U.S. bourbon boom turning into mania

Limited releases that collectors covet drive up prices for all.

In June, two men in Virginia were charged with an unusual form of insider trading: selling information about when and where rare bottles of whiskey were going to appear in staterun liquor stores.

To an outsider, their scheme may sound strange. To many bourbon collectors, it is just another cautionary tale from today’s frenetic whiskey market — and one that some probably wish they had thought of first.

According to prosecutors, Edgar Garcia, an employee of Virginia’s alcohol control board, fed the confidential information to Robert Adams, a private collector, who sold the list to scores of people on Facebook for up to $400 each.

Virginia requires that hard liquor be sold at government-owned outlets, where it is priced significantly lower than in most other states. To control the inevitable rush by bourbon lovers to snap up sought-after bottles for less, the state keeps distribution details a secret, announcing the releases at random times via email and on the board’s Facebook page. Fans then stampede to the stores — and every minute counts.

“I was there within 20 minutes,” wrote one buyer on Facebook after a release in November, only to find the shelves already picked over. “At least 10 people in the store when I got there.”

The willingness of Garcia and Adams (who both pleaded guilty) to commit a felony just to sell information, and the apparent eagerness of others to buy it, is a measure of how much the decadelong bourbon boom has turned into a mania.

Bourbon and rye, the leading styles of American whiskey, have long been considered workaday drinks, sold at working-class prices. As recently as the early 2010s, it was hard to find a bottle priced above $100, and most sold below $50. Even as the market for six-figure single-malt Scotches boomed, collectors largely shunned American whiskey, aside from a few standouts such as Pappy Van Winkle.

That has all changed. At an auction at Sotheby’s in the spring, several bottles of Michter’s bourbon sold for more than $20,000 apiece. A new brand, the Macklowe, is selling its American single malt for $1,500. And a bottle of LeNell’s Red Hook Rye, an extremely rare whiskey bottled in the late 2000s by a Brooklyn liquor-store owner, LeNell Camacho Santa Ana, can go for more than $90,000.

The price leap is not just at the luxury level. Everyday bourbons such as Buffalo Trace or Eagle Rare, which once sold for about $35, now often go for twice that.

“Today, $75 is the new $35,” said Dixon Dedman, who created Kentucky Owl, one of the first luxury American whiskeys not called Pappy. Dedman and his partners sold Kentucky Owl to Stolichnaya for an undisclosed sum in 2017, and he just introduced a new brand, 2XO, with a retail price starting at $95.

The craze drives collectors to extreme lengths. Like music fans eager to snag tickets to an upcoming show, some will camp overnight outside liquor stores, hoping to grab a limited release from cult distilleries such as Buffalo Trace and Four Roses.

It’s hard to pinpoint when the bourbon boom went into overdrive. The Distilled Spirits Council of the United States, a trade group, says sales of all American whiskeys have grown at a steady pace over the past decade, from 16 million to 30 million 9-liter cases.

For most of that time, the volume of sales was consistent across all price categories, from cheaper to so-called super-premium bottles costing more than $50.

Then, around 2016, sales of super-premium whiskey took off, while those of cheaper whiskey slowed. Over the next five years, sales of so-called value whiskey, priced under $20, rose just 4.2%, while sales of super-premium rose more than 129%.

Bourbon fans were becoming better educated, and with that education came a willingness to pay more for higher quality and, even more important, exclusivity. In response, distilleries began to offer limited-release bottles with unusual qualities — drawn from a single barrel, for example, or bottled at high proof — which fueled interest.

Supply became an issue as well. Whiskey has to age, so production can’t simply ramp up to meet demand. The amount of whiskey on the shelf today is a function of decisions made five or more years ago.

The pandemic drove demand higher by combining unexpected free time, in the form of quarantines, with unexpected money, from a booming stock market and government stimulus checks.

Social media then amplified the hype, in which a lucky buyer posts a photo on Instagram of his latest find, ideally taken from the driver’s seat just after leaving a liquor store, has become a status symbol. Depending on the bottle, it can be as potent as a Rolex-clad wrist.

Although some people will drink those bottles, others will flip them on the illegal secondary market, often for much more than they paid, or hold on to them as an investment.

“There’s some poor guy out there whose wife has been nagging them about the 120, 200 bottles in the basement,” said Taylor Cope, who edits the website Malt Review. “And he says, ‘No, you don’t understand, I paid X for these, and they’re worth 2X or 5X or whatever,’ and maybe for him that’s some weird nest egg or retirement savings.”

For many veteran collectors, the mania has become a turnoff. What was once a geeky niche community has been replaced by an aggressive world of wealthy collectors and speculators, driving up prices beyond what most people can afford. These longtime collectors even have a special insult for fans of overhyped whiskey: “taters” (which may be short for potato, although no one is quite sure).