Tuesday, December 4, 2012

Excessive Exuberance: The Van Winkle Phenomenon

Vanessa DiMauro, CEO of Leader Networks, writes that "Excessive exuberance is the Achilles Heel of social media." It's the Achilles Heel of many things touted on social media too, including the sudden hipness of all things whiskey. Nothing exemplifies this better than the Van Winkle phenomenon.

Because it's end-of-the-year and holiday time, when editorial budgets run out, and your better-paid writers and editors are on their way to a beach somewhere, you're going to see lots of lists: gift ideas, year's best, party tips, and so on. The name of Van Winkle will be on many such lists.

Let's acknowledge right off that the people who most need to read this probably won't, because then they would be informed and most Van Winkle fanatics aren't.

Let's also acknowledge that there are people who have long enjoyed the whiskeys selected and bottled (but not made) by the Van Winkle family. Most of them aren't interested in all the commotion about Van Winkle, and with only a slight twinge of regret are happy to drink something else. That's because they know their way around bourbon and know that the Van Winkle whiskeys, while very good, are not sine qua non.

Here's the history. Julian P. "Pappy" Van Winkle used to own Louisville's Stitzel-Weller Distillery, makers of Old Fitzgerald and other bourbons. After his death, his heirs couldn't agree on the company's direction, which forced a sale. Pappy's son, JPVW Junior, started a new company using the only brand the family retained in the sale, Old Rip Van Winkle. His son, Julian (JPVW III), continues that business to this day. Assisted by his son and in partnership with the Buffalo Trace Distillery, he sells bourbons at 10, 12, 15, 20, and 23-years-old, and a 13-year-old rye, under various iterations of the Van Winkle brand.

Van Winkle primarily sells bourbon made with wheat instead of rye. That's a minority approach, but not unique. Most of the Van Winkle whiskey is made at the Buffalo Trace Distillery in Frankfort, which also makes the W. L. Weller line of wheated bourbons, a former Stitzel-Weller brand.

Van Winkle has always been a very small brand. It was pricey and its extra-aged products were not to everyone's liking. Still, it always had a good reputation among enthusiasts. Then, a few years ago, a few celebrities mentioned they liked it and it started to show up on "best of" lists. Whiskey was suddenly hip and the laziest question a person can ask about whiskey is, "what's the best?" Van Winkle became the default answer and began to be very hard to get. Some retailers and scores of eBay sellers asked absurd prices for it and, in at least a few cases, got them.

Van Winkle is a problem for retailers because there’s so much more demand than supply that people who fancy themselves ‘good customers’ get testy when a store can’t fulfill their Van Winkle desires.

The phenomenon is driven largely by lazy journalists who simply copy what other people write, so everybody who writes about bourbon and desirable high-end bottles winds up writing about Van Winkles. Most of the pieces are written by people who know little or nothing about whiskey. They are ‘life style’ journalists. Their bread and butter is ‘ten best’ lists, which they simply compile from a couple of already published ‘ten best’ lists, so the thing feeds on itself.

Generally, the people clamoring for a Van Winkle are the same as the people behind the lists. They know almost nothing about bourbon. For them, it’s the lazy shortcut route to connoisseurship. They read somewhere that Van Winkle is the best, and since they only buy the best of everything, and they (apparently) have more money than they know what to do with, Van Winkle it must be.

If you actually just want a very good bottle of that type of bourbon (wheated and well-aged), the Weller line is right there for you. The Weller 12-year-old is comparable to all but the 20-23 year-old Van Winkles, and costs about $30 a bottle. It’s in short supply too, though not as crazy as Van Winkle. For that matter, purely in terms of the whiskey, most would be happy with a bottle of Maker's Mark (also a wheated bourbon and about $20 a bottle). If you want something exclusive and high end, the 2010 edition of Parker's Heritage Collection, a 10-year-old barrel proof wheated bourbon, is the peer of any Van Winkle.

If you're a real bourbon enthusiast, you already know this. If you're a typical Van Winkle fanatic, you never will.

Julian Van Winkle (JPVW III) explains the scarcity strategy well. Because there is so much more demand than supply, his cost of selling is about zero. He simply announces how many bottles he has to sell, customers tell him how many they want, he tells them how many they can have, and pretty soon it’s all gone. It's a nice business.

Most stores never put it on the shelf, and they have people on long waiting lists for it. It’s great for Julian but it’s kind of a nuisance for the stores. Yes, they sell every bottle instantly, at a healthy markup, but they have to deal with dozens if not hundreds of unhappy customers.

There are plenty of knowledgeable bourbon enthusiasts who like Van Winkle too (it is genuinely good stuff, just not ambrosia) and wish they could find and afford it, but they’re competing with all the dopes who have to have it because they read something about it in Maxim. It's not worth the trouble.

And now there is one more year-end Van Winkle story.


sku said...

I think if I was in the retail business, I'd be tempted to just say no to the Van Winkles. It just seems like it's more trouble than it's worth for anyone but the big chain stores. Given that it's going to leave most customers unsatisfied, why even stock it? Then, instead of saying "you've got to enter our lottery or be on this list," they can just say, "sorry, we don't carry it."

Anonymous said...

Chuck, Sku, or anyone with information about this, I'd be interested in knowing if retail stores can arrange with Sazerac to basically forgo Pappy or any Van Winkle labels in favor of getting more of a BTAC allotment. I bring this up because it seems like among enthusiasts the Pappy-Rat Race gets worse every year, leading some to just not bother getting on a wait list. That said, almost all enthusiasts would like at least one of the BTAC bottlings if they could get their hands on one. Not everyone wants all 5 but everyone wants at least one of the BTAC.

I guess the main logic is, given the size of retail store waitlists, you have to assume a vast majority are 1) only interested in pappy and 2) not regulars of the store. So can a store just decide to sell BTAC, get more of it in place of pappy, and have an easier way of making more longterm bourbon customers happy?

I imagine Sazerac would never agree to this, but I gotta think there are some improvements possible in the year end premium bourbon market.

Ethan Smith said...

I've had my suspicions about the Van Winkle line and your article has confirmed it. Though the VW whiskies are great whiskies, I could never understand the craziness over them. I'd heard at one point that BT was possibly discontinuing or making changes to the Weller line. Is this true?

alligatorchar said...

The once universal praise for all things Van Winkle has taken a turn for the worst on occasion. Personally, I just can't understand the criticism I find here and there. Julian has done well to put an excellent whiskey on the market for many years. Whiskey is a product that takes a long time to make so there isn't a magic lever he can pull to make a bunch more on demand. He's putting his stocks out on a consistent basis to meet demand the best he can especially considering the multiple sources he's had to navigate. Regardless of complaints about provenance his line has maintained a reputation for consistency and excellence. He commands a modestly higher price most years due to the demand for his product. The crazy markups some retailer ask aren't due to the anyone jacking prices way way up at either the distillery or distribution. It seems to me Julian has managed his brands reasonably and fairly.

I ask what should he be expected to do differently that would make more sense than what he is already doing?

Anonymous said...

Thanks Chuck for telling the real story behind the Van Winkle hype.

Chuck Cowdery said...

Changes are always a possibility, but Weller isn't going away.

As for trading VW for BTAC, that would have to be between the retailers and the distributors. Effectively, two retailers would have to agree to trade some or all of their allotment of one for the other, then the distributor would execute the deal. Not something Sazerac can really affect because of the 3-tier distribution system.

Chuck Cowdery said...

Nothing I said is a criticism of Julian. The phenomenon is a double-edged sword for his company, but there's virtually nothing he can do to 'cool down' the market a little. My criticism is for the lazy consumers and lazy journalists.

And to think I was afraid I used the word 'lazy' too much.

Greg said...

Chuck - nice article. Straight forward writing and throwing a bit of cold water on the VW hype. I have the VW line of bourbons in my bunker and while good, there are other offerings that I like as much if not better. I received an e-mail from a local ABC just the other night; it was a long e-mail about the soon to be available VW line and how getting a bottle will be first come first served. I didn't bother responding because there's no value in fighting for a single bottle. I'm in no way saying PVW isn't good....but seriously....so are a lot of other bourbons.

Anonymous said...

Chuck, you mention that the Weller 12 is similar. What, if there is any, the difference between the BTAC Weller and a Winkle product other than is uncut and unfiltered?

Tim Davis said...

Couple of notes:

1) This year and last, the demand for on-premises sales has skyrocketed. In Dallas/Ft.Worth the majority (80%) of VW products went to wholesale - because restaurants and bars want to be able to sell pours of this coveted juice - or at the least have a bottle on the bar that people will buzz about ("oh my, did you hear Bar X has Pappy 20 - it's only $60 a glass!")

2)Despite what Alligatorchar believes, distribution IS impacting the price. Republic, for example (one of the largest distributors) spiked a 50% price hike on all VW products this year which impacts many, many markets.

That's not at the behest of the VWs, mind you, word is that Sazerac has only marginally upped their VW asking price over the last few years (a couple of bucks - nothing dramatic). It's being driven by Distribution.

And, factor that the bulk is now going to wholesale customers - not retail - where the consumer mark-up is even more insane, and you get some ridonkulous prices (I've seen Pappy 23 at $150 a pour).

3) Everything with a Pappy brand on it has at least some - if not all - Buffalo Trace juice in it (yes, even the Rye!). It's not the coveted Stitzel-Weller juice that started this craze years back.

Ironic that a brand renowned among enthusiasts for the legendary whiskey in the bottle no longer contains that whiskey - and is bigger than it has ever been.

Tim Read said...

@sku interestingly, one of our once-revered whiskey buying institutions in the San Fernando Valley has done just that (along with BTAC). While I was there recently we got on the topic. He said he wasn't carrying any of it because it wasn't worth the hassle to him and he said it was probably his most enjoyable fall in a long time since he didn't have to deal with it. Sounded like he had no regrets and no plans to return to dealing with it. Given Driscoll's public vexation with it too (remember when their servers crashed due to people scripting against it to buy?) I wouldn't be stunned to see K&L drop it. I can't imagine it's worth all the overhead that they have to deal - phone calls, emails, website traffic, etc - for what likely amounts to little more than a dozen bottles or so between all three of their locations.

The aforementioned SFV retailer is improving lately, by the way. Much better than this spring's sorry state.


Unknown said...

Always worth repeating your information on Pappy. I read about this with your discussion with John Hansell. http://bit.ly/Vknc6C

Is Pappy worth the release prices? Maybe.
Is Pappy worth the eBay prices? NO.

Yannis said...

Nice read, Chuck. And I completely agree Earlier this week, I read something on Straight Bourbon where even the K&L rep had to comment.

My PVW contact didn't call me this time and you know what, that's totally fine by me. Plenty of equally good whisky, as you say.

Just picked up a bottle of the acclaimed, some say legendary, Lot No. 40 Canadian rye, and it's doing just fine on its own, or in a Manhattan, at more than half the price.


SteveBM said...

Heard that, Chuck!

Chuck Cowdery said...

I didn't mention William Larue Weller (the BTAC wheater) because it's really its own thing and not similar to any of the other Wellers or Van Winkles.

alligatorchar said...

Tim - I can't speak for all markets, but in Arizona, I haven't seen even a hint of distributors raising their prices in any significant manner on any Buffalo Trace product over the past few years. And FWIW Republic is the local BT/VW distributor.

Justin Victor said...

All of the PVW hype is so easily skirted in OK as our total state allocation is 0 bottles. HEY DRISCOLL!!!! Come to Oklahoma and hang up your shingle!

Anonymous said...

Great piece. While some lazy journalists shoulder much blame for the hype, I cast more blame on "fashion conscious" consumers who don't think for themselves or read between the lines. While I will purchase a high end bourbon after Christmas/New Years and Easter, I generally stick to BT, Weller, Knob Creek, etc which can be had for under 25-30 bucks. One doesn't have to spend too much money for good quality. A friend (who doesn't drink bourbon) asked me for recommendations for his home bar for guests, I gave him a list of good booze at good price points (under 30 bucks, for sipping or cocktails), but he only wanted to know what the "expensive stuff" was. I didn't mention PWV to him, but those are the vain people (or trying to impress others) that the journalists have hooked. Oh well, as bad as the hyping is for bourbon, it's worse for wine.

mongo said...

a manager at a store in minnesota informed me that they could only get large allocations of the van winkle lineup if they could sell even larger amounts of something called mcgillicuddy's. this may be a local distributor issue, but suggests that the craze for van winkle benefits more than just the van winkle family.

ChrisW said...

Don't forget that a larger allotment, due to hype, is going overseas. The Taiwanese are going full bore into bourbon and the mark-up is even higher for this market. Also, big customers, a la Bevmo, are demanding a cut of the action and squeezing out the smaller specialty and mom n pop stores. It all snowballs together.

Anonymous said...

Hey T,

I am in LA and got that same comment from some places I go to.

Do you mind sharing the places you refer to?

TODD APPEL said...

Great commentary, Chuck!...I would venture to say the only thing I have a slight disagreement with is that PVW should quell the demand...But what they are really selling besides decent whiskey, is exclusivity...another discussion...but bottom line is that I think it is better that the Maxim/Celeb crowd focuses on this whiskey and not something really extraordinary and more affordable...PVW can take the brunt of the idiots with money...and we can sacrifice the ability to buy it to them in return for the ability to buy something they havent "discovered" yet...let them sit on waiting lists...it makes them special...Happy Holidays!