Pricing whisky: the cost of a bottle today

As DISTILLERIES new and old produce more and more new products, the range of choice continues to grow, writes Ian Wisniewski for WhiskyInvestDirect.

But my budget remains fixed, not to mention constrained, and whatever funds are available have to be carefully allocated.

And, as we saw in my last article, the picture is complicated further by the sheer number of places selling whisky nowadays.

In practice, two price structures apply: the ‘primary’ retail market comprising current releases, and the ‘secondary’ or ‘re-sale’ market, in which whiskies originally sold on the primary market become available once again, from specialist dealers and auction houses.

Let’s look first at general trends in the retail market.

Encompassing a wide range of stockists, from supermarkets, where a bottle typically costs around £15, to specialist retailers offering products worth thousands, there are nevertheless some key focal points for retail

Kristiane Sherry, the Editor for online retailer Master of Malt’s website, identifies the price range of £35-£40 as “a sweet spot in terms of the cost of production compared to what people are prepared to pay”. This is followed by a second grouping around the £70-£80 mark.

Prices have changed over the last few years, accepts Sherry, but not as dramatically as one might think. “It may feel as though retail prices of whisky have become more expensive over the past five years,” Sherry argues, “but when you look at the numbers prices have actually risen in line with inflation.”

There are always exceptions of course, such as Japanese whisky and certain ‘middle-aged’ bottlings.

“15-18 year old Scottish malts have probably gone up a bit more than inflation, wherever there are stock issues,” admits Sukhinder Singh, founder of the multi-award-winning retailer, The Whisky Exchange. “But then some whiskies, including many old and rare whiskies, were underpriced. The question is not what price they’ve gone up to, but where they should be positioned. We know the price point that works for every brand, and it’s different for each one.”

In which case, what determines the price point of a whisky? The picture is complicated.

“The cost of production is one factor and this has been rising, though it might take a few years for an increase in some costs, such as packaging, to come through,” says Douglas McIvor, Spirits Manager of Berry Bros & Rudd (a specialist retailer with an extensive whisky range, including own-label Scottish malts. “The level of stock is another vital influence on price. Each distillery has finite stocks, so the retail price also reflects the balance between supply and demand.”

On the demand side, the attitudes of consumers are key. John Glaser, the founder of premium blended Scotch producer Compass Box, has noticed changes in the United States, the biggest spenders on Scotch whisky in the world, in recent years. “A retail of $100 a bottle used to be a higher-end price point at which you could move some volume,” he notes “but in the past couple of years that’s been breached, with more people now willing to go over $100 a bottle.”

The amount consumers are prepared (or able) to pay inevitably raises the question of ‘value for money,’ and how this is assessed.

Compass Box addressed this head-on with a special bottling, “This Is Not A Luxury Whisky”, in 2015. In Glaser’s words, “We released This Is Not A Luxury Whisky in 2015, which was great and truly scarce, from a famous distillery, peated and aged in a sherry cask. We stripped the packaging right down, including an individual bottle design. Our question with this release was: what’s it all about? We wanted to create a conversation, but not to make anyone feel uncomfortable.”

So what motivations does Glaser see behind the purchases of the modern whisky consumer?

“Some people are buying for immediate consumption, some for re-sale, though both motivations are based on the reputation of that brand,” says Glaser. “Consumers now have a much greater breadth of experience, and are more aware of the growth potential that the value of expensive whisky has.”

Value, and collectability, typically peaks in limited-edition bottlings, with any bottle labelled number 1 in that series having a particular appeal.

“The inaugural release from the Lakes Distillery was 100 numbered bottles, which generated a lot of interest. However, a Macallan bottling in the thousands will still do well, as it really comes down to the distillery rather than the number of bottles,” says Graeme Maxwell, Whisky Specialist at McTears auction house.

Assessing the current value of a particular bottling, or estimating the amount required to acquire it, is far easier now that whisky auctions are so frequent, and the results readily accessible. This is also an interesting counter-point to retail prices being set by brand owners, whereas consumers determine auction prices.

“What people will pay for a bottle of whisky at auction is the most transparent way of setting the price, and feels very democratic. Over the past 18 months I’ve seen everything go up in price,” says Isabel Graham-Yooll.

The rate at which prices can escalate is amazing.

“Macallan 40 year old 2017 was released at £5-6,000 retail and within 2 weeks a bottle had been sold at auction for £13,000,” says Sukhinder Singh of The Whisky Exchange. “In the last 12-18 months old and rare whiskies have increased by 50-100%, depending on the brand. A recent release of Black Bowmore totalling 157 bottles retailed at £16,000 each, and within a year was selling at £25,000. People think ‘I’ll put my money into whisky,’ assuming that all limited-editions will go up in value.”

Needless to say, nothing is ever guaranteed and prices can easily fluctuate.

“When a particular expression achieves a good auction price this can result in more people putting the same expression up for sale, hoping to cash in, however, a larger number of the same expression suddenly appearing can also result in the value dropping,” says Graeme Maxwell.

“Not every limited-edition is going to offer the most valuable investment potential. For instance a high quality general release is more likely than a limited-edition to be bought to be drunk. This means a larger release will, with time, become more limited and more sought after,” says Isabel Graham-Yooll, Auction Director of www.whisky.auction.

My conclusion is that, ultimately, whisky is price-less, and it would be ideal if no price was actually involved. But let’s not dream of the impossible. Let’s keep it real, and budget for the drams we can actually afford to buy.