Scotch Whisky: Uber-Premium's Impact on Prices

'I'm getting beach bonfires, butterscotch, dried fruit, and a distinct whiff of greed...'

FOR a Scotch whisky drinker it was the best of times, not that we knew it, writes Tom Bruce-Gardyne for WhiskyInvestDirect.

In 2007 if you were completely undiscerning and simply wanted the word 'Scotch' on the label, Tesco would sell you a bottle for £7.99, and if you wanted a decent 10- or 12 year-old single malt there was plenty on offer below £20 – especially before Christmas.

These deals during peak demand used to infuriate the industry. "They don't discount Easter eggs at Easter do they!?" Leonard Russell, MD of Ian Macleod Distillers, would grumble. Well, they do now – but Scotch has gone in the other direction.

That £7.99 whisky left under £1.00 after tax for the retailer and distiller, barely sustainable for vodka let alone a spirit that demands a minimum of three years in wood. Such prices proved that the 1980s' whisky loch was still not fully drained. Once that happened prices rose, as did tax.

Entry-level Scotch now starts at £11, or around £1.30 after duty and VAT. Most mainstream malts have jumped by at least £10, and probably half have lost their age statements, prompting suspicions that it's not just policemen who are getting younger.
 
If you want something older you have to dig deep given the squeeze on aged whisky. Stocks of maturing malt over 11 years old declined 6% a year from 2010-2014 according to the Scotch Whisky Association. Extrapolate that forward and by next year there will 190m litres, down from 309m six years ago.

The impact on price? To take just one example, a 15 year-old Glenfarclas at Royal Mile Whiskies now costs £48.95, while the 21 year-old is £91.95 and the 30 year-old is £394.95.
 
Above that, and amongst the rare, limited editions from sought-after distilleries, you enter a very different world where bottles are fondled, traded and very occasionally drunk. Although small, this is a world of collectors, speculators and very wealthy drinkers.

Until recently these uber-premium whiskies were less intended for sale than to cast a halo over the brand, but that all changed with the advent of a secondary market. Bottles released after decades of careful maturation were bought and flipped at auction at double the price. This provoked a big readjustment in the primary market, helping to fuel the speculative boom still further.
 
But there's more to this story, because how much distillers charge for their rarest bottlings is a measure of status. As Dr.Nick Morgan, Diageo's head of whisky outreach, says: "Some people have invested a lot of money in getting A-listed."

Macallan currently enjoys poll position on price, and has seen the gap between its 12 and 30 year-old expressions widen exponentially. In 2003 the former sold Down Under for 65 Australian Dollars, while the latter was A$375 according to the whiskyandwisdom blog. Today that chasm stretches from A$165 to A$4,000.

Of course, the same has happened to top rates of pay whether you sit on the board of Goldman Sachs or play for Man United – and if you do, perhaps you are the new go-to market for such whiskies. But the price-tag on these rare malts has encouraged some distillers to reposition the rest of the range, causing howls of protest from loyal fans who complain they have been priced out. The broad base of blended Scotch and mainstream malts still seems relatively affordable, if costlier than before, and in line with other aged, dark spirits. Above that you might note a slight whiff of greed.

Perhaps the pendulum has swung too far from the unsustainable pound-shop pricing of the past.