If you have been around bourbon very long you understand how big the secondary market for bourbon is. Large groups are continually shut down and spring back up as many smaller groups with different names. Frustration over this topic frequently brings up the same comments. People are always asking things like why don’t distilleries do more to stop the secondary market, and why don’t distilleries just raise prices on limited items like Pappy and BTAC to stop hoarding or flipping? The reason is simple. Distilleries are the biggest beneficiary of the secondary market.
The first way distilleries benefit from the secondary market is through the hype and fomo it creates around releases. When people find out they can’t find George T. Stagg they are steered towards Buffalo Trace becuase they share a mashbill. The best example of this is the Pappy craze sparking sells of Weller. As recently as 2-3 years ago you could walk in most good stores and find Weller Special Reserve and Old Weller Antique with ease. As the Pappy craze spiraled out of controlled people were steered towards Weller as an alternative because they share the same mash bill and are produced by the same distillery. This has led to a run on Weller products, and now they are allocated as well. The hype of BTAC and Pappy lead to increased sales of the entire Buffalo Trace boubon portfolio.
The second way distilleries benefit from the secondary market is a little cloudier. They use to push large quantities of the other products they produce such as vodka. Distributors use allocated releases as a way to talk stores into buying stock that they don’t necessarily need or want. I know we are harping on Buffalo Trace as an example here, but they are an easy example to talk about for this scenario as well. Buffalo Trace doesn’t just distill whiskey they also distill several labels of vodka. When stores ask what can I do to get an extra bottle of William Larue Weller the answer is often something like buy 40 cases of Platinum Vodka. Have you ever walked in to a store and seen cases of Popov stacked to the ceiling? This is why. A friend of mine who recently opened a restaurant asked the distributor how he could get some Old Weller Antique and was told he would have to carry the entire Buffalo Trace portfolio including Wheatley Vodka.
Distilleries may talk publicly about fighting the secondary market. They may encourage customers to report stores who are gouging prices on allocated products. The truth though is that distilleries aren’t working behind the scenes to eradicate price gouging or secondary markets because they are the ones who benefit the most.