Those who aren’t new to the world of bourbon will know about the crazy prices of bourbon in today’s market. If you’re just getting into the ‘bourbon game’, you are most likely shocked and a little confused. How can these companies charge so much!? This article reveals the truth about bourbon pricing and who’s really making the money. Let’s dive in…
Why is Bourbon Expensive?
There are many reasons why bourbon is so expensive. We need to take into account the raw materials, aging process, taxes, marketing, retail mark-up, and labor costs – amongst other things.
One of the biggest costs in bourbon production is the charred oak barrel, which can only be used to make bourbon once, and only once. This would be fine if the barrel only cost a few dollars, but this isn’t the case. In fact, one of these barrels costs roughly $250. The barrel can be sold to be used for other spirits, but the sale price fluctuates.
Along with the barrel, there is the grain itself. This cost includes buying the grain, mashing, fermenting, and then distilling the grain. The raw materials can generally be found at the following prices:
- Corn – 750lb for $375
- Rye – 250lb for $115
- Malted barley – 50lb for $30
- Yeast – $50
Bourbon doesn’t just make itself. The distiller and their staff need to collect a wage. This adds another few hundred dollars to the cost per barrel. Oh, and then there are costs for electricity, water, and fuel.
As the bourbon ages in the oak barrels, precious liquid is lost due to evaporation. In fact, distillers frequently lose 10% of liquid during the first year of aging, and then 4% more every following year.
Just like all of us, distillers have many taxes to pay. However, it is even more complicated than our tax forms. The tax rate varies from state to state. For example, there is no bourbon tax in Wyoming, but distillers in Washington have to pay $31.48 per “proof gallon”. The average bourbon tax in USA is $5.56 per proof gallon, which roughly translates to $0.96 per bottle of bourbon.
There is also the federal tax to contend with. This tax costs the distillers roughly $13.50 per proof gallon, which adds a few more dollars to the final sale price.
But that’s not all… there are also ad valorem taxes, with the main one being a tax on the value increase of an aging barrel. The tax isn’t a huge amount, but it adds up over time. Finally, distillers are face with yet another tax on every box of bourbon sent out of their distillery. Only two things are certain in life: death and taxes.
So, you’ve got your finished bourbon, and it’s delicious! However, how will anyone know how delicious the bourbon is, if they have never heard of it? To make profit, distillers need to promote their product to customers and retailers.
Endorsements, TV adverts, promotional events, and print ads all cost money. These promotion methods can be extremely effective, but they can cost tons of money to create and maintain.
The top shelf bourbons may seem unfairly expensive, but they have usually spent far more on advertising when compared to the cheaper bourbon whiskies. Just think, how much did it cost Jim Bean to hire Mila Kunis for their adverting campaign? Although we think it was definitely worth it.
Along with the distillery, the retailer needs to make some profit. Their sale price needs to cover their costs, facilities, and staff. The price varies from state to state, but retail stores tend to add a 20% mark-up.
The Most Expensive Bourbon Ever Sold
It was once a variety for whiskey to be sold for over $100 dollars. These days, it is incredibly common. In fact, finding the 10 year old whiskeys for less than a few hundred dollars is near impossible.
One of the most in-demand luxury bourbons comes from Michter’s Distillery. At a recent charity auction, they sold a private barrel selection for $210,000. That’s right – a barrel of bourbon for nearly one quarter of a million dollars!
This barrel will hold roughly 150 bottles of whiskey, which means each bottle from this cask will cost at least $1400 when sold individually. Not sure about you, but I can’t afford to spend that much on my weekly bottle of bourbon.
Mitcher’s also sell individual bottles of bourbon called Celebration Sour Mash. They are extremely rare, but have been placed on the shelves for $10,000.
As you can see, the American bourbon market is growing and growing. Just like with Bitcoin or the stock market, when something becomes higher in demand, the prices start to skyrocket.
So, that’s why most bourbon whiskey is so expensive. Every year of age makes the product more expensive, which is why bourbon that has aged for 20 years is so much more expensive than bourbon that has aged for 2 years. You see, more liquid has been lost due to evaporation and more tax has been paid.
Other than the aging process and taxes, there are the raw costs, labor, promotion, and the retail mark-up. It is no wonder why bourbon is so expensive.
The main driving forces behind the increase in bourbon prices are an increase in demand for older bourbon and greedy tax collectors.
Those on a budget may want to purchase bottom-shelf whiskey that hasn’t been aged or promoted by big companies. You can visit Flaviar for some rare bourbon whiskies, or maybe try their monthly bourbon club package.