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Kevin Gibson: ‘Pappy’ craze creates crazy black market for rare bourbons

by Kevin Gibson

pappyLooking for a nice bottle of Pappy Van Winkle bourbon?

Go to Craigslist.org’s Louisville site. Click “collectibles” and then search “bourbon.”

Now, go to the bank and withdraw your life savings.

The rising popularity of bourbon and whiskey the past three or four years has seen the opening of more and more whiskey bars, such as The Silver Dollar and Haymarket Whiskey Bar, and turned what once was considered a hobby into a full-blown craze. High-end bourbons, those considered by enthusiasts to be the top of the heap, have become almost literally impossible to find in stores.

In fact, if you go into a liquor store and ask for a bottle of, say, Pappy 15-year-old, there’s a very good chance you’re going to make the person behind the counter laugh.

The demand, and relative supply shortage, has created a bourbon black market; bottles of whiskey that just five years ago would have retailed for under $75 and would sit collecting dust for a few months before being purchased are now a full-blown commodity.

One Craigslist ad, placed Oct. 24, advertised a bottle of Pappy 20-year that would normally retail at about $130. The price? $750. Another, posted by someone in Chicago, listed three bottles of Pappy 20 for $750 each and a Pappy 15-year (about $80 retail) for $500.

“Must arrange for pickup in Chicago,” the ad reads. “Serious inquiries only.”

And it isn’t just Pappy brand bourbons – a bottle of George T. Stagg is listed for $350, “firm.” A bottle of Four Roses 125th Anniversary is priced at $400. A William Larue Weller from Buffalo Trace is $250. And these are this year’s releases, not vintage.

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The recent theft of 195 bottles of Pappy 20-year bourbon from Buffalo Trace wasn’t pulled off by someone who wanted to get really drunk – whoever did it knows about the value.

The Bardstown High School principal has been accused of the crime after he allegedly tried to sell bottles of Pappy bourbon to a liquor store. He has denied the accusation. Regardless of who pulled off the heist, everyone knows the why.

“There is a secondary market in all things popular like this,” said Howard Levinson, a bourbon enthusiast who also works sometimes as a consultant to bars and restaurants. For some reason, however, the bourbon black market is viewed as a hush-hush, seedy affair.

“Look at wine,” Levinson said. “No one looks at the resale of a legendary bottle or vintage awkwardly. A great cabernet that someone bought five cases of and years later sells at a five-times profit isn’t looked at the same way, when it is the same thing.”

There’s even a bourbon trade circuit on Facebook in the form of a closed group called “The Bourbon Exchange” that is rumored to be awash in after-market dealings.

Bourbon writer and author Fred Minnick, who recently released “Whiskey Women: The Untold Story of How Women Saved Bourbon, Scotch and Whiskey,” blames government regulations.

“The black market … is a direct response to popularity and our country’s archaic alcohol laws,” Minnick said. “By requiring all alcohol to be sold through the three tier system – importer/producer, distributor and retailer / bar – our government has effectively made it illegal to sell the unopened bourbon products sitting in our basement. … Meanwhile, the value of the bourbon, let’s say a Pappy Van Winkle bottled in 2000, has increased 1,000 percent.”

Minnick points out that sometimes auction houses will sell expensive bottles of bourbon for an individual owner, but it takes a big cut of the sale price. That really isn’t fair to the bourbon owner who may have smartly foreseen the value growth and stashed that bourbon.

Imagine if you’d bought a 1966 Mustang fastback, garage-stored it for nearly 50 years, and then couldn’t legally re-sell it at a profit. There would most definitely be a black market for those cars.

Perhaps an even bigger problem is counterfeit bourbon and whiskey – take another look on Craigslist and you’ll also see used, empty bottles that once held high-end bourbon, and they’re selling for up to $50 in some cases.

“And what are they doing with these bottles?” Minnick said. “I doubt they’re hanging them on the fireplace.”

The suggestion, of course, is that some particularly unscrupulous black marketers will fill those bottles with cheaper bourbon and resell them as the real thing. Selling legit bottles of Pappy is one thing; trying to pass off Maker’s Mark as Pappy is something else entirely. Unfortunately, a beginner may not be able to tell the difference.

“So, I trust a pile of bourbon found in an old lady’s basement over some guy promoting it on Craigslist,” Minnick said.

Levinson believes, to undercut black market practices such as these, that the three-tier system should be altered.

“States should permit collectors to use a store as a middle man with a special tax and reasonable commission,” he said. “This way, the stores could sell it on consignment openly, make it easier for all and make the collectibles more price-competitive.”

The current system, he noted, also makes it difficult for bars and restaurants to openly offer rarities to customers by the glass. Serving unregulated, “black market” alcohol can put a bar’s liquor license at risk.

As an experiment, I walked into Evergreen Liquors in Middletown recently and asked for a bottle of Pappy Van Winkle 20 year. Beer manager Matt Lyon chuckled when I did.

“Honestly, we’ve gotten out of the Pappy business,” Lyon said. “We’d get two bottles, and we’d get 200 people [looking for it]. It was upsetting customers.”

He said there are plenty of good bourbons that are easily obtainable in stores and are far less expensive. But hype leads people to chase down Pappy Van Winkle and other such high-end brands. He suggested W.L. Weller and Old Fitzgerald as bourbons people could try as an alternative. Another way to get Pappy is to go to a reputable whiskey bar and order it by the glass.

“If someone is looking for good bourbon, we’re more than happy to help them find one,” Lyon said. “Any wheated bourbon is going to have some similar characteristics [to Pappy]. But if people are looking for a bottle of Pappy, they’re not just looking for good bourbon.”

It’s almost as if the stuff cures disease and fights crime by moonlight. But the fact is, it’s just bourbon. Really good bourbon, if the experts are correct, but still just bourbon. It’s just really well hyped. For the enthusiast, “it’s almost a status symbol now” to own a bottle of Pappy, Lyon said. Of course, that drives the black market even more.

Working in a liquor store, Lyon said, educates one on how to spot someone who is likely just looking for hard-to-find bourbons to re-sell at a profit.

“You don’t recognize them” as regular customers, he said. “They come in and say, ‘I’ve been looking all over town for this.’ Or they say their regular liquor store is sold out.”

What happens in a lot of liquor stores is that store management will hold auctions for those sought-after bottles of Pappy. Or they’ll sell them well above retail from under the counter. In short, bottles of Pappy will rarely, if ever, see a store shelf.

Levinson noted that what really drives the process – which is something of a vicious cycle – is buzz and marketing. Scarcity only breeds more demand, then demand breeds higher prices, and higher prices help feed the buzz. Those new to the bourbon craze are being led by this, he said, while the more experienced bourbon lovers are trying to get ahead of the buzz.

“The people taking it the most seriously and putting time and research into it are staying ahead of the curve,” he said. “Some of those have excess that they sell to fund the next round of purchases.”

In other words, what is next year’s Pappy Van Winkle? That’s a question that is yet to be answered. Meantime, good luck finding a bottle for your Thanksgiving get-together.

Unless, that is, you’re willing to pay the price.

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