Street Liquor Economics

What does one of the country’s best selling beers have in common with a label of vodka so obscure it barely registers two dozens mentions in Google? Turns out, judging by the large number of empty containers on the street, they’re both top sellers in my neighborhood.

Steel Reserve High GravityAfter its launch in 1997, Steel Reserve High Gravity Lager (actually a malt liquor) has seen a meteoric rise to the top of the discount malt liquor world. For the launch the Ramones completed three short songs to use as advertisement and the company kicked up a controversy with billboards in New York City showing animals copulating. Today the Ramones tunes are still available to download today on the brand’s nearly text-free website.

Steel Reserve has been flying off shelves every since. In 2005 the beer ranked #7 among all beers in supermarket sales, ahead of nearly every major beer including Coors Light, Blue Moon, Miller Lite, and Heineken. According to this source, the company sold the rough equivalent of 225 million 24 ounce cans that year. The stunned author of a beer blog reported it was “the only malt liquor to break into the top 50 best selling beer brands in grocery stores in over twenty years,” commenting the company was “moving juice.” Although the beer had slipped to #25 on the 2006 rankings, it was still ahead of such established brands as Beck’s and Coors Light. Plus, who buys malt liquor at a supermarket, anyway?

This malt hotshot drew the attention of one of the world’s largest beer companies. The SABMiller company (formed after South African Breweries purchased Miller in 2002) purchased the Steel Reserve High Gravity brand for $215 million in cash, crowing to investors the brand was the leading malt liquor in the U.S. and had boasted 35% annual sales growth between 2003 and 2005.

Velicoff Vodka, on the other hand, is relatively obscure, registering just 24 mentions on the web according to Google. It seems to be a big seller in the nation’s capital: a 2006 Washington Post story called it “the alcoholics’ choice,” and three of the four photos mentioning the brand on Flickr were taken in D.C. (Including this shot by Flickr user Terecico) The bottle’s label provides little information — there’s almost nothing on the web about the bottler, Grosscurth Distillers Company located in the tiny town of Bardstown, Kentucky. While perhaps a greater story exists behind this enigmatic spirit, today I’ll consider these two beverages wild popularity.

As the reader might guess, I quickly discovered they were among the cheapest forms of alcohol for sale at my corner liquor store. At $1.35 for a 24 ounce can, Steel Reserve High Gravity was hands down the cheapest form of alcohol. At $2, the Velicoff was more expensive than many of the 24 ounce cans, and the same price as the always-popular Wild Irish Rose wine. However, when its stronger proof is taken into consideration, the liquor falls to the third cheapest per ounce of pure alcohol among the random variety of products I sampled in my unscientific study. Here’s the full table:


Name Cost Size (OZ) % Alcohol $/OZ of Alcohol
Steel Reserve High Gravity $2.25 40.00 8.10% $0.69
Steel Reserve High Gravity $1.35 24.00 8.10% $0.69
Everclear $16.99 25.36 95.00% $0.71
Velicoff $2.00 6.76 40.00% $0.74
Wild Irish Rose $2.07 12.68 18.00% $0.91
Milwaukee’s Best $3.99 72.00 5.90% $0.94
Bud $2.50 40.00 5.00% $1.25

Readers will note that Everclear is cheaper per ounce of alcohol than Velicoff — but then again, so are a host of keg beers. No doubt sales are depressed by its undrinkability and high price.

This brings us, finally, to the question of why Steel Reserve High Gravity is a major brand worth millions and you’ve never heard of Velicoff Vodka. I suspect the difference may have something to do with the true cost of the stuff. As Kihm Winship explains in his thorough history of malt liquor, “unlike lager beer, [malt liquor] uses smaller amounts of the more expensive ingredients, malted barley and hops, and larger amounts of the less expensive ingredients, corn grits and sugar,” making it less expensive to make than beer. On the other hand, there’s plenty of vodkas selling at very low unit cost, albeit in larger quantities. Is the glass bottle more expensive than a can? Are the profit margins on cheap, small-size vodka too low to interest a corporation, or is this an undiscovered niche? Without further research or an industry source, we can only guess.

More
> The Cautionary Tale of Malt Liquor
> Wall Street Journal: Malt Liquor’s Moment
> Reviews of Steel Reserve High Gravity on BeerPal.com
> Wikipedia: Steel Reserve

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Author: Rob Goodspeed

Comments

  1. Pingback: DCBlogs » DC Blogs Noted

  2. One must consider the alcoholic in examining buyer behavior, while a malt liquor may be more easily consumed in mass quantity and deliver a cognizant drunk with less physiological ramifications than a black-out vodka stupor that leaves a passed out alcoholic vulnerable to robbery and abuse, and unscientifically may logically lead to more adverse problems such as a faster death of the liver. Also one must also consider the stages of an alcoholic, while some even purchase cooking stove alcohol gel, perhaps the Steel Reserve appeals to budding addictions without the psychological fall-out, the youth looking for the fast buzz, the hard drinker moving on to the better value….after all it’s only a beer…

  3. I just moved to DC from upstate New York and I thought it was nuts to see all those Steely cans on the ground. We used to drink that crap because we were poor and stupid — and you could only get it around Buffalo. Glad I’m not the only one surprised by the gallons of godawful ‘high gravity lager’ (read: it’s cheap, it’s nasty, it’ll get you drunk) some people drink down here. It may be disgusting, but it tastes like home!

  4. Found this blog as part of my research into Grosscurth Distillers, although my interest is on the whisky side of things. Just to add to the story, Grosscurth Distillery seems to have burned down in the late 60s (http://php.louisville.edu/advancement/ocm/news/release.php?relid=228) and the brands and warehouses were sold off to other companies (Makler Brothers), who then sold them to other companies. AFAIK one of the whisky brands, Bourbon Supreme, is now under Fortune Brands and another, Old Mill Stream, is part of bourbon giant Heaven Hill.

    I grabbed a bottle of Old Mill to review and noticed the Grosscurth Distillers Co on the label, but the North Carolina Alcohol Control Board buys the stuff from Heaven Hill.

  5. Great post! For some folks, its all about getting the best bang for the buck – flavor and enjoyment of the drink is secondary, at best. Still, there’s no reason to litter!

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