Friday, January 12, 2018

State of the Booze Union

It's a tricky time to be a spirits enthusiast in America.

While spirits are more popular now than they've been since the 1970s, the last handful of years have created a lot of new wrinkles.

First, the good. In some respects, there are more options than ever. Distillers are releasing new expressions on an almost daily basis and (some are) paying far more care and attention to their products than they did when they were effectively producing commodities. Entire categories of spirits that would have required huge amounts of legwork to source fifteen years ago can now be found on back bars and liquor store shelves across the country. Many retailers have expanded their exclusive release programs, offering options that can't be found elsewhere and increasing diversity. The internet is full of people talking about spirits, which makes finding information easier than ever. Clubs and tasting groups have sprung up in every state. And for those who care about such things, spirits are cool, giving the drinkers a caché that hasn't existed since the Mad Men era.

But not all is well. Popularity is a fickle beast. For those who had knowledge and connections during the 1990s and early 2000s, options may seem extremely closed off as stocks of old spirits have become severely depleted. What once went for a song is now many times more expensive as competition increases. But these are the effects of the market - large, primarily impersonal forces outside of individual control.

More complex are changes made at the level of state and national governments shaping the American market. While many more American liquor stores now sell their stocks online, shipping them across state lines has become an increasingly fraught task. Many states flatly refuse imports into or exports out of their borders. In some cases this is due to state monopolies on liquor sales that do not want to give up control. In others it is about protecting the interests of local distributors, who wish to ensure that they get their cut from liquor sales. In 2010 efforts were made at the national level to tighten these regulations further and make it easier for states to restrict cross-border sales, but thankfully the bill did not pass. In the meantime, some states, such as Kentucky, have taken it upon themselves to restrict internet sales, closing off once-popular stores such as The Party Source that previously shipped across the country. Binny's Beverage Depot, a major Chicago area chain that has a vast exclusive single cask program, announced that once again it was no longer able to ship spirits outside of its home state. While a previous clampdown on interstate shipping was resolved, it's currently unclear if or when this will be reversed. From this vantage it is not clear whether the issue is state regulations or the national logistics companies, but either can be a problem. Even the much-vaunted K&L Wines in California, which has a significant local market to sell to, is fairly restricted in which states it can ship liquor to (for better or worse, Oregon is not on that list).

The lack of a legal secondary market for spirits has also complicated the situation. While there are compelling arguments that secondary markets only serve to encourage speculators, the demand for limited releases, especially of bourbon and rye in the States, is practically insatiable. While any number of attempts have been made to localize and regularize these sales in some fashion, whether through Facebook groups or auction sites, many have foundered on the fundamental fact that liquor sales through any channel other than an authorized retailer are flatly illegal throughout the country. So far many the more visible efforts have either shut down or folded on their own. This is in stark contrast to Europe where numerous auction houses and websites host sales on a regular basis. There are hints that this may be changing, with Kentucky now allowing licensed retailers to buy and sell 'vintage' spirits, though it is unclear how that market will evolve. While this makes life more difficult for flippers and drastically reduces the liquidity (heh) of the market, it also means that getting ahold of limited releases is often more about legwork and relationships than money, because even the biggest bank account may not let you find someone willing to part with a particular expression for cash.

On an international level, January 2013 saw the temporary cessation of spirits shipping from the United Kingdom to the United States, due to a change in Royal Mail's policies. While workarounds were eventually discovered, shipping prices rose dramatically as a result and have remained high ever since. To cite one example, shipping spirits from a well known store like Master of Malt to Fiji costs the same as shipping to the United States. While this does not entirely foreclose that source of spirits (I have heard suggestions that this has become a more popular source for American enthusiasts), it does make them much more expensive and difficult to justify as values, even after the post-Brexit tumble in the pound.

The fractured nature of the liquor market in the United States and frequent lack of alternative channels can make it difficult to sustain enthusiasm. Especially for folks living in control states with limited selections, the itch to try new spirits can be extremely difficult to scratch without creative legwork. Even for those in broader markets like California, it can feel increasingly difficult to find bargains as prices rise and once-prized expressions disappear from circulation. On the flip side, there are some, especially bourbon fans, who find that the chase (even when it slips into quasi-legal territory) is now a big part of the fun. The thrill of slipping one past the powers that be is not insignificant, but trying to evade regulations comes with a host of risks ranging from packages impounded by customs, to buying fakes from unlicensed sellers, to criminal prosecution in the most egregious cases. Knowing where to draw the line, especially when official standards are hazy, is difficult.

Unfortunately it appears unlikely that this situation will change anytime soon. While there are some efforts to legalize direct sales across state borders, there are a large number of interested parties vested in the status quo, ranging from distributors to state monopolies. It will take pressure from below to budge lawmakers into loosening the grip of distributors and other intermediaries in the three-tier system, let alone making legal alcohol shipments from other countries easier and cheaper.

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