Saturday, June 3, 2017

The sad state of rum and brandy selections in America (and how to fix it)

Last night I wanted to buy rum.

But I couldn't. As I perused a shelf 30 feet long and 4 feet high, I couldn't find a single rum worth buying. Mind you, this was at Specs, which is like the Wal-Mart of Texas liquor stores: a giant selection that crushes small competitors, but not much for customer service.

Every bottle there was garbage: jammed full of sugar and caramel coloring, polluted with vile flavorings ("cinnamon spice"!), slashed down to 80 proof (or below), spiked with unknown additives, and, even when it had some age, completely cloying and boring. 

Sure, they can be used as mixers. But so can vodka, and I'm sure as hell not drinking that stuff neat. I want something worth sipping on its own, from a bottler that has the decency to leave it non-chill filtered, 92 proof or above, without any chemicals or sweeteners swallowing the spirit whole.

At TotalWine nearby, there is exactly *one* rum worth grabbing: that Smooth Ambler Revelation ($57) that's really solid. That's it. There's also two Berry's rums at 46% (Fiji 9 year and Grenada 9 year) but the Grenada is presumably Westerhall (snooze) and the Fiji is overpriced ($70). That said, I might break down and try the Fiji, even given its lighter style. But that's mostly because, as I've said many times, I'm a degenerate with no self-control.

I'm sure whisky was once near this point: filled with bottom shelf 80-proofers and boring blends from Scotland. But old batches of Johnnie Walker were pretty damned fine, from the dusties I've tasted. And bottom shelf, $10 bottles of 80s and 90s bourbon crushed today's "top-shelf", widely available rum offerings (Zafra 21 anyone?)

There's a similar problem in Armagnac and Cognac: sugared and diluted, gussied up with dyes and adulterants. Try to find a decent French brandy at Specs or TotalWine, I dare you. Middling at best and not worth the money.

It's not a total loss: a few retailers like K&L Wines (Cali), D&M Liquors (Cali) and Astor Wines (NYC) bring in fantastic Charles Neal and Nic Palazzi bottles: unfiltered, unadulterated and fantastic. And Binny's (Chicago), while not selecting their own casks, has a wide range of Darroze Armagnacs and some excellent Calvados and rums. Kudos to all of them, especially K&L, which is at the leading edge of brandy right now.

But ordering from them requires shipping, and I'm in a no-ship state. In fact, most states are no-ship states now thanks to overbearing state alcohol regulators who want to protect in-state monopolies/oligopolies in distribution and retail. It's a corrupt system that stifles competition and stiffs the consumer on selection.

Similarly, just the process to get a label *introduced and approved* federally is a pain, let alone the similar, overlapping and duplicative state regulations that stall the process, drive up costs, and discourage innovation.

Then the tax system, at every, level piggybacks onto the oligopolistic pricing from the entrenched players, making the bottles far more expensive than they should be. Why are the bottles taxed? In part, to fund the very regulators aiding and abetting their own bloated budgets and the perpetuation of these rent-seeking practices.

The result is that Texas has a grim rum/brandy selection but great whisky offerings because the perceived demand is there: TotalWine and Specs can sell cask strength malts and bourbons with ease, as the average customer is more discerning. Yes, plenty of them will still buy Jack Daniels and Crown Royal, and that's the bulk of whisky sales, but the indie bottles and single-cask offerings move briskly. It's worth the shelf space, cost, and hassle. And it brings in good customers.

Plus, you can get an 10 year, bottled-in-bond, 100 proof, single-barrel Henry McKenna for $25. Or Laphroaig Cask Strength for $55 or Springbank 10 for $50, staggering values, all of them. In large part, the whisky-end of this broken system works (kind of) in spite of the impediments, because the demand is able to overcome the artificial restrictions on supply. This produces more competition, so prices stay reasonable.

Of course, there have been massive price increases on some "super-premium" bottles by Diageo, LVMH, and Beam/Suntory, but those are a symptom of a hot market, not the fault of regulators. There's profit to be had and they're grabbing it. They see flippers snapping up limited edition bottles and selling them for 2-10x the price the same day on Facebook message boards, and the corporate reps don't have to be PhD economists to figure out the math.

But that still leaves rum and brandy withering on the vine, marred by watery mixers and pitiful selections.

Rum and brandy need a selection revolution. The best stuff is available across Europe, and there's a niche market for it here too. Right now, it's much easier and cheaper for me to have a bottle of rum shipped from the Netherlands or the UK rather than from California or New York. When I order from there? No couriers or shady begging needed. Easy breezy, they ship it ex-VAT and the per-bottle price is usually cheaper than at a domestic store, even when shipping is added. This is true of whisky as well.

And unlike some stores (*cough* Astor) that will allow a third-party courier to pick up the bottles, the Europeans actually pack the boxes up with styrofoam, bottle packers and bubble-wrap. Imagine that!

Best of all, the foreign selection is killer, especially with rum: Kill Devil and Velier, Hampden indies, Caroni cask strength, Long Pond at 46%, and Foursquare galore. And on the Cognac and Armagnac end, it's pretty damned strong too: big selections from Darroze and the ocassional L'Encantada and Charron.

As a result, the bulk of my buying these days is done at K&L or overseas. At Spec's and TotalWine? I buy cigars and the occasional whisky. They used to get 90% of my business, but today, it's probably less than 20%. Other than a few house malts and bourbons I keep on hand, or the occasional special release that they stock, there's not much of a need to stop there.

So how to fix this conundrum?

The solution is two-fold: first, retailers need to take risks. K&L is crushing with its Armagnac business, not because it's a huge profit margin--it isn't, as they offer fair, direct-to-consumer prices and it's a niche market. But it brings in high-end customers who will buy their Islays and sherried monsters, their Belle Meades and Smooth Amblers. It makes them key players in the premium spirits game at a time when retailers are hurting. The Bud Light and Smirnov revenue doesn't disappear because they stock an Enmore 24 year rum.

Nearly every single K&L Armagnac ends up selling out. So does every Calvados and most of their indie Cognacs. The rums do fairly well. Yes, sometimes they have to be put on discount, but that's not often. They don't sit on the shelf for too long. It's clearly worth the time and investment. They're not white elephants.

And that can be replicated in other big cities: Austin, Dallas, Houston, Chicago, whereever. We all read WhiskyFun and see Serge Valentin going nuts over Hampden and Caroni rums. Sku and the Serious Brandy page on Facebook shows there's a growing community, however tiny it might be, of influential bloggers who are jumping into Armagnac, Cognac, and Calvados. And the trendsetters will cause the casuals to follow suit. It's already happening.

Second, it's time to radically deregulate the alcohol industry. What, exactly, is the benefit of the TTB and state regulators like TABC who won't even enforce their costly labeling regulations and allow additives to be slipped in without any warning to the customer? The entire regulatory scheme is a sham: it makes sense in theory (protect the consumer), but like most regulation, it becomes captured by industry and the bureaucrats end up protecting the incumbents. This is true in beer as well.

Some believe the solution is more regulation, or at least more effective regulation. This position argues that these same ineffectual, corrupt bureaucrats can alchemize into strident, Eliot Ness types if we just write enough nasty letters or complain on private Facebook threads. It's quite a charmed notion, sincere but naive. It ignores how undemocratic, insulated state bureaucracies function in practice, and more importantly, the overall cost-benefit analysis of the regulations as a whole.

Why can't Balcones in Waco, TX ship directly to me? Why do they need the middleman distributor and the crappy selection of a rent-seeking retailer like Specs, which provides almost zero valuable services but jacks up the price? Because of the antiquated, costly regulations that protect the big boys in distribution and retail. Their lobbyists get involved. It's unseemly. 

In fact, in the "three-tier system" that is in most states, a retailer can't also have wholesale or manufacturing (distillery) levels in the business, so it leads to all kinds of silly divestments and the inability of Balcones and other distilleries to ship directly in-state.

Why can't Wal-Mart sell whisky in Texas? Because supermarkets can't sell it. Why? To protect the retail package stores.  In the name of preventing the boogeyman of "vertical integration" and monopolies, the state creates tiered oligopolies. It's a mess.

And it's time to open it up. 

Sku, of the sadly-deceased RecentEats blog, is right: this is the Golden Age of Brandy, with more brilliant, small chateau casks available than ever before, at great prices and unfiltered. But you need to live in California, New York, or Illinois. Most of the country is missing out on the revolution. So how do we save it, let alone expand it?

We're past the point where someone is going to add methanol into their whisky and customers go blind. This isn't the Prohibition Era and one lawsuit from a sick-or-dead customer is enough to discourage that behavior, along with the fact that the bad press would destroy the entire brand. We aren't in the era of traveling medicine shows where the fake booze con man would then skip town. 

It's time to abolish these onerous state and federal regulations, almost en totum. The system protects a brick-and-mortar retail system that's on its last legs, as we see in the closing malls and big-box stores across the country. What's the justification for the added costs, as compared to what we, the customer, get in return? How much innovation is blunted? How much protection do we actually need?

And most importantly, how many people will never get to try the beauty of Hampden or richness of Pellehaut because it never reaches the shelves as a result of this malignant leviathan of regulation?

The byzantine system isn't just diluting the spirits themselves, it's diluting the selection and culture. It's parasitic and has outgrown its usefulness. Here in Texas, certain state legislators are making moves to cut down on the power of the TABC, and I applaud their moves as a great first step. At the federal level, the same is needed.

But that'll take time. 

For now, I'll keep hiring couriers and using Transferwise to convert U.S. Dollars into Euros. I'll keep crossing my fingers that none of the bottles break in shipment and that maybe a few more retailers take risks. And I'll have to keep watching other enthusiasts demand that we expand and further enable the same regulations that are the key source of the problem.

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