Monday, May 27, 2013

Thoughts on the Facebook Bourbon Exchange

For many years, eBay allowed the sale of bourbon, as long as the seller posted a disclaimer saying that "The value of this bottle is the bottle, not the contents" or something similar. It was laughable, but it gave people a secondary market for bourbon. Unfortunately, it was illegal--spirit sales are fairly tightly controlled you can get yourself into trouble by selling or trading privately. Six months or so ago, eBay cracked down on the issue and since then, they have not allowed the listing of whiskey on its site. It was probably a good decision for eBay, but predictably, a new site has popped up; the Facebook group titled "Bourbon Exchange."

Before I get into my thoughts on Bourbon Exchange, I'd like to comment on the insanity of the three tier system of alcohol distribution. You cannot go to the website of your favorite distillery and buy a bottle of their whiskey. That's because the whiskey has to travel through the producer, distributor, and the retailer before you can get your hands on it. (A partial exception applies to sales at the distillery, but even so, if I understand correctly, the distillery still has to do the paperwork. So in practice, they become their own distributor for on-site sales.) The system makes very little sense and it is a relic of prohibition era moralism.  In many states, the state government owns the retail stores--Virginia for example. Spirits distribution is pretty clearly not a "free" market in any sense of the word.

All of this creates a perfect scenario for a secondary market. I can't prove this, but it has been alleged that some retailers were putting up their allocations of hard to find whiskies like Pappy van Winkle on eBay because they could connect with a buyer with more money than sense. Some private collectors were hoarding good whiskey and selling it to the same people. More honest retailers, like K&L out of California ran auctions on their own site, just to point out the absurdity of prices people were paying. (Jefferson's Ocean went for over $1,000.)

Whiskey, and bourbon in particular, is in a bubble situation. More experienced bourbon aficionados remember when Pappy would sit on the shelf untouched. People newer to bourbon hear how great Pappy is and pay hundreds of dollars just to get their own bottle.

Which brings me to the Facebook bourbon exchange. It is almost perfect that Facebook is the end point to the bourbon insanity. In a very slightly veiled way, people are posting bottles for sale on the site, similar to the way they posted bottles on eBay. It's all probably illegal, but not entirely surprising. I have some very conflicting thoughts on the issue.

On the one hand, after a lot of work, I'm sitting on a bunker of bourbon that could fetch up to, say, $2,000 if I were willing to sell it on Bourbon Exchange. On the other hand, I didn't pay near that amount for the bottles and to sell it for $2,000 would be a rip off for the buyer. I want to be clear here--I don't blame any of my bourbon friends for selling their bottles via Bourbon Exchange. It's been highly tempting to me, and $2,000 would more than pay for my bourbon consumption for a year; maybe two. (Many of my bourbon friends have bunkers that exceed mine by a factor of 100.)

But I just can't bring myself to do it. I'd be a terrible business man--I don't want to rip people off, especially the people that share my hobby. But again, I won't blame you if you do.

My mother used to tell me the old saying, "A fool and his money are soon parted." Here's a piece of advice for the guys buying stuff via Bourbon Exchange: Don't. Put your time in. Search for the Pappy on store shelves. Experience the frustration of visiting 30 stores over the weekend after a Pappy release and finding nothing. Then find easily available bottles that YOU like. Better yet, find bottles that YOU like that are under $20. Don't act like bourbon is a status symbol. And goodness gracious, if you are thinking of buying a bottle from Bourbon Exchange, at least do the research to find out if you can still find that bottle on a shelf somewhere!

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