Thursday, June 6, 2013

The Bourbon Exchange May Be On To Something


The Bourbon Exchange, a page on Facebook, launched in April. You may have read about it here or here.

It has 732 members as of today and the page is constantly busy. If you want to know what it's all about, click on the links in the previous sentence or just click this one to go there. You may notice that the link takes you to an internet site that instantly sends you to the Facebook page. That's in case Facebook ever decides to shut them down.

Even if you don't care to engage in the sorts of transactions the Bourbon Exchange exists to facilitate (is that oblique enough for you?), the page is interesting to bourbon enthusiasts for other reasons.

First, because of the legal environment in which whiskey collectors are forced to operate, the true secondary market is suppressed. There is a secondary market for alcoholic beverages and some alcoholic beverages have significant value in that secondary market, but it is impossible to give a reasonable assessment of what that value is because there is no reliable record of transactions, except from the occasional auction.

Generally, people who participate in the whiskey secondary market are working blind, at least at first. As they gain experience and get to know other collectors they can establish a body of knowledge about past sales.

They can also learn about their fellow collectors. Trust is essential in any marketplace, but especially an illegal one. The closed environment of Bourbon Exchange encourages social interaction to help build trust. Bourbon Exchange lacks many key features of a truly open marketplace, but it does allow participants to gain experience and accumulate valuable information quickly. Fairly soon, transactions among the most active participants will begin to reflect true market values. It's a start.

Facebook is ideal for this because it's so picture friendly. The main role the Facebook page plays is as a display case. Members exhibit some of their treasures and what happens next is up to them. Values aren't discussed on line, nothing to do with buying or selling is, but other members can easily message the exhibitor through Facebook. They can do the rest of their business that way or take it to email.

What these pictures can tell the rest of us is what's out there? What do people consider desirable, valuable, or otherwise worth collecting? What are people willing to part with? How does my own collection compare?

Some of the participants are excellent photographers. It's fun to see some of the rare bottles you'll probably never touch, let alone taste. Some call it 'whiskey porn.'

There can be a cumulative effect. Most of bottles shown are either very old or were limited editions, typically very limited. Various Jefferson's expressions seem to show up a lot, perhaps out of proportion to how many were sold. How should one interpret that? Buyer's remorse, perhaps? Not that it means the seller no longer likes the stuff to drink, just that in retrospect they may be in an overbought position. You can't necessarily pin down the exact meaning of what you're seeing, but clear patterns may eventually emerge.

It's all information we didn't have before.

Second, extremely rare and desirable bottles such as A. H. Hirsch Reserve (not to be confused with 'Hirsch' without the 'A. H.') need to see the light of day. With A. H. Hirsch and other very rare products that are no longer available, it's just a shame if there are people who want them, and people happy to part with them, but they can't be brought together. It's un-American.

Most people who bought A. H. Hirsch and the like, including those who bought them by the case, did so because they liked the whiskey and knew the supply was finite. It seems likely that some, perhaps many of those people would like to, as they say, adjust their holdings.

'Open to buy' is an expression in retailing. It's the amount you, the buyer, have available to spend on new merchandise and it's linked directly to the investment you already have in merchandise on the floor. The only way to replenish your 'open to buy' account is to sell some of the merchandise you already own.

Many whiskey collectors are married men whose wives exert strict control over their 'open to buy' account.

It has been many years since any iteration of A. H. Hirsch has been readily available. What's a bottle of A. H. Hirsch 16-year-old gold foil really worth? The best way to find out is to flush out as much of the bunkered stock as possible. If you have any to sell, now is the time to make your move. Don't let your overbought position in Hirsch keep you out of the marketplace for new treats.

The legality questions always loom, of course. It's hard to see how eager sellers connecting with eager buyers, all of whom are above the legal drinking age, does anyone any harm, but that doesn't change the fact that it is illegal to sell alcohol without a license.

Third, what the Bourbon Exchange can do without any legal worries is be an information exchange. It's a place where people can find out more about the bottles they have and the bottles they want. The possibility of transactions doesn't even have to be mentioned. Collectors like to show and talk about their collections. If anything else happens, it happens somewhere else entirely.

When people show what they recently found at retail, you can see what's still 'out there,' in at least some quantity. That also tells you what's not. Part of the hobby is dusty hunting. Dusty hunting and, therefore, its facilitation are 100 percent legal.

Bourbon Exchange is a good place to learn because most of the participants are sufficiently knowledgeable that, Wikipedia-like, correct information is quickly validated and incorrect information is refuted. Unlike the average drinker, bourbon collectors value reliable information, so interference by egregious dopes is kept to a minimum.

Finally, Bourbon Exchange is an opportunity to form a real community around this very specialized interest, which is what social media does best. Being members-only (and the operators are particular about admitting only real identities), everybody can see who else is looking in. People can figure out who to trust. Networks can form. It's a good thing.

The Bourbon Exchange isn't even two months old, so who knows what it will look like in a year, but it should be fascinating to watch.

9 comments:

Tim Breitberg said...

It's been a great thing. I was posting pictures of my collection in a "finally, someone else will see and understand this habit I have. A few people contacted me about some bottles I had that I didn't have an emotional connection to, and away they went. One such exchange enabled me the funds and information enough to pick up not 1, but 2 bottles of Buffalo Trace Single Oak, which I hadn't thought to mailorder and don't think much made it into my home state of Illinois. And once I got my 2 bottles, and posted my brags, 3 other group members asked me wheere I got them, so the group enabled 4 different people the chance to get a couple bottles we'd thought we'd never have. All based on a couple photos.

Wes Henderson said...

Love this page. Great people, true bourbon lovers.

Thanks for spreading the word, Chuck.

Anonymous said...

Richnimrod said;
I don't disagree that this is a forum of interest to Bourbon enthusiasts, and it's probably replete with (often correct, and esoteric) data. My issue is the future of the forum as jump-off point for speculators who merely "invest" in bottles with the expectation of future profits. This is counter to those of us who sincerely wish to taste the wonders of some of the storied brands, and limited offerings that are so hard to find. I suppose we can't have one without the other; but those who hoard for profit find no fan in me. ...And, I believe this forum only encourages that practice.

Anonymous said...

Anon, what forum doesn't encourage that practice???

Anonymous said...

I like to think Chuck is my new best friend! It has been fun and knowledgeable on bourbon exchange.

Stephen Shackleton

Anonymous said...

I've been a fairly active participant since it's inception, and if I were a PhD econ candidate I might look at the bourbon exchange as a potential thesis subject. It would be fascinating to study the flow of information through the group and track the impact on prices over time. I think when you have products where the gap between the hype and real quality as determined by knowledgable insiders is large you see a large number of offers made. I think this is the case for the Jefferson's, and some of the dusty bottom shelf SW juice you see offered quite a lot. As the level of knowledge begins to even out I think you will see a corresponding leveling of prices and offers more in proportion to the stock levels you refer to. At least that would be my hypothesis. Any Econ majors out there looking for a project?

Anonymous said...

Chuck, what changed your mind about resellers of whiskey bottles? I remember you were very against any resellers and people buying up hard to get whiskeys.

Chuck Cowdery said...

I don't think I've changed my mind. Personally, I don't engage in the practice, but I don't object to others doing it. I've always cautioned people about the risk and have objected to dishonest marketing practices by some eBay sellers, but some of my best friends are collectors who buy and sell. In fact, I wish it could be done more openly and I hope I can help that come about.

Pat C. said...

I'd love to see more people using bottle-spot.com. We've got plenty of bourbon traders there now, but the more people that use it the lower prices will go. We want it to be an open, honest marketplace. Right now the most popular option seems to be craigslist, and that makes it hard to compare prices across wide geographies, leading to price gouging in certain areas.