Fourth Drink Economics
Kentucky’s beautifully rolling hills are inspiring this time of year, but it’s not the sort of beauty that inspires a man to think too hard about price elasticity. Certainly not if you’re in a carload of guys on a weekend hall pass without a Missus in site. Certainly not if you started drinking at lunch. Yet, if you want a bottle of Evan Williams’ Single Barrel – their 9-year-old, rye-recipe bourbon, you’re driving to Kentucky as well. Although, strictly speaking, you don’t have to start drinking in Nashville.
Earlier this summer, Evan Williams announced that its popular expression was a little too popular, and would only be available on Kentucky shelves. The easiest way to give something a cult following that defies economic sense is to restrict supply, but Heaven Hill, its parent company, have more pedestrian reasons: Inventory. Unlike vodka, gin, or memory chips, if there is a spike in demand, you can’t ramp up production and restock the shelves next quarter. With bourbon, you are looking at closer to a decade – and that’s a lot of lag time where your booze-hound customers are going to continue to drink, something.
Heaven Hill jumped into the single barrel bourbon space with gusto in the 1990s with the Evan Williams offering that was about half that of Blanton’s, who really started the craze. The company then pioneered the gimmick of “vintage” labeling. This doesn’t mean making it look like Davy Crockett wrote out the ticket, but putting the year the whiskey was distilled on the bottle. It was novel because the physics of the matter is that a whiskey’s “vintage” makes no difference that a human tongue can detect because magic happenes in the barrel. Still, it gave dedicated bourbon drinkers something else to gab about. Any marketing department with such a keen grasp of “fourth-drink logic” is bound to make a splash. They did, selling so much of the stuff that now they can’t keep up. At this point Evan Williams options were to dilute the product to meet demand, or restrict distribution.
The perverse economics of bourbon are so long, and so wrapped up in the fourth-drink logic that this is actually a good problem to have. To wit: that price elasticity formula that you never want to see through the bottom of a cocktail glass:
I know right? It’s enough to drive you to drink. What it means is that a drastic change on top of the line is going to show up elsewhere in the equation. And because it is a cruel world, that means price. Or if you’re one to the good people at Evan Williams, big, boozy margins. The advantage for the customer in driving to Kentucky for a bottle is, well, all the other bottles. It’s like a kid in a candy store. Here is where legal compels me to point out that at least one of you morons in the car, preferably the driver, needs to stop drinking until you get where you’re going.
Bardstown, Kentucky bills itself as the bourbon capital of the world, and that’s true enough. It’s a beautiful little town in the bargain. It hosts a Bourbonfest every September, which is great fun as bourbon enthusiasts like to get together and get not-quite-gassed. Like every other crowded event, though, it is subject to the laws of diminishing returns. Go on one of the 51 weeks a year when they aren’t drawing an international crowd.
If you want a full shelf of Evan Williams Single Barrel, head to their distillery in the decidedly more urban “whiskey row” of downtown of Louisville. The weather is generally great, the scenery beautiful, the downtown is busy; all made more so by a uniquely Kentucky concentration of bourbon bars every block and a half.
There really is no reason not to go as soon as you wrap up those intense, and probably expensive, negotiations with the Lady of the House over that hall pass.