Scarce, High End Bourbon Drives American Scandals

By Richard Thomas

High end bourbon has been rocked by twin scandals in 2023, and while they are taking place on opposite sides of the country, all of it lies in the realm of bottles that are either truly finite (i.e. no more are coming) or those commanding demand that far outstrips supply. Collectables, in other words.

Things Go Downhill For Justins’ House of Bourbon
The investigation of Justins’ House of Bourbon is much larger than originally reported in the wake of raids by Kentucky state authorities on the retailer’s Lexington and Louisville stores. On that same day, a similar raid was undertaken in Washington, DC on a warehouse used by the business. Unlike the Kentucky action, which was reported to have taken away a small number of bottles as evidence, the DC operation is stated to have found hundreds of what could be illegally transported bottles of bourbon.

At a closed-door hearing of the DC Alcoholic Beverage Control Board on February 8, the DC authorities ordered Justins’ House of Bourbon to “show cause,” meaning to appear and argue why they should not be cited for violations. It was also revealed that these actions in Kentucky and Washington, DC are part of a wider interstate investigation into illegally transported alcohol, one that also involves Pennsylvania, Texas and federal regulators. The bottles found in the warehouse are alleged to have been brought into DC using illegal channels, including both illegally bringing the bottles to DC and their illegal import into the US. Reports state that hundreds of bottles of Blanton’s were confiscated by ATF agents.

Blanton’s Single Barrel Bourbon is infamous in bourbon circles for having gone from a relatively available, mid-range product to a scarce commodity commanding more than three times the official pricing in the space of just a few years. Blanton’s is, however, still relatively available and often affordable overseas, where the allocation is more in tune with regional demand.

The available information suggests that, insofar as only the Blanton’s is concerned, Justins’ House of Bourbon could have been buying bottles of bourbon off of foreign markets and bringing them back to the US for sale at a substantial mark-up. At the time of writing, Justins’ House of Bourbon did not have Blanton’s listed on their retail website.

Oregon Regulators Allegedly Rig The System
Part of understanding what “illegally transporting” bottles of spirits means in the United States is also bound up with the unfolding scandal in Oregon. Following Prohibition, the United States instituted what is known as the three-tiered liquor sales system. For the most part, this system separates the production, distribution and sale of liquor; producers can only sell to distributors, and distributors only to retailers. If you’ve ever read about how a pioneering craft distillery had to lobby for changes in local law to be able to operate an in-house bar or sell their own product out their doors, the three-tier system is why.

Some states combine distribution and the retail sale of liquor together by making both the province of the state government. These are called Control States, and there are 17 of them. One such state is Oregon, which means the state of Oregon is both its own liquor distributor and the owner-operator of its liquor stores.

The three-tier system is often criticized, but if you’ve ever wondered why the government split these functions up in the first place, look no further than what has allegedly been going on in Oregon. Top managers at the Oregon Liquor and Cannabis Commission (OLCC) are reported to have abused this consolidated authority to divert the state’s allocation of high-demand bourbon, such as Pappy Van Winkle, away from the general public and toward their own consumption.

An internal OLCC investigation indicates that it has been practice going back for at least the last several years to divert these bottles to particular stores in the state’s retail system, where they could be picked up by senior staff of the OLCC, including former director Steve Marks. Allegedly, the scheme extended to state lawmakers as well. Marks has since resigned as head of the OLCC.
The scandal has prompted Oregon’s elected officials to take a closer look at the project to build the OLCC a new warehouse and headquarters, proposed to handle the increased volumes that came with the legalization of cannabis products in the state, as well as the increased liquor trade. The price tag on this project rose from $62.5 million in 2019 to $145.7 million in 2022, part of which is down to the 33-acre parcel the OLCC purchased for the project. The land was appraised at $22 million, but the OLCC paid $40.7 million. OLCC has argued that there were few locations available for their construction project, and the remainder of the cost overruns can be attributed to the spiraling cost of construction generally since the Pandemic.

This Oregon scandal has been especially painful to bourbon enthusiasts, because Control States are widely seen as places where regular consumers have a shot at buying a prized bottle of bourbon for the official retail price. Pennsylvania and Virginia are Control States that run lotteries for rare bourbons, giving their interested consumers a fair and equal shot at buying such bottles for below open market prices. In other Control States, diehards often camp out at stores, so as to be first in line to get the new pickings when they come in. What the regulators in Oregon have done makes a mockery of such fair measures and devoted acts.

The Price To Be Paid
These scandals are driven by the enormous thirst for bourbon, a thirst that has made the list of difficult-to-acquire bottles lengthen as it has gained steam. Pappygate, a conspiracy led by a Buffalo Trace worker who stole rare whiskey (among other crimes), was uncovered in 2015. Back then, the aforementioned Blanton’s was available on any premium liquor store shelf, and the idea that it would become as scarce as it is today would have been taken as fantasy. Pappygate is now the subject of a two episodes of Netflix’s Heist.

But the insanity surrounding Pappy Van Winkle lies at the root of these evils. When all things Van Winkle became famed, rightly or wrongly, as the best bourbon in the world, some of that luster rubbed off on Buffalo Trace. Although the Frankfort, Kentucky distillery does not own the Pappy Van Winkle brand, it has made wheated bourbon for it under contract since 2002.

Although there are factions of bourbon fandom that hang their hearts at Four Roses, Wild Turkey, Jim Beam, Willett, Old Pogue and other distilleries, a large and important group will insist to their dying days that the only bourbon worth drinking comes from Buffalo Trace. Having watched this situation grow up over this first quarter of the 21st Century, I can tell you the largest part of that esteem comes from Buffalo Trace’s association with Pappy Van Winkle.

Thus, one Trace-made brand after another has become a scarce commodity, either over-fished from the sea, or else hoarded at the retail or distributor level to inflate the price. The craze for Pappy first extended to W.L. Weller 12 Year Old, after said bottle was dubbed (incorrectly at the time, although nowadays the description is accurate) “Baby Pappy.” From there it spread to other Weller expressions, the Col. E.H. Taylor brand and Elmer T. Lee; and now to Blanton’s and even Eagle Rare. Scuttlebutt even has regular old Buffalo Trace Bourbon itself showing up short in some markets.

Although prices for annual release and limited edition bourbons are generally above market price, Buffalo Trace remains the only major distiller to experience this kind of genuine shortage, where even their premium-but-still-regular whiskeys are all but absent from store shelves. It’s a fever, and sometimes fevers make people do crazy things.