Cheap booze — I mean, really cheap booze — is all around us. It’s what bars pour in their well drinks. It’s what teenagers spring for when they flash their fake IDs at the local liquor store. It’s probably in your grandparents’ liquor cabinet, maybe even yours too. The “handle” size invariably comes in a plastic bottle with those cutouts for your hands in place of an actual glass handle. The brands are names you almost never see advertised.
In the spirits industry, this market segment is known as the “value” category. And if you’re the type who can tolerate the sensation of a chemical burn in your throat if you were to take it straight, it’s a hell of a value! But how popular is this segment in reality? Why don’t liquor companies ever market it? Where’s it made? Is it very different from more expensive liquors?
Alongside the head of a major liquor distribution company in the South (who didn’t wish to be named, in order to speak more freely about it all), and the drinks market analysis of IWSR, we’re chugging some answers to these mysteries.
Let’s talk top-shelf versus bottom-shelf alcohol, then. Just how popular is cheap booze?
Depends on who you ask. According to IWSR, which tracks this sort of thing, “value” spirits made up 24 percent of the total volume in America in 2020. (It was flat for the year, and is forecast to decrease by about one percent in the next three years.) But according to the distributor we spoke to, that’s still a huge number. Take something popular, like Johnnie Walker, the best selling Scotch in the world — a bottle of cheap Popov vodka will easily outsell Johnnie by a ratio of eight or nine to one, he says.
What’s the most popular type of bottom-shelf liquor?
The distributor says it’s vodka, and also that it’s not even close. The second most popular bottom-shelf liquor is blended whiskey.
What are the biggest brands in all this?
Well, here’s where it gets strange: Much like burger chains, bottom-shelf booze is very regionally oriented. So in some areas, Popov is the biggest vodka, while in others, it’s Taaka or Kamchatka. In still others, McCormick or Fleischmann’s. (In my hometown, an obscure brand called Crown Czar seemed to be popular.)
Why’s it like this?
“That’s a mystery that nobody can answer, except that different ones caught on in different places over the years,” the distributor says. “I think in our industry, it has more to do with whichever wholesaler did the best job getting it out there early on, and getting the best distribution and marketing.”
It will probably not surprise you to learn that, like everything else in America, the alcohol industry has gone through tremendous consolidation, so what was once a very regionalized economy is now dominated by a few overwhelmingly large players. These large distilleries buy up the smaller ones (and also their own competitors). Since brand loyalty is so high for alcohol, it’s much easier for these massive distilleries to just keep making cheap vodka, or blended whiskey, and sell it under the label that people in a region are already loyal to. Why force something new on people when you don’t have to?
But who’s actually making all of these liquors you don’t often hear about?
According to IWSR, the biggest three brand owners in the “value” category are Sazerac, Heaven Hill and McCormick. Sazerac in particular gobbled up many bottom-shelf brands in the past decade, not only buying entire distilleries small and large, but also specific middle- and bottom-shelf alcohol brands from its competitors like Diageo. (In 2017, Diageo sold to Sazerac Seagram’s VO, Seagram’s 83, Meyers’ Rum, Popov vodka, Booth’s Gin, Goldschlager, Yukon Jack, Sambuca and 11 other brands for $550 million. Diageo, however, has held onto the very popular Smirnoff brand.)
If you didn’t already know, right about now it’s worth explicitly stating that a brand like Sazerac also makes far more upmarket liquors (such as Buffalo Trace) — or at least, ones much better known (Fireball, Southern Comfort, Corazon) than the really cheap stuff. You won’t find these big distilleries and conglomerates rushing to associate themselves with cheaper alcohols, though — they’re not particularly interested in consumers knowing that they make the bottom-shelf stuff in addition to the fancy stuff.
So are these big brands manufacturing the cheap drink in the same places they distill their expensive drink?
Oh yeah. “They’re made in the same still,” the distributor says. “A lot of times it’s the same recipe, it just goes in a different bottle with no marketing dollars [behind it].”
Wait. The same recipe?
Well, mostly. The distributor says the basic ingredients and process are the same in everything, comparing it to chili. “If you’re making chili, there’s thousands of different chili recipes, but there’s only probably 20 variations of ingredients,” he says. “That’s really the way it works. Yeah, it may be a little different recipe, but it’s not anything significant.”
But when it comes to top-shelf versus bottom-shelf alcohol, don’t they taste wildly different?
For the most part, no! You may not remember the Pepsi Taste Test back in the 1980s, but it fooled and embarrassed many thousands of absurdly loyal Coca-Cola drinkers. Smirnoff did something similar a while back — the company performed blind tastings with consumers across the country against more expensive vodka brands. The distributor says Smirnoff didn’t keep records on it, but that it proved true: Nobody could get it right.
“Here’s what I would tell you,” the distributor says. “I’ll guarantee you, you can go to the bottom shelf, buy something and in a blind tasting, put it up against Grey Goose, Tito’s or anything else out there, and nobody can tell you which is which. And they will tell you, ‘I’m a Tito’s drinker, by God — that’s the only thing I drink,’ or ‘I’m a Grey Goose drinker,’ but they’ll never pick it out.”
What are the profit margins like on cheap liquor?
Alcohol companies sell a lot of cheap liquor, but because it’s priced so much lower than higher-end liquors it’s not a huge cash cow. At the end of the day, the margins on bottom-shelf alcohol sales to the wholesaler are pretty similar to other market segments, but here’s one difference: Higher-end liquors get discounted a lot more often, as it’s a more competitive market segment. Any and every liquor store always has promotions going on for better-known liquor brands that have some marketing dollars behind them. These discounts can change the wholesaler margins a lot, especially when you throw in the added costs to wholesalers of big floor stackings and other displays for the liquor that’s being promoted on sale. Since low-end alcohol almost never goes on sale or gets marked down, everybody likes making and selling it.
“Ultimately, for the supplier, the margins are great on this low-end stuff because they don’t spend any money marketing it,” the distributor says. “They’re not making tons of fancy signs and buying Super Bowl commercials. They just don’t have to spend the money, so it’s much better.”
What about liquor stores?
Liquor stores can’t really refuse the popularity of low-end alcohol. The distributor says it sells just as well from the high-end merchants as it does in more basic liquor stores. “Across the country you’ll have people that put in a high-end store and they’ll say, ‘I’m not gonna sell any of that stuff, I don’t want that consumer,’ yet within six months they’ve gotta have it.”
Is there not a specific demographic for low-end liquor, then? It’s… everyone?
Yep. Your family, your next-door neighbor, your favorite bar, they all buy, sell and enjoy the stuff, you just may not know it. In this way, low-end alcohol reveals a little something about human nature.
“The consumer that lives in that million dollar house and has the big mortgage, when their friends come over they might have that bottle of Grey Goose on their bar, but under the counter, what they’re drinking every night is something else,” the distributor says. “They also may be filling the Grey Goose bottle up with something else to impress their friends.”
By the way, that’s in all categories, he says. Bourbon, tequila, gin, you name it. When they’re not flexing for their friends or to impress others, people simply drink cheaper when they drink at home. It’s like the way these billion-dollar distilleries generally don’t associate themselves with the cheap alcohol they make, but they’re more than happy to manufacture it and continue buying up and consolidating these brands. It’s a funny market segment: Bottom-shelf alcohol is widely made, sold, purchased and enjoyed on a massive scale — it’s just that nobody really wants to be seen with it.
Adam Elder
Adam Elder is a writer in San Diego. He's also written for Esquire and WIRED magazines, VICE, The New York Times, The Wall Street Journal, The Guardian, newyorker.com and elsewhere.
