The Economics of Pappy Van Winkle

Pappy Van Winkle Black Market

Disclaimer: The resale of alcohol is illegal, without proper license, and I am in no way encouraging it. I also have no problems with the current market, buyers, sellers or prices. This article is just an observation of a free market at work which I find fascinating. 

Edit: The owner of bottle spot read the article and emailed me this

The only thing I’d point out is that according to the lawyer we conferred with before launching Bottle-Spot, the resale of distilled beverages and wines for non-commercial purposes is not illegal. According to 27 U.S. Code Section 203, it is unlawful to engage in the business of producing, importing, exporting, selling or offering to sell distilled or malt beverages or wines, and for anyone to purchase them at wholesale. The most important component is the summary, which states the law is intended to enforce the 21st amendment, which prohibits violating any state law in inter-state commerce. It also states it’s intention to protect tax revenue, which should not be an issue unless someone is buying at wholesale illegally.

Because of the above, we don’t believe that reselling alcohol as a hobby is illegal, so long as it is a hobby and not a business (the IRS sets those rules). If people are still concerned, they can restrict their dealings to intrastate (so long as it’s legal in their state), because the above law applies only to interstate commerce.

Why are bottles of Pappy Van Winkle so expensive on the secondary market? The bottles retail for $79 and are reselling for $500. Is the bourbon market a in a bubble? Expensive whiskey bottles are nothing new and neither are the high prices on the secondary market. What is unique about the current bourbon secondary market is that these current releases are sold for 5 to 20 times the retail price. Normally, prices like this are reserved for bottles no longer in production or from a distillery that no longer exists. This is not the case in the current market. A 2013 Old Rip Van Winkle 10 year bottle consistently sells for $150-$200 with a retail price of $39. I believe the secondary market has benefitted from the retailer’s short comings.

What is the bourbon secondary/black/grey market?

The secondary market was born out of the increased demand and shortage in supply of bourbon. Bourbon collectors and drinkers have organized in multiple ways to exchange bottles. First, eBay was a substantial marketplace for collectors until alcohol sales were shut down. Next, there was an active group on Facebook called the Bourbon Exchange. This has also since been shut down. There still remain several groups on Facebook for buying, selling, and trading bourbon bottles. Craigslist is another popular option. However, in my opinion, craigslist is still synonymous with scams. The best option seems to be This site has verified emails and other safe guards in place to ensure quality trading. No matter the outlet the secondary market is thriving.

In a typical market, equilibrium is reached by balancing supply, demand and price.

supply and demand graph


The bourbon market is experiencing the exact opposite. It’s currently in a state of disequilibrium because demand significantly outweighs the supply, which drives up price.

supply and demand disequilibrium

Two parties that have exploited the secondary market are the retail gougers and scalpers. Retailers are hiking the price of Pappy because of the volumes of calls received about its release. They then see what the bottles are selling for online and follow suit. Scalpers in turn grab every bottle they can within a 500 mile radius. They then resell that same bottle at a much higher price on the secondary market. A third group that should also be mentioned is the opportunist. This is a consumer who grabs an extra bottle when he can because why not cover your bourbon habit by selling a spare bottle? The amazing thing about these three parties is they have stepped in and stabilized the bourbon market where the retail market could not.

What’s next for the bourbon market?

We have to remember it wasn’t that long ago distilleries had to use gimmicks to sell their bourbon. Julian Van Winkle tells the story of how they used branded decanters to sell their bourbon, my how the times have changed. The bourbon industry is now playing catch up in a major way.

In most markets the answer is simple, increase the supply. When your product takes 10-23 years to make this is not a viable short-term solution. Buffalo Trace (and most distilleries) has increased their production but most of this bourbon is only 4-6 years old. The way I see it is there is only two short-term solutions. One, the distilleries and brands increase the retail price to cut out the scalper. This solution benefits the distilleries but hurts the consumer and cuts out the margin of the scalper. (Hypothetically, who knows? Maybe the secondary prices will rise congruent with retail pricing). Two, do nothing and wait until the hype machine runs out of steam and demand dies down. Number two is more of a risk because there is no telling when demand may die down. We can only speculate as to what will come of this massive demand we have created.

Personally, I believe the only solution is for the distilleries to raise retail prices. Compare the scotch market to the bourbon market. The quality in a $30 bottle of bourbon blows a $30 bottle of scotch out of the water (don’t kill me scotch fans). Historically the demand for scotch was much higher, however, the current spirits market is trending in favor of bourbon. We’ve already seen NDP’s (Non Distiller Producers) use secondary pricing in their Limited Editions. Angel’s Envy released Angel’s Envy Cask Strength bourbon for $200. Michters released a sour mash whiskey for $3,000(I assume these are still on shelves).  Whistle Pig released Boss Hog which was a 12 year old barrel proof rye retailing for around $150. The point is consumers are proving they will pay premium prices for quality bourbons and American whiskeys. Distilleries (the ones that make, age and bottle the bourbon) should be reaping the benefits of increased demands, not some guy that stands in line for a few hours and immediately resells the bottle.

2013 Secondary Market Bourbon Prices:

Pappy 23 – $1,000-$2,000

Pappy 20 – $600-$900

Pappy 15 – $450-$550

Van Winkle Lot B (12) – $200-$300

Old Rip Van Winkle 10 – $175-$200

Van Winkle Reserve Rye – $450-$600

BTAC – $200-$300

Buffalo Trace Antique Collection prices varies greatly by bottle. Sazerac 18 and William LaRue Weller are on the high end, Thomas Handy on the low end and George T. Stagg and Eagle Rare 17 somewhere in the middle.


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