In December 2022, a bottle of Pappy Van Winkle 23 Year Old Family Reserve sold at auction for $52,500, more than the list price of a base Tesla model. Buffalo Trace Distillery’s aged bourbon is arguably the most sought-after bottle of American whiskey in production today.
Pappy Van Winkle commands high prices in the post-retail market in part because it’s so rare: around 84,000 bottles are released each year. By comparison, Jim Beam, a much more affordable and accessible brand, ships around 84 million bottles a year. Pappy Van Winkle’s rarity helps explain the furor over the recent revelation that senior Oregon Liquor and Cannabis Commission (OLCC) officials had been hijacking bottles for personal use.
The Pappy Van Winkle line of bourbons is divided into age categories, ranging from 10 to 23, which the distillery distributes across the country. Whiskey obsessives track shipments, sometimes queuing for hours at a store that supposedly received a delivery.
Oregon is a “control state”, meaning alcohol distribution is handled entirely by a government agency. The OLCC acts as a compulsory intermediary for all distilled spirits and contracts with private companies for the retail sale of packages. Oregon, like some other states that control liquor distribution, has lotteries for rare bottles. Winners have the opportunity to purchase these products at the manufacturer’s suggested retail price, usually a few hundred dollars for Pappy Van Winkle.
Senior OLCC officials circumvented this system. When they wanted Pappy Van Winkle 23 for themselves or political friends in the state, they would redirect rare bottles to a store near OLCC headquarters in Portland. The bottles would be reserved for them, hidden from the general public. After work, they would stop at the store and buy the bottles at the legal price, a fraction of the after-retail price.
Thanks to Oregon’s opaque liquor allowance system, OLCC officials didn’t have to enter their own lottery, line up outside their own state-run stores, or pay a auction markup. This system gives OLCC officials extraordinary power in a market for very rare and high-value collectibles. At the same December auction mentioned above, for example, four other bottles of 23-year-old Pappy Van Winkle, valued between $3,000 and $4,000 each before the auction, sold for more than 40 $000 each.
In 2022, according to OLCC data, the entire state of Oregon received just 999 bottles of Pappy Van Winkle whiskey, including just 33 bottles of 23-year-old bourbon. State officials used the lottery to distribute 150 of these Pappy bottles, including only five of the oldest and rarest numbers. The odds of winning the right to buy a bottle was approximately one in 4,150.
The vast majority of the remaining bottles were awarded by OLCC officials, who purchased some for themselves and others as gifts to state lawmakers. They also hijacked less rare but still hard-to-find bourbon brands like Elmer T. Lee.
Defenders of the state’s liquor control system have long argued that it keeps prices low and maintains local distribution, rather than leaving it to supposed predation by large out-of-state corporations. But in practice, it is a system of privileges for the powerful.
For nearly a decade, the OLCC was run by Steve Marks (a former top aide to former Governor John Kitzhaber), who was paid around $222,000 a year. Marks resigned at the request of current Oregon Governor Tina Kotek after news of his agency’s corruption broke in early 2023. But the scandal wasn’t the product of one person. ; it was the inevitable result of granting state officials enormous power in a private market.
Oregon is one of the 17 control states. Another is Virginia, where another bourbon-related scandal unfolded in 2022. An employee of a state-run liquor store illegally passed information about state distribution plans to the chief from a group of online whiskey enthusiasts. The information was then sold to bourbon enthusiasts, giving them an edge over other collectors.
States persist with liquor control systems in part because they generate revenue for the government. Between 2020 and 2022, Oregon reports, the OLCC “contributed more than $625 million to Oregon programs, counties and cities,” about half of which went to the state’s general fund. But these systems also cost money, and the people running them don’t necessarily care how they spend it.
For years, the OLCC planned to build a new liquor warehouse. The project cost estimate increased from $62 million in 2019 to $145 million in 2022, an increase of 133%. In 2021, the OLCC purchased 33 acres for the Canby warehouse. He paid over $40 million for the land, which had recently sold for just $6 million and was appraised at $22 million just before the OLCC purchased it.
The terms of the purchase were so egregious that the Oregon Public Lands Advisory Board rejected the deal. It was one of only two such rejections in more than a decade, the committee chairman told Jefferson Public Radio. This decision was only advice, however, and the OLCC proceeded with the purchase anyway.
The OLCC touted the warehouse project as a way to expand alcohol options for Oregonians. But this represents a costly expansion of an already reprehensible state power.
For a decade, the Northwest Grocery Association (NGA), a consortium of grocery chains operating in several states, has been trying to end Oregon’s state liquor monopoly. A ballot initiative backed by the NGA would have allowed the sale of distilled spirits in grocery stores, which is already legal in neighboring states of California and Washington. This measure failed to qualify for the 2022 ballot due to pandemic-related challenges in collecting signatures.
When the ballot measure was withdrawn, rival group Keep It Local, backed by beer distributors and teachers’ unions, issued a triumphant statement, calling the stalled privatization push a “misguided proposal to dismantle liquor system that works”. On the contrary, the revelations about the OLCC make it clear that the system works best for the powerful and connected who can manipulate it to their ends.