February 25, 2014: Whiskituity® Economics

In our crowdfunding campaign on IndieGoGo (here), we’re offering our annual Whiskey-for-Life program, the Whiskituity® for $325. The Monthly version is $3,500.  

I realize that’s a lot of money, but I think you’re getting a lot for it.

Right now, our young Silver Sweet Corn Whiskey retails for around $25. As our Straight and Bourbon Whiskeys become available in the future, they’ll likely retail for $30 or $32.50. An important thing to remember is that, as a Whiskituity® holder, you’ll always be entitled to the best Whiskey we have available for sale. Prefer our Straight Whiskey to our Bourbon? You got it. Want a few years of Silver Sweet Corn Whiskey? No problem.

To help illustrate the value of the program, here are three scenarios that describe what you can do with your money: buy a Whiskituity, buy Whiskey at retail each year, or invest it. Now, I understand that inflationary pressures erode the future value of money, but let’s assume that The Indiana Whiskey Company raised prices each year in lockstep with that rate (makes the math a lot easier, whether or not that’s exactly what will happen). The retail price reflected here would then be identical to “today’s dollars”. I used the 20-year Treasury bond rates published 2/3/14 from treasury.gov as the risk-free investment rate under the same time horizon.

Here's what I came up with:

Results? Well, it looks like there’s a clear win for the Whiskituity over retail once you get to year 11. Over the course of your drinking lifetime, you could very well spend 5 times as much as $325. Obviously, if you’re 21 right now, you have a pretty good shot at living more than 20 years. If you’re 40, do you see yourself drinking Whiskey past 60? I know I do.

Now, if you just invested your money at the risk-free rate, you’d come out $296 ahead. That looks good until you realize you haven’t enjoyed a single bottle of Whiskey in 20 years. That price, according to me, is way too high.

It’s a risk for us too. 

Commodity prices are uncertain. In late 2012, Corn reached a peak of $6.75/bu. Today, it’s around $4.50/bu. If spikes like these occur in Corn, Wheat, Barley, LP or Natural Gas, our Whiskeys become more expensive to make per bottle, which means the price at retail would likely increase.

It could happen the other way too. Prices could drop from new farming technologies, better techniques, or weather conditions that improve crop yields.

Also, you could live to be 150 years old. Luckily, I probably won’t be around to worry about it at that point, but we still have to account for it.

So why would we offer it?

“if a deal is too good to be true” and all that…

Well, I think there are two big reasons to offer it: timing of cash flows and lifetime customers.

First, we expect our aged Whiskeys will be more profitable than our unaged Whiskey. We just have to wait a few years to sell them. So in a way, we’re using future profits to help subsidize current operations, and at a rate that’s more attractive than traditional bank loans or Preferred Stock.

Second, we’re able to get a customer for life. When I worked for MillerCoors, I was shocked to learn how much the company spent on advertising to new and existing customers. If we sell you a Whiskituity®, we’ll let the bottle each year speak for itself. Our guess is that you’ll want to tell everyone (read: gloat) about how much foresight you had when you invested your $325 with us.

In a nutshell

It's a $325 investment that lasts a lifetime. Whether you're getting it for yourself, your newborn son, a bride and groom, or one of your parents, it's going to be there for a long time.

-Charlie