2022: Year of the Bundle

The sales tactic of bundling less desired spirits with a sought-after bottle spiked in 2022. But is it working, or hastening the bourbon bubble’s burst?

The bundling boom is the latest trendy ploy of America’s “three-tier system” to move excess product. Consumers don’t generally prefer bundles, it’s safe to say. When it’s really just one bottle you’re after, taking on two or even five others to get it is expensive and irksome.

Some do express understanding and support for retailers, who, in order to get the small number of allocated bottles customers clamor for, are made to buy high quantities of Wheatley Vodka or Fireball or Four Roses Yellow Label or whatever products distilleries are making more of than consumer demand appears to warrant—otherwise why the need for bundles? And why shouldn’t retailers pass this burden on to consumers if it’s consumer demand for popular rare bottles that drives it? A worthy counter-question to that: Why should consumers be made to pay for the misjudgment of manufacturers who oversaturated their own product’s market?

I’m going to do my best to put a positive spin on all this. But I ain’t gonna lie, it may just be spin! I’ll try to keep it humorous, at least.

So pour a glass of something you got in a bundle. Here we go…!

a system that… works?

The National Alcohol Beverage Control Association (NABCA) summarizes the three-tier system as follows:

Manufacturers [tier 1] provide alcoholic products to wholesalers [tier 2], who distribute the products to retailers [tier 3], who sell to the consumers [tier 0?]. No one entity can be involved in more than one tier under most state models and each tier is regulated and licensed separately.

The positive intent is to streamline tax collection, prevent monopolies that might stifle healthy competition, and make it difficult for illegal or potentially dangerous alcohol products to reach the consumer. It kind of works.

A commonly noted negative is that an intermediary between the manufacturer and consumer naturally means a mark-up in the eventual shelf price. Take out the middle tier—wholesale distributers—and in theory prices for the consumer might drop by up to a third. Positive!

But then, also in theory, distribution might end up narrower than wider. Negative… if wider consumer choice is truly a concern in this plentiful whiskey booming era. What region doesn’t have its handful of local craft distilleries these days, after all, adding interest to the common inter/national brands?

Another oft-cited negative is that, despite best intentions, the three-tier system is as subject to corruption as Prohibition. It’s an American system pertaining to something a lot of people want, after all. The Al Capones and George Remuses of today’s whiskey world might not be murderous mob bosses. But some believe those legendary beneficiaries of Prohibition have been replaced by a legalized three-tier mob of blind-eye-turning manufacturers, glad-handing distributers, and shoulder-shrugging retailers. Though there may be some metaphorical arm twisting at work, at least nobody’s getting whacked.

Manufacturers only suggest retail prices (the msrp, or manufacturer suggested retail price) but they don’t set them. They sell to distributers at a much lower price in anticipation of their msrp. Distributers then determine the price they sell products to retailers, also lower than msrp. Retailers then determine whether to sell at the msrp or some higher mark-up. And consumers decide whether they’ll pay that price. Fair in theory—everyone has the choice to buy or not.

Kinda. You can’t choose to buy something or not if it’s out of reach, whether geographically or economically.

When faced with gripes, the system neatly allows each tier to point the finger of blame at the other. If a consumer complains to a retailer about a high price or scarce availability or bulky bundles, the retailer can shrug and blame the distributer. The consumer is never able to confront the distributer, so that conversation ends there. Even if they could, the distributer could point to the retailer as the final determiner of how bottles are sold and for how much. The retailer could push back on the distributer, who might negotiate a variation on the deal. Meanwhile the manufacturer can remain seemingly above it all, having bid goodbye to their product when they sold it to the distributer.

A capitalist system that works—people spend their money, people make their money, and nobody is to blame.

Kinda.

This past autumn, at least two shops in my area with E.H. Taylor private barrels bundled them with Sazerac De Forge Cognac. Coincidence? Similarly, variations on the same Heaven Hill product bundles began showing up at multiple retailers. In one email chain related to these that I was privy to, a retailer stated, “That’s how Heaven Hill wants it.” Not how the distributer wants it. How Heaven Hill, the manufacturer, wants it.

Now, was that what the distributer told them? Or did a rep from Heaven Hill say it? Did the retailer infer or misspeak? I can’t know. In any case, I find it difficult to imagine that such a variety of local shops, from independent mom-and-pops to larger chains, were all hawking the same bundles by mere coincidence. They all deal with the same regional distributers, so, logically there lies the blame. But then this dangling comment, “That’s how Heaven Hill wants it…”

Any conclusions are pure theory—which, true to the three-tier system, would never be verified by anyone involved. Anecdotally, I’ve asked around in my whiskey social media circles, and invariably those who work in the system dismiss the notion that manufacturers have anything to do with bundling schemes. The commitment to this dismissal is curiously fervent. One must ignore a whole lot of American history to believe that a system built around selling alcohol is going to be carried out to the letter. It seems rather farfetched that manufacturers are entirely uninvolved in the bundle trend, and that some amount of collaborative coordination doesn’t take place.

For the retailer’s part, some do charge msrp or close to it for the bottles among these bundles. I appreciate that. And when their pairings are thoughtful, rather than merely unloading the bulk items that whiskey connoisseurs (arguably the target buyer for bundles) don’t want, well then I can sometimes wrap my willingness, and my wallet, around such a bundle.

But those retailers who thumb through Google and Facebook looking for secondary market prices, and then mark Weller Full Proof up to $600 and George T. Stagg up to $1000, these people don’t have my sympathy or my business.

To be frank, I find the consumers who buy and/or flip at these prices equally dispiriting. They contribute to the downside of the whiskey boom, promoting the everyone-for-themselves principle over that spirit of sharing that is the whiskey community at its best. To my mind, if one must point blame, point it at consumers ☞ If we were to stop buying into nonsense, all three tiers would stop trying to sell us nonsense.

But that would make too much sense.

I’m not too keen on chaos, but I am a big fan of chance. Those retailers who on a random Tuesday afternoon hide unicorns like easter eggs on their shelves? Love that! Chance decides who gets it. The popular notion that “good customers” are owed something is a bit too pro-entitlement for my tastes. If rewarding customers comes into play, it should be up to the retailer’s discretion and not a forgone expectation by the customer.

Sammy Suleiman, owner of Royal Liquors in San Francisco, whom I’ve interviewed here on the blog, once posted on his Instagram that stores don’t need friends, they need customers. That instantly made me respect Suleiman more than I already did. He runs a small, one-room shop that’s been in his family for forty years, and he charges very reasonable prices. His tolerance for nonsense is low. Those few customers who have railed about him on social media have inevitably been not a regular, but some rando entitled bro who came in and didn’t get what they felt owed.

If my dollar is truly my ultimate vote, then I’ll vote for retailers like Suleiman who come up with creative games to distribute the unicorns and charge decently for them. That’s more fun than bundles or raffles or getting in line at dawn. And it’s certainly better than taking on another bottle of Wheatley Vodka!

Another retailer I know posed the argument that bundles encourage consumers to branch out from their usual spirits and try new things. I can see how that might work. And I’m a proponent of curiosity. However I can’t buy an argument for Wheatley Vodka or even the very famous Sazerac De Forge Cognac, original ingredient of the Sazerac Cocktail, being too off any regular spirits enthusiast’s beaten path. Again, if a bundle is thoughtfully curated rather than a mere means to move common bulk, this notion of bundles as curiosity ticklers could work in practice and I would personally be more likely to go for it.

The Nouveau Dusties?

This past month I’ve noticed something I hope suggests the bundling boom might be starting to misfire: Many bundles are not selling. Weeks, even months after hitting the social meds and emailed newsletters and crowded shelves, certain bundles remain penned up together awaiting consumers.

Has the bundle market been oversaturated? How many extra bottles of blah can we be expected to buy, after all? Will bundles become the new dusties, holding back those key bottles that otherwise might have sold instantly?

My own hope is that these excess bundles will continue to gather dust, prompting any and all of the following:

Retailers giving in, breaking bundles up and letting their customers choose what they actually want.

Distributers pulling back on forcing retailers to buy things everyone knows don’t sell well enough.

Manufactures putting out less of the undesirable products they’ve evidently over-produced.

And here are some related fantasies I harbor:

Consumers across the US refusing en masse to buy anything priced more than 1.5x msrp.

Consumers likewise refusing en masse one another’s attempts to flip bottles at “secondary prices.”

Retailers across the US refusing en masse to buy excess cases of stuff they can’t sell, and forgoing the allocated unicorns if need be until the distributers break.

The three-tier system amended to make wholesale distribution optional.

And if that last bit can happen, manufacturers refusing to work with distributers and retailers who employ the practices that feed the unicorn frenzy.

Fantasy. Pure fantasy.

But there’s hope! The pandemic forced businesses and governments to alter how things are normally done. For example, cities gave over street parking and bus stops to restaurants and bars for outdoor seating. More significant to this post’s topic, in some places, like Kentucky and California, distilleries can now ship directly to consumers within certain geographic limitations. Have the first few grains fallen in an eventual landslide that will bury the three-tier system?

Epilogue:
The Gouger Gouged
a tale of karmic justice

To wrap this up, a related short story, and true.

Walking home one recent evening, I passed by a corner store and through their open door my eye caught the recognizable sight of E.H. Taylor, six bottles still in their beige tubes and high up on the top shelf. I stepped inside to see which variation of the brand they were…

The standard Small Batch release, as it turned out. Right next to them stood one each of the Blue, Yellow, and Red Spot Irish Whiskeys. I’m not a big E.H. Taylor fan, but I was curious to see a full case there. And I do love me some Blue Spot. The following dialogue ensued:

ME: Hello. How much is the E.H. Taylor and the Blue Spot up there?

[CLERK gets a ladder and climbs to the top shelf.]

CLERK: E.H. Taylor is… $149.99. And the Blue Spot is… $29.99.

ME: [short pause] …And the Yellow Spot next to it?

CLERK: That is… $34.99.

ME: And the Red Spot?

CLERK: Red Spot is… $49.99. Wait, no. It says $499.99. That’s strange. Let me check these.

[CLERK descends the ladder with each of the four bottles and goes to the register to scan them.]

CLERK: So E.H. Taylor… [scanner beeps] yes, $149.99. Blue Spot… [beep] $29.99. Yellow… [beep] $34.99. And the Red… [beep] $49.99. So, the sticker is off on this one…?

[CLERK stares at all four bottles with a furrowed brow.]

ME: I’ll take the Blue and Yellow Spot.

CLERK: Okay. I will have to check on this one. $499.99 seems like a lot.

ME: It does. Although you can buy a bourbon for $1000 these days if you’d like.

[CLERK smiles, brow still furrowed, snaps a photo of each tube’s price tag, then rings me up for the Blue and Yellow Spots.]

CLERK: Receipt?

ME: Yes please.

CLERK: Here you are. Have a good night.

ME: Thank you, you too.

[I leave.]

Given the E.H. Taylor Small Batch was priced at three-times the usual cost, it’s very likely the Red Spot was indeed intended to be priced at $499.99—roughly four times msrp. That makes it very possible the Yellow Spot was intended to cost $349.99 and the Blue Spot $299.99.

Whatever the intended prices, at least one if not two or three errors were made, and I came away with my own self-selected bundle of Irish whiskeys. I cannot work out how these errors made it onto the shelf. How could whomever was looking at the invoice enter into their P.O.S. system and tag prices that were easily less than what they themselves paid for the bottles?

I’ll never know. But one thing is certain: Gouge, and thou shalt in time by thine own rod be gouged.

Resources

“America’s Alcohol Distribution System Means You Can’t Always Find the Whisky You Want,” article by Sussanah Skiver Barton in/on Whisky Advocate.

“Cutting Out The Three Tier System,” an episode of Bourbon Pursuit on that topic.

Interesting Brew Enthusiast article on the subject. Though it’s focused on breweries, the summation of pros and cons is applicable to spirits as well.

The National Alcohol Beverage Control Association website

“Understanding the Three-Tier System of Alcohol Distribution,” article by Jessica Fields on vinepair.com