different than how I like to relax with a glass of 4% ABV English bitter rather than a 9% California IPA. It's no different than how I would rather drink two glasses of 11% French gamay, than one abrasive glass of 16% California Cabernet.

I miss the ability to just drink something simple, well-made, and straightforward that has a reasonable price tag and offers me a chance to recapture a bit of the past. Ultimately, it's possible that David OG and I bought this cask more for ourselves—for our personal enjoyment and consumption, rather than for our customers. Every year we go back to Scotland and find ourselves personally more interested in what won't sell, than what we can actually move through inventory of. It's exciting to find a barrel of whisky that we know people will like (and obviously it's our job to do so), but I think sometimes the two of us simply like to relive old liquid memories and can't help ourselves when we taste something like the Bruichladdich 21.

In the old single malt market, mature Bruichladdich from a hogshead wasn't all that prevalent, but it wasn't all that sought after either. In today's new market with $500 bottles of 25 year old standards, I'm not sure it's all that more desirable. That's OK, though. I don't mind sitting on this stuff for as long as we need. It's not like we can get more anyway. 

-David Driscoll