Understanding The Secondary Market
The secondary market. The elephant in the room. The thing that everyone talks about, but no one is supposed to talk about. It’s like watching Fight Club play out in real life. But, instead of a ring, it’s underground social media groups, and instead of boxing gloves, it’s bottles of highly-coveted bourbon.
But, is it really surprising the secondary market has taken hold in the wake of the big bourbon boom that’s taken place over the last couple of years? Not really. But the waves can be felt throughout the bourbon community, and, while it has made some bottles more accessible regularly if you have the coin, it’s also taken the thrill out of the hunt and the wind from the sails of new whiskey enthusiasts around the country.
Why Is The Secondary Market A Thing?
Two simple words: “supply” and “demand.”
Take a look at just about any other limited commodity with a ravenous fanbase. Shoes for example. People wait in line for days for the release of rare shoes. Some people wear them, some people display them, and other people sell them to those who value their time more than the price inflation of buying them secondary.
This means the odds of running into a pair of these rare shoes while casually browsing your favorite kicks store is highly unlikely. But, for a price, you could get them almost any time you want.
This translates to the whiskey industry as well. People will wait for days for releases of highly-allocated whiskey. And, like our previous example, some will drink the bottles, some will display the bottles, and some will sell the bottles for a profit. Sometimes this helps fund their whiskey hobby. Other times it’s just to make some spare walking cash. Either way, the concept is very much the same.
So, let’s say you have a bottle of Stagg Jr. It’s a bottle that should run you somewhere in the $65-75 range at the suggested retail price plus a little upmark. However, those bottles are going for nearly $300 at the writing of this article in those underground circles. Weller 12, a $40 bottle, can go for upwards of $250+.
Now, there are ways to bet on bottles rather than just buy them at an inflated price. Many groups will offer spots to individuals who wish to take a dance with lady luck. They’ll divide spots up and sell each individual spot for a cheaper entry for participants.
How Does This Affect The Community?
There’s been a big difference that many people haven’t seen in many other circles. That is the dramatic inflation of price on the retail side of things.
When I first got into whiskey, there was a thrill of the hunt. It was fun hopping in the car with a buddy and hanging out while checking your local stores every once in a while to see if there was something really special. The demand wasn’t nearly what it was today, and Blanton’s, Eagle Rare, Weller, and Buffalo Trace hung out on shelves in nearly every store.
Those days are long gone, but with a balance of scarcity came a thrill when you found an allocated bottle at retail. It was even more rewarding when it was one your friend had been looking for and you knew that you were going to make their week by picking it up for them.
But now, I’ve seen Buffalo Trace going for upwards of $70 in some seedy stores, and Eagle Rare for over $100. Why? Because store owners have caught wind of the secondary market.
Now, there’s a double-sided argument to this. First, for enthusiasts with massive amounts of expendable income, this may be just another collector’s hobby. Even the inflated price of whiskey is likely viewed as incredibly affordable for someone who, let’s say, collects expensive watches. $150 for a bottle of Blanton’s is a lot more palatable than a $35,000 Rolex. There are also new whiskey enthusiasts that are willing to pay that massive price once just to have a bottle on their shelves where it will collect dust as they admire it in a bitter-sweet haze. And, typically those people will argue that the secondary isn’t bad. Either because they can pay for it and having that market there makes it readily available, or they are defending themselves for spending that money just to have the bottle.
However, the crowds out those who sincerely enjoy drinking the whiskey they find and don’t have massive budgets to pay inflated pricing likely have a much different opinion. They put the time and effort into building relationships with their local store owners, put boots to the pavement out looking for these bottles, and now the pickings are slim. Many store owners who genuinely love the community are hesitant to give out bottles, fearing they’ll never be enjoyed. And, those that they do know will drink it flock to their limited supply and they have to make tough decisions on who gets what bottle. Other store owners are just looking for huge profit off single bottles and are basically engaging in a “pseudo secondary market” themselves.
Either way you look at it, what it does objectively is remove bottles from the hands of those who love to drink whiskey, and puts them into the hands of those who will treat them as an investment or showpiece and typically leave them unopened.
So What Can We Do?
This is a tough conversation to have. First off, the secondary market is highly illegal. Anyone who participates in the secondary is risking a $2,500 fine, 100 community service hours, and/or up-to a year in jail. If you ask me, not worth it for some whiskey. Especially not when you can find bottles that are pretty dang good sitting on shelves around the country at retail pricing. They may not have the fancy names behind them, but there are some sleeping gems of which there is no shortage.
The other tough part of this conversation is that there really isn’t anything to do. For as long as people have been collecting things, there’s been a black market for them. Try as we might, it’ll always be there. And, there will always be people willing to spend the money to have a piece of the action. So, whether we like it or not, secondary is likely here to stay for the long run until the whiskey boom begins to die down.
Greg Sinadinos started his spirits journey writing a whiskey periodical for Fine Tobacco NYC Magazine. He began answering review requests under a social media page he named “Whiskey Culture,” which quickly merged with Greg’s passion for connecting with others and his interest in history.
Today, Greg travels the country not just looking for great whiskey, but also exploring the history and individuals that the whiskey community is founded upon. He has authored “Whiskey History From Around The World” and is the host of “The Rickhouse” web series.