North Shore Party @ Martin's West, August 17th 7 PM


I hope to see many of you this Tuesday night at Martin's West in Redwood City as we welcome North Shore's own Sonja Kassebaum to town.  I'll be playing bartender and making North Shore cocktails for $4 until the booze runs out.  Gin & tonics, martinis, and Aviations will be sliding down the bar and into your hand!  Happy hour starts at 7 PM and goes until the we run out.  I hope to see you all there and make sure you get a chance to talk to Sonja and tell her how awesome her gins are!

-David Driscoll 


Hanging With Eric Seed

In my last few posts about the independents of the liquor world, I have frequently mentioned a dinner where, to put it melodramatically, various industry folk were discussing the important issues of our times.  Sitting next to me at the table that evening was the entrepreneurial Eric Seed, founder of Haus Alpenz, and importer of all spirits strange and exotic.  Maybe you're heard of Dolin vermouth, the now-ubiquitous French concoction lining the shelves of every decent bar?  That's Eric.  How about Hayman's Old Tom Gin, John Taylor Falernum, Batavia Arrack, or Smith & Cross Jamaican Rum?  Take a glance at the bar menu for Bourbon & Branch, the Rickhouse, Heaven's Dog, Smuggler's Cove, and Bar Agricole (only the five best bars in the Bay Area) and you'll find that just about every drink has one of Eric's imported ingredients built in. 

Having never met Eric previously, I was excited to spend an evening chatting away and picking his brain about future plans.  Needless to say, his current projects are fascinating and have me eagerly awaiting their release date.  You may have read about one of these most recently as it will prove to be quite historic.  Eric managed to get his hands one of the rarest and most storied spirits of all time: the Royal Navy rum stocks.  The story behind this rum is so fascinating that I'm not going to even try and do it justice, but you can read about it here (and I suggest you do).  Basically, it's the rum that used to be rationed out to the royal seamen, as was tradition for hundreds of years.  As if learning about this rum wasn't exciting enough, Eric pulled out a flask and poured me a wee dram.  These things are going to go for $1000+ a bottle, so I didn't take this opportunity lightly.  It wasn't at all what I expected, but it was fascinating.  Most rum from back then was never sweetened like Ron Zacapa or El Dorado are today, so this is an entirely different style and the ulitmate collectors item.

Check out Eric's portfolio and read about his wonderous supplies of booze.  It's as fun as liquor gets.

-David Driscoll


The Importance of Independents/Independence Part III

Purchasing single malt casks through a distributor has proven to be a win/win situation for just about everyone.  If the buyer does their job right and selects a top-notch whisky, then the customers go home with an exclusive bottling, the retail store has a product with a fixed in profit margin, and the distributor gets a big sale with cash up front.  However, at the moment, there are close to zero options for privately bottled single malts through the main channels of distribution, directly from the distillery,  Bruichladdich is the only one I'm currently aware of that does a barrel program, but unfortunately their pricing isn't very affordable.  I can understand, however, why no one is interested in changing the format and rocking the boat here.  For some people, this industry seems to be very profitable the way it is at the moment.

Luckily for single malt consumers there are other channels available for purchasing their favorite whiskies.  Bottlers like A.D. Rattray, Signatory, and Chieftain's have been very successful as of late in tracking down some amazing barrels and bottling them at affordable prices.  They see the logic in working with retailers on pricing, as well as refusing to undercut smaller stores in favor of deals with big chains.  They are also distributed by small independents who don't view them as just another product in a gigantic catalog.  The true value of independent bottlers comes not only in their affordability, but also in their ability to check the big players - offering their own products in better expressions and at better prices.  For example, Diageo offers the Port Ellen 30 Year distillery bottling at over $400 a bottle, but you can buy the Chieftain's bottling of Port Ellen (which in my mind is a superior whisky) for $260.  At this point, most consumers haven't yet grasped how to navigate the independent bottlings, always prefering the distillery bottled malts, but it's only a matter of time before they get priced out of their favorite dram.

When I was at dinner the other evening, I was sitting with the head of an independent distributor in California and the chief of an independent whisky bottler.  When asked about making deals with large wholesalers, the distributor replied, "Costco will never get a better deal than K&L or any other smaller store we deal with because we care about our relationships with each customer equally, plus we don't have the inventory to ever become a permanent product there.  They would drop us after eight weeks and then we'd be back to where we started.  Plus, we would have damaged our steady pricing in the overall retail market."

The scenario he described actually happened to us with a small tequila vendor.  We were working with them closely to help build their brand and at the same time they were going to Costco to try and get a big deal.  They worked out such a big arrangement that Costco could afford to sell the tequila for less than we were buying it.  It would have been cheaper for me to walk over there, buy it off the shelf, and resell it here (if such a thing were legal)!  I only found out about it because I recommended the tequila to a customer and he said, "Yeah it's good, but I can get it at Costco for much cheaper."  I about fainted.  When I called the vendor about this, they admitted to me that they were indeed selling to Costco, but why should I expect a similar price when I wasn't buying nearly as much?  I asked them how they expected me to buy their tequila for more than Costco was selling it, but they didn't seem to understand.  Once a product sells for $39.99 at Costco, that becomes the value of the bottle in the consumer's mind - anything above that price is simply too much.  They were destroying the possible value of their tequila before they had truly established it.  "But you have Patron and Costco sells it for less than you," they replied.  "Do you think you're Patron?" I asked before ending the conversation.

Some products are going to sell no matter how big the discrepency, which is why the big players can keep raising their prices.  In certain situations customers come in looking for a big name product and will buy it at whatever price because of convenience - they're late for a party or we were in walking distance, etc.  These are brands that are sold on name, not on value.  That's why there are liquor stores on every corner selling the exact same products at various prices.  However, if no one knows how good your product is then you need help selling it.  Specialty stores like K&L, D&M, Cask, and Beltramos have staff members with the expertise to do so.  Hence, the symbiotic relationships we form with independent distributors and producers.

To be continued....

-David Driscoll


The Importance of Independents/Independence Part II

When you're a retail buyer and you're looking to refill your shelves after they've emptied, you'd think you could just re-order the product for the same price you originally paid.  It doesn't work that way, however, and it's easy to lose track of what got you to your most recent purchase price.  If I paid $25 a bottle for a case of a certain whiskey and I run out, then of course I'm looking to re-order more for that price.  Unfortunately, what usually happens is something like this: that price of $25 was part of a deal where I had to buy three other whiskies in conjunction.  That combo has now expired and I can either buy a case on its own for $29.66 a bottle, or I can buy three hundred bottles and get that price of $25.  I can't afford to buy three hundred bottles, and if I pay $29.66 then we have to start losing money, or I have to raise the retail price.  The purchasing of spirits is a constant circus of fluctuating pricing, new specials, and expiring deals.  Navigating this whirlwind can be frustrating because every deal becomes a worrysome purchase, where you say to yourself, "How much should I buy because I may never see that price again."

Yet, in the middle of this raging sea, there are independent distributors that provide some semblance of stability by working with retailers to come to a continuous agreement.  I'll never hear the words, "Yeah, David, the price of Noah's Mill bourbon went up this month, sorry about that," or "That Murray McDavid mix-and-match deal is over for the year."  The independents are not managing nearly as much booze as the big players and therefore are not in a constant state of inventory shock - the main cause of these quarterly sale opportunities.  They've chosen their products carefully and are committed to representing them with the fiercest of loyalty, so there is too much at risk involved.  They're dealing with relative unknowns that do not carry the prestige of say Patron, Maker's Mark, or Ketel One.  If the price of Rothman's Creme de Violette goes up, are retailers still going to carry it and are customers willing to accept a price increase?  In this case it's more difficult to say, hence why such drastic fluctuation rarely occurs.  If you decide to support the smaller brands on the market, then they're going to work with you to help bring success to both sides, rather than dangle a carrot in front of you and try to goad you into buying things you didn't originally want.

Last night I went out to dinner with a group of industry folk, including some independent distributors, and we talked about big retailers like Costco and Trader Joe's who are stepping up the spirits game.  With these stores there is so much buying power that special deals are made in their favor with quantities that only they could ever sell.  They want the best price on everything and they want a better one than K&L gets so they can run a lower price.  If I complain, the distributor might then decide to offer me the same price as long as I buy 2000 bottles, which leaves my choices at that point as: drop the product from our store, sell it knowing that our customers can go a block away to Costco and buy it for six dollars cheaper a bottle, or match their price and make nothing.  Brands like Bombay Sapphire (with which this exact scenario happened) don't care too much if we drop their product because who is K&L to them?  We're one retail store, so there's no room to negotiate or make a deal.  The inherent problem with these gigantic deals is the constant lowering of a retail price for a product that hasn't gotten any cheaper.  This changes the expectations of customers everywhere because once it goes down it can't go back up.  They then walk into K&L and say, "$36.99 for Balvenie 12? That's expensive!"  No it isn't! That's what it costs! 

When I spoke of this incident at the dinner table last night, one of my buddies who distributes in SF said, "But you can't keep raising and lowering your prices! Your customers will be upset and they'll never know if they paid the best price or not.  Why can't you just be happy charging a bit more and knowing that you give better customer service?"  That's an interesting point and it's a philosophy that many stores are happy to embrace.  I've lowered prices to match our competitors in my year as spirits buyer and it's made my stomach sick everytime I've done it because I know we've had it at a higher price for some time.  In my experience, however, most people who are shopping for Lagavulin 16 are not looking for me to give them my advice or offer them any expertise.  They're looking for the cheapest price on Lagavulin 16, which is why we have it. 

To be continued...

-David Driscoll


The Importance Of Independents/Independence

I am constantly getting emails and notifications from our financial secretary Michele about invoice pricing being higher than what we were originally quoted.  For example, a case of whiskey was ordered at the price of $24.50 a bottle, but instead is being billed at $25.66.  She sends the descrepancy over to me and I then make the decision of keeping the product and paying the bill, or having it picked up and sending it back.  This scenario usually occurs six to eight times a week and it's always with the same distributors.  There are combo deals for June, which have expired come July and increases in shipping fees or broken case costs, which can fluctuate pricing, but in the end everything keeps going up, up, up.  You may be saying to yourself, "Easy, just send it back and demand the price you were originally quoted!"  I wish things could be so simple, but unfortunately it doesn't work that way.

Every week the price of liquor changes within the main distribution channels.  Even if I sit down with a vendor and am quoted a price for a product, there is still no guarantee that it's going to show up at that price.  If I want to be a stickler, I can send it back when this happens, but I know it's not going to change anything.  Plus, I can't just run out of Lagavulin 16, Glenlivet 12, or Grey Goose Vodka.  These bottles need to be on the shelves because they're the fastest movers, but it's only a matter of time before these big names become too expensive to hold their current pricing.  Whether it's five cents or five dollars, these well-established products go up in price nearly every month, even though our retail price remains unchanged.  If you're any sort of business person, then you can see where this leads you.

This is to be continued....

-David Driscoll