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Is Pappy Van Winkle the New Harlan?

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Five year waiting lists. High end concierge calling all around town, looking for a specific bottle on behalf of "an important guest." What retails for $100 and $200 when it can be found, quickly being flipped for $1,000 and $2,000. Today's Bourbon market has all the hallmarks of that other great bull market, the Cult California Cabernet run of the late 1990s. But if the two phenomenon are similar, how so? And what lessons could be learned about today's Bourbon market from yesterday's Cult Cab frenzy? Let's take a look.

There are several attributes of the current insatiable appetite for high end Bourbon that recall the glory days of the Cult Cabernet market. I've made up a reference list of convergences.

1) Limited quantity: Just as the Cult Cabs made "limited production" a phrase forever afterwards associated with the most sought after wines, today's high end Bourbon market seems defined by the scarcity of the older bottlings.

2) A handful of easily recognized brands: In both instances, about five different brands really separated from the rest of the market in terms of consumer demand. Where it was Screaming Eagle, Colgin, Araujo, Bryant Family, and Harlan before, now it is Pappy Van Winkle, Parker Heritage, Eagle Rare Antique Collection, Black Maple Hill, and A.H. Hirsch Reserve.

3) An allocated market: Tight distributor control on who got to purchase how many bottles at wholesale helped shape the contours of the Cult Cab market, and it is at work again with Bourbon.

4) Easy to understand terminology: Kentucky and Bourbon, California and Cabernet. The parameters are pretty straightforward, and don't require much specialized study. This isn't Irouleguy or Listan Negro we are talking about.

5) Big flavors: Noticeable oak and high alcohol, plus maybe a little sweetness on the palate.

7) Distinctly American: Bourbon is a home grown, all-American product and this is a period of increased improvement in American distilling, in the same way that Napa Valley was associated with the rise of American winemaking.

8) The foreign benchmark is even more expensive: When the Cult Cabs were originally released from their respective wineries, they were less expensive than the famous names of Bordeaux, and again it is true that the in demand Bourbons, on release, are less expensive than the famous Scotch brands. This allows people to say "Well, it's still not expensive as it could be!" which is a healthy sentiment for building a market bubble.

9) A similar demographic: The buyers for high end Bourbon today seem to be, by my own observation, overwhelmingly male, and often in the 25 to 49 year old age range. The same audience profile that was snapping up Cult Cab in the 1990s.

10) Original prices in the hundreds of dollars: This is important, because it means that if someone has the access, they can fairly easily put together the capital to buy some bottles for resale. In other words, a large group of folks have the means to engage in bottle scalping. When the original prices are in the thousands of dollars, this is less true.

Which leads us to...

11) The entry into the market of financial opportunists: What really exacerbated the scarcity of the Cult Cab market was people actively buying the wine as an investment, not with the intention to drink the contents. Because if you are planning to drink the bottle, you might only buy so much, but if you are planning to sell the bottle for a profit, well, sky's the limit. And that meant that people were scouring the market outlets for every available bottle. Which made it that much harder for the casual drinker with a passing interest in the category to find a bottle themselves. Which added to the perceived scarcity. The same cycle is in effect with some Bourbons at the moment.

12) A consumer desire for luxury bottlings: During the period of time that Cult Cab exhibited the greatest pull on the market, there was PLENTY of Cabernet around. But it was the normal, non-Cult Cabernet that was widely available, and those weren't being bought with gusto. It was the most expensive and the most rare offerings that the consumers desired and talked about. And once again, there is plenty of inexpensive Bourbon on the market. Simpler bottlings that are widely available. But those are being passed over in the desire to find the specific items that have consumers under their spell.

A good example of this desire for luxury, rather than for more basic bottlings, was the furor over the proposed dilution of Maker's Mark. In that instance, the feedback firmly indicated that customers would rather have a more expensive product than a product of lesser quality. That trend was apparently not lost on the Buffalo Trace distillery, who have started more tightly allocating their mid-range Blanton's Bourbon. Some observers have speculated that this change may facilitate longer aging of the stock that might have gone into Blanton's, and thus more high end aged stock for sale at higher prices from Buffalo Trace, which also produces Pappy Van Winkle.

So what can be learned from all this? If the Cult Cab market of the past is any guide, we will see producers offerings more high end products just as soon as they can, which will have the eventual effect of diluting customer interest. We will also see the producers themselves purchased at very high valuation numbers, as indeed we just witnessed with the agreement of Suntory to purchase Beam. And as occurred with Cult Cab, certain restaurants may be the big beneficiaries of the market, as consumers desiring a sip of something rare seek out restaurants that have what they are looking for. But let me propose one more point: For all the talk about how much the American palate has changed in an attempt to find lower alcohol and the flavors of terroir, one large market segment seems to have kept their focus on the other direction.

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