One of the most famous cigar lines in history was uttered in 1920 by Woodrow Wilson’s snarky vice president: Thomas Riley Marshall.
Tired of listening to the politicians in the Senate drag on about the needs of the American people, an exasperated Marshall jumped in and said: “What this country needs is a really good five cent cigar.”
For the last decade-plus, I’ve operated under a similar mindset when it comes to marketing. When presented with offers to “make our Instagram go viral” or specialists who promise to maximize our Google Ad bids, I’ve always said: “I don’t need to spend $5000 on marketing. All I need is a really good $50 bottle of Scotch. The rest will take care of itself.”
When you’ve got a really great product to sell, the public will find out. In the age of social media, people are practically begging to tell all their friends about the next great deal, posting pictures every five seconds about what Bourbons they found today next to a receipt of how much they paid.
Unfortunately for me, however, my school of thought (and Marshall’s view on cigars) is only validated when people choose to partake. A really good $50 bottle of Scotch is only a great value to those who actually plan on drinking it.
But David…..why would someone who doesn’t drink be interested in purchasing Scotch whisky?
A number of reasons, most of them based on secondary market profiteering, fanatical collecting, and the fact that a bottle of whisky keeps for years after you open it. People today are willing to spend a lot more than $50 on Bourbon and Scotch because they only plan on drinking a half ounce a week over the next ten years.
When people don’t drink, it completely destroys the distribution model that most of your favorite distillers have going for them. What I mean is: retailers get their allocations of Pappy, BTAC, and other rare whiskies based on how much of the standard whiskies from those portfolios they can sell. So when customers stop drinking Ancient Age, Buffalo Trace, and Wheatley vodka, the formula no longer works.
And we’re already at the precipice.
Most of the customers I deal with these days have long graduated beyond Ancient Age, Buffalo Trace, and Wheatley vodka. They want Stagg. But I can only get more Stagg if they buy more Buffalo Trace. It’s a gigantic Catch 22 that’s been dragging on for years now, and it’s about to catch up with our industry in a hurry.
It’s at the point where even if I found the next great five cent cigar (or for the purposes of this article, the next great $20 bottle of Bourbon), I don’t think 80% of our customers would bat an eyelid. Drinking is a very different exercise today than it was ten years ago because of how coveted some of these liquids have become.
If a bottle that you bought in 2010 for $50 could fetch you $2000 in today’s market, would you still drink it? If it were me, I probably wouldn’t. I’d probably sell it for $2000, take the $1950 profit, and buy more booze that I can drink without guilt or anxiety—especially if I’d already had it before.
But this is not fictional role playing. The above scenario already happens many times a day, around the world, from guys who have been buying whiskey for decades and are now ready to cash out. So now I want you to imagine another scenario.
Imagine that you’re a retailer and you’ve got a number of rare Bourbons to sell. You know that you can probably sell them for five times what they’re worth, but you also know that customers will be furious with you should you decide to do so—despite the fact that you had to buy tens of thousands of dollars of products that don’t sell just to get those bottles in the first place.
So you decide to do the right thing and sell the bottles for a fair price to some nice customers. Then, while browsing around the internet, you see the same customers you hooked up with a fair price selling the bottles you sold them for a huge mark-up.
I’ve met plenty of consumers over the years who will go around bullying retailers into fair SRPs (suggested retail price), only to turn around the next minute and sell their bottles for a boat load of cash.
That’s when retailers get pissed and say to themselves: “No more. If I have to buy tens of thousands of dollars of booze that no one wants in order to get these bottles, then I’m going to make the profit, not some cherry picker who only comes around when I have something valuable.”
That’s the mindset that I have to fight on a daily basis in retail because—and I especially saw this when I was working in distribution—most retailers are at their wit’s end with all of this. I still wholeheartedly believe that there’s a fine balance between customer service, pricing, and availability, but I can tell you that fewer and fewer retailers are going to continue putting in the effort.
When I was repping Chichibu in 2020, we would only sell the higher-end bottles to the retail accounts who sold the most Iwai and Akashi. That’s the way distribution works. But what happens when 80% of their retail customers have already tried Iwai and Akashi, and now they want Chichibu?
More importantly, what happens when they’re not even interested in trying Iwai or Akashi because they only drink “the good stuff?”
I can tell you what happens: the entire model collapses upon itself, and retailers start jacking up prices to recoup expenses on all the bulk brands they had to buy to get the bottles in the first place.
-David Driscoll