Bourbon has always been a popular drink in some circles, but there has been a recent surge in the market. With your old stalwarts still gracing the shelves in bars and grocery stores, you will be forgiven for not recognizing some of the names. With celebrities bringing out their own brands and well-known names churning out new flavors at an alarming rate, the market has definitely become saturated.
Today's bourbon market is noticeably different from when you had a few known brands of each type of liquor. You can now walk into a store and stand in front of shelf upon shelf of bourbon brands that look remarkably similar.
Liquor has recently become a product that celebrities have begun to put their names to. With celebrity endorsement, companies are able to charge more for their brands. This is because fans of the celebrity will buy the liquor in addition to other merchandise. With celebrity endorsement meaning higher promotional costs, bourbon companies are being forced to increase their sale price.
In addition to promotional costs and celebrity endorsements, bourbon is so expensive because of the cost of making it. Starting at the beginning of the bourbon-making process are some of the highest costs. The oak barrels that are used to make bourbon can only be used to make the bourbon once. Meaning each barrel of bourbon begins with the cost of the barrel, roughly $250. This is no small cost to pay out and must be averaged over the cost of each bottle of bourbon to offset costs. Then the manufacturer must pay for the grain they are using, different types have different costs, and this is not as cheap as you might think.
Once they have bought all of the materials, the manufacturer must then mash, ferment and distill the grain. This process then leads into the next cost of the bourbon-making process – the staff and overheads. Each barrel needs staff to make the bourbon and the running costs for the water and electricity.
Making bourbon is not a quick process, and some of the bourbon is lost in the distilling process. This loss must be added to the cost of what remains in order for the manufacturer to make a profit. It is estimated that 10% of the bourbon is lost in the first year of aging, and 4% each year after that. So a bottle of bourbon aged for 7 years would lose 34% from each barrel. A loss this high must be included in the bourbon's retail price to be offset.
In addition to the above costs, there are also the taxes that the distillers have to pay. This is an extremely complex process with tax rates varying between states. With some charging no tax and others charging various amounts per proof gallon. There are federal taxes for the distiller to pay on top of state taxes, averaged at approximately $13.50 per proof gallon.
There is then an additional tax added for the value increase over time as the bourbon is distilled. This tax is low but increases with each year. Added together, the taxes do mount up and need to be added to the price of the bourbon in order for the distiller to make a profit.
In addition to the celebrity endorsement costs above, there is the cost of additional promotion; TV, billboard, and bus adverts. Putting out the initial adverts is expensive. However, maintaining these adverts is an increased cost. There is no point in putting up an advert for it to become worn and tired due to weather conditions. The desired market will walk past dilapidated adverts and not pay them any attention.
Distillers need to make a profit, but so do the stores that are selling the bottles of bourbon. The stores will purchase in bulk from the distiller at a price per bottle of bourbon that will allow the distiller to make a profit. The store will then need to add their own markup to ensure that they, too, make a profit.
As you can see, there are several aspects that go into why a bottle of bourbon is so expensive. Each cost seems small individually but added together can have a big impact on the sale price.
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