Is whisky too expensive? How much should you pay for a good bottle of single malt? How much should you pay for a bad bottle of malt? Why are some distilleries or labels so expensive, whilst others seem so much cheaper? Why do NAS whiskies cost so much, when all you ever hear about is that their vattings contain mostly young malt? In fact, when it all boils down: Why is whisky so expensive?
That’s a lot of questions. So what are the answers?
The cost of making whisky is obviously one part of the equation. And the forces that govern that haven’t really changed all that much in the last 20 years. However, what you can sell the whisky for is a totally different prospect. And that’s something that has changed exponentially in recent times.
If you believe what you read on the packaging of just about every whisky available, the production processes behind whisky haven’t changed in 150 years. It seems every whisky is still “handcrafted, using traditional methods”. And, to some extent, that’s true. It’s still just water, yeast, and barley, and the processes haven’t changed all that much, apart from becoming more up-scaled, mechanised and automated.
So, really, one of the only two major things that’s gone up cost-wise when it comes to making whisky is simply the supply price of those three ingredient materials, and the cost of oak casks to mature it all in. The other major item is the cost of energy – there’s the cost to heat the water for the mashing, and the cost to heat the stills for distilling. This is where some of the more modern distilleries (particularly the likes of Roseisle and Ardnamurchan) have an advantage, as they’re now installing some pretty serious kit for waste recovery, bio-energy, and all manner of processes that now either conserve, reserve, or re-use energy. If energy is the biggest running cost in distilling, the big players are now taking major steps to minimise those costs.
So, assuming that production costs have gone up relatively linearly over time, one might expect that the retail price of a bottle might show a similar pattern? Alas, this is where market forces enter the picture: It’s the simple equation that involves supply and demand. Or, perhaps more accurately – what the market will bear.
Everyone today seems to be whinging that malt whisky is too expensive and that the big brands are gouging us. Certain brands or distilleries are seen as rip-offs (overpriced) and certain labels get loads of abuse and vitriol from commentators, bloggers and on whisky chat/Facebook sites because it’s deemed they cost too much. Want my opinion? I’m inclined to disagree. Well – perhaps it depends what we’re talking about…
Not so long ago (the early 2000’s to be precise), malt whisky was still in the early start-up phase of what we now all acknowledge is a massive boom. At that time, here in Australia, $55-$65 would buy you a new bottle of either Highland Park 12, Macallan 12, Lagavulin 16, Glendronach 15, or Talisker 10 (to name just a few of the usual suspects). Fast forward to 2018, and you can still get a perfectly acceptable single malt for $75-$80. If you take into account a decade’s worth of inflation, not to mention Australia’s outrageous bi-annually increasing excise on spirits over that period, the reality is that we’re arguably able to buy malt whisky today for less than we were able to 10 years ago! (Of course, whether the quality is the same as 10 years ago is another matter. But if you need convincing, you should read this feature piece: Is whisky better or worse today than it was 20 years ago? )
Of course, before you object or point out the gaping flaw in my argument, let’s address the elephant in the room: I’m well aware that the above comparison only deals with either entry level whiskies, or the flagship expressions of those distilleries’ portfolios. But my reasoning still holds true at this end of the market: You can pick up an acceptable single malt for anywhere between A$75-$95. (For overseas readers, that’s GBP43-54, Euro 47-60, and US$55-$70). Such a price range covers the likes of Ardbeg 10, the Glenmorangie Original & Extra Matured expressions, Highland Park 12, Talisker 10, Glenfiddich 12 & 15, Laphroaig 10, etc, not to mention a host of…ahem…NAS whiskies.
(If NAS whiskies make you angry, you might like to read this article at some point).
Where things have got silly in the last 10 years is the cost of the whiskies that fall into the newly founded ultra-premium category. There now exists a category of whisky and a host of expressions that are priced at levels that ensure only society’s wealthiest individuals will ever taste them. (Although sadly, in most cases, as collector’s items, they’ll never be tasted). We’re talking about whiskies that carry retail prices in the tens of thousands. Now I love an old and rare whisky as much as the next person, but if you think I would (or could) drop anywhere between $2,000 and $250,000 on a bottle, then you’re reading the wrong blog!
For those who like numbers, we can put some maths to this: Today, the difference in retail price between a distillery’s entry level bottling and its ultimate expression can be a multiple of 450 to 550. (As an example, Balvenie 12yo retails for $85; The Balvenie 50yo is $45,000. Hence $45,000 divided by $85 equals a multiplier of 529).
This is where it becomes interesting to once again wind the clock back 10-15 years or so. For, back then, the difference in price between a distillery’s entry level expression and its ultimate expression was only a multiple of 5 or 6. In 2003, I walked into a bottle shop in Sydney and looked up to see both a Macallan 1946 and a Macallan 1948 on the shelf. And they were each priced at the-then outrageous figure of $375. Did I buy them? Of course not!! How could I justify $375 on a special Macallan when the regular Macallan 12yo (which – at that time – was truly one of the best single malts money could buy) was only $65?? Similarly, the incredible original Black Bowmore retailed for $250 at a time when the regular 12yo was just $55 – a multiplier of 4.5 Distilleries still had ultimate or ultra-premium expressions, but they were priced such that they weren’t beyond the means of the average person.
In 2003, a Macallan 30yo cost $340. The entry level 12yo (Australia didn’t have the 8yo or 10yo bottlings that were the entry level expressions in other countries back then) was $65, and so the mathematical ratio we explored earlier was 5.2. Today, the 30yo Fine Oak retails for $5,000 and the 12yo is $105, so the ratio in 2018 is 48. I’d wager that many regular drinkers might have reached into their pockets for a $340 30yo in 2003; I doubt many of today’s regular punters would drop $5,000 on a 30yo today.
And so we live in interesting times. In many ways, malt drinkers have never had it so good: There are now so many more distilleries bottling their whiskies than was the case 10-15 years ago, and there are more and more independent bottlers out there with amazing drams on offer. The range is wider than ever before, and there are more and more bottlings that are cask-strength and un-chillfiltered. On the flip side, we also now live in an era where old and aged bottlings are priced beyond what many of us can afford.
So why, what, and when did the switch get flicked? Ironically, we only have ourselves to blame. The answer lies in the secondary market and the internet. Distilleries would put out a great bottling at a reasonable price, whereupon it would sell out. The brands would then watch in helpless bemusement or despair as that same bottle would get re-sold just a few weeks later for 10 times that price on Ebay or other similar outlets. We, the consumers, were profiteering. Collectors – or, more accurately, flippers – suddenly effectively consigned the distilleries and brands to the role of wholesaler, and the flippers pocketed the lucrative retail mark-up. You can understand the anger and frustration on the part of the bottlers: “If people are prepared to pay outrageous prices for our whiskies, then it’s only appropriate that we collect the proceeds, and not some scalper”. So they cut out the middleman, and simply started setting recommended retail prices at the levels that the end buyers had been paying on the secondary market anyway.
Whisky suddenly became an investment, rather than a drink. How many of those $50,000 bottles of Macallan or Dalmore actually get opened and consumed? I’d suggest not many of them. Most will either be the pride of a collection, waiting to be sold, or simply sitting in a box until the owner feels its re-sale value has appreciated sufficiently. I wonder how many people watched “Kingsman” and earnestly went off looking for a ’62 Dalmore? Good luck on that quest – the last bottle sold for £125,000 seven years ago. (By the way, they weren’t lying in the film – it was an unbelievable whisky. Yes, I have. Don’t ask).
So, let’s go right back to the start and address the opening question: Are you paying too much for your whisky? If you’re drinking an old, rare, official bottling – then the answer is undeniably, yes. Is it worth it? Only two things can answer that…your bank account balance and your tastebuds.
I was going to end there, but as a quick afterthought, it’s worth noting that each of us has our own individual limit or resistance point at which price we feel a whisky becomes too expensive. Sadly, too many of us have linked that limit to age. For example, most of us wouldn’t pay $250 for a 9yo, but we’d happily pay $250 for a 20yo. Why is this? This is the very thinking that has led to the outrageous prices distilleries can now charge. Some of the best whiskies I’ve ever tasted were 9 years old. They were worth twice, even three times the price I paid for them. (SMWS 29.88 comes to mind immediately, as does SMWS 35.36 – two 9yo whiskies that rank amongst the best I’ve ever tried.) How much you should pay for a whisky, or at least, what constitutes good value for a bottle of whisky should be governed by how much you enjoy the bottle’s contents. Not its age, nor its label, nor the fancy decanter it came in. As James Bond once said, “I’m looking at you, M.” Rant over.
Cheers,
AD
Got some thoughts you’d like to add? Scroll down to the Comments section below and join in the conversation…
Well written Andrew and totally agree with this. First things first: you passed on ’46 & ’48 Macallan at $375? Ah well I just had to rub it in a bit. I know the feeling: I remember baulking at the $199 price tag on a Highland Park 30yo, or the $249 Lord of the Isles I also passed on many years ago. Every whisky drinker has these tales, and they all hurt.
I think your line of “I doubt many of today’s drinkers would drop $4,000 on a 30yo today.” sums it up perfectly with the ‘drinkers vs collectors’ argument (which is very nicely articulated in the article by Stephen Mathis in the last Unfiltered mag). There was an interview of some nutty collector a while back who spent the $987,000 on that Dalmore Trinitas set and the interviewer asked “so when are you planning on opening it” and he responded with “never, not in my lifetime”. Truly chilling.
My 2c: I don’t think the ‘whisky investment’ bubble will last. Collecting for investment isn’t something that’s been around before and is still a very new concept. Bottles of Hanyu selling for $180 on a Monday, then on auction sites for $12,000 on the Tuesday can’t possibly be sustainable long-term. Only time will tell.
Cheers! Appreciate your comments, and I share your pain with HP30 and LOTI…two more examples of bottlings I previously passed on when originally launched. The really sad thing is that there are some spectacular Dalmore bottlings out there that 99.9% of whisky drinkers will never get the chance to taste. And that’s not good for anyone 🙁
Interesting to note the elasticity of the market for very old whiskies. Note the reasonableness of the Glenfarclas 40 y/o @ $750 in comparison with say a Dalmore 40 y/o @ $3500. The Dalmore certainly couldn’t be 4 times better and yet the price indicates this. So why the difference? To what extent does this represent Dalmore’s capacity to value add through marketing? (Sorely tempted to pun about getting a nose ahead of the competition) Alternatively, does Glenfarclas’s relatively good value represent the differences in business strategy. Dalmore picks up custom through association, ‘I can’t buy the Trinitas, but I can get the next level down.’ Whereas Glenfarclas generates customer loyalty through being accessible. Pretty clear choice for me.
I agree with your point that for many whiskies the price multiplier between entry level whiskies and ultra-premium whiskies is getting a tad ridiculous.
I think there might be more people willing to splash $250 on a 9yo than you’re thinking though. Just look at the number of ‘standard releases’ (albeit often ‘limited’ releases of thousands of bottles) from the likes of Glenmorangie, Ardbeg, Bruichladdich/Port Charlotte/Octomore – many of which are NAS releases – that are up around the AU$200 mark. I’m certainly guilty of splashing out on some of these (notably pretty much every Octomore released since the 4.1 – and here I feel your pain in regards to walking past “ridiculously expensive” older bottles!).
I realise that this generally has to do with marketing, and with many of these being one-time productions, and therefor ‘limited’ in availability (although as I stated above, given the sheer volume that some of these ‘limited’ runs produce, they’re not particularly limited). There are plenty of people shelling out the extra dollars on whiskies without great ages.
Hiya. I am also frustrated at the distortion of the whisky market by “speculators and investors” and agree this has hurt our ability to access many premium whiskies and special releases. I like many of the NAS offerings, and continue to buy my whiskies based on flavour, not collection value. SMWS whiskies provide an excellent value proposition, a case in point being the recent 8yo SMWS 33.134 Peat Roasted Pig Hawaiian Style which is a gem of a whisky, young, exuberant, so flavoursome and complex. So I definitely agree your closing comments: “How much you should pay for a whisky, or at least, what constitutes good value for a bottle of whisky should be governed by how much you enjoy the bottle’s contents. Not its age, nor its label, nor the fancy decanter it came in. ” Bugger the Samurai Suits and Crystal.