...where distraction is the main attraction.

Wednesday, April 17, 2013

Whisky with Florin - Part Two: The Whisky Market

(continued from Part One, here)

MK: Your Summer 2010 trip sounds great! Good to get your son in on the proper knowledge early. Kids learn quickly, while it takes forever to get adults to understand how a pot still works (I am one of those adults). I've spoken with a couple other whisky geeks recently who, like us, went to Scotland before their whisky discoveries began......then returned a second time (family in tow) touring the distilleries. My second trip is in the planning stage...

I have a bottle collection that I enjoy, but size-wise it's a fraction of most of the collections/bunkers I've seen. It's my sample collection that fuels my whisky education and my posts. I adore samples. Since my employment status hasn't been terribly consistent over the last two years, minis/drams/samples have been the more cost effective path to my journey. I also try to hit up as many tastings around town as possible.

My whisky tastes have been mercurial. I used to love all of the ex-sherry malts, not so much anymore. Once upon a time I was very sensitive to any hint of peat, now I'm just daffy about phenols. Aside from drinking with my cousin and a couple of buddies on the East Coast, I trod my whisky journey alone until 2011. It was: Glenfiddich --> Johnnie Walker --> Macallan --> Glenmorangie --> Oban --> Dalwhinnie. Two years ago, I tried an indie Caol Ila and an indie Bowmore; then the real fun began. The blogs, Maniacs, reviews, and (especially) books caused more good trouble.

When I find an interest in something I get obsessive. Then each small discovery creates an entirely new pathway. Like you, I have a wife who has been tolerant of this whole whisky affair. For that I am very thankful.

As much fun as discovering whisky alone had been (I'm not the most social person), meeting folks online and offline who are on similar whisky paths has opened the experience up further and made it more meaningful for me.

I'm glad you brought up your six classics (from OP12 to Glen Garioch), I have a few of my own too and would feel blessed to drink nothing but these. I have to remind myself of that from time to time. May their prices rise slower than the rest! :-)

Back in December, public discussion about rising whisky prices was triggered by a few posts between David Driscoll of K&L Wines and Oliver Klimek of The Malt Maniacs.

David considered the possibility that whisky prices will remain high because we're seeing a new

reality: People who have the means are willing to pay higher prices for whisky and will continue doing so without pause. He likened it to the Bordeaux market in '90s. Prices went up and have continued to rise for more than 20 years.

Oliver countered that we're seeing a whisky speculative bubble that, unlike Bordeaux, is pushing up the prices of everything including the cheap stuff.

To me, David's article was incredibly disheartening because I can see his point. I didn't agree with him, but mostly because I didn't want to agree with him. Also, having family members who've worked in Finance, I know that no market's pricing remains aloft forever.

I was wondering, where do you sit between these two sides? Do you think we're witnessing an unsustainable pricing bubble? Or are we seeing a new long term pricing reality?

Have rising prices effected your choices when you shop for whisk(e)y?

FV: There are so many things to say here... You'll be sorry you asked!

Let me start by acknowledging that you and I are spoiled. The prices in the US have been amazingly good. Some single malts still cost as much in US$ as they do in £ in a Glasgow supermarket. There is so much whisky to choose from, in particular American whisky, which is so hard to come by in Europe. If your shop doesn't have a whisky you want, you can check another dozen stores all around the country, or a dozen more in UK and Europe and have it shipped to you. While prices and availability vary across the US, in California in general they are the best. You can live a good life - and many do - buying all your whisky at Costco and Trader Joe's. Glenlivet 12yo for $22 and Lagavulin 16yo for $53? Thank you so very much!

This being said, the prices are clearly rising and the whiskies are harder and harder to find. My local BevMo is a depressing sight these days, the whisky cabinets look like they've been burglarized. The distilleries are running out of aged stuff and repackage their offerings so that they can ask for double the price for the same whisky under a different label. I opened a bottle of the Col. EH Taylor Rye today; to me, that's the "baby" Sazerac 6yo rye, at 2.5 times the price, definitely not worth the $70 I paid for it!

And yes, all this is affecting my buying habits. You had a sad, but very lucid and poignant post on your blog at the beginning of the year, where you stated that you are buying a lot out of fear these days, and that this chips away at the pleasure you get from this hobby/vice. I fully agree with you. I bought a lot out of fear last year! A lot of times it was buying some of my favorite whiskies from stores where the price increases had not reached yet. Other times it was trying to buy a bottle before it disappears. It's become such a competitive sport! I am not talking about Pappy hunting here, which is way more insane than I'm comfortable with! And this is all whisky that I bought in order to drink over the next few years, as soon as I get to it, not to leave to my estate or to finance my retirement with.

It is paradoxical that the more the prices increase and the more limited the offerings become, the more we buy! It's the equivalent of a run on a bank, where the customers lose their confidence in the suppliers. This is a temporary type of shortage, due to the instability in the market. This is you and me buying last year more than we needed to drink. But there is only so much whisky one can drink in a lifetime (500-2,000 bottles, depending whether you drink a bottle a month or a bottle a week), so it doesn't make sense to store too much, even if you can afford it. The supply should catch up with this artificially inflated demand pretty easily.

But there are other factors that change the supply-demand balance, in a more important and lasting way. A very important one is information. This very blog that you write is creating new consumers, every day; people who did not know what they were missing before reading your views and reviews, and now they want to try this bottle or that for themselves. Five years ago this source of information was practically inexistent! These readers are your new competition for that bottle of Springbank, and they are not going anywhere, now that they've discovered good whisky!

And then, of course, you have an entirely new category of consumers in the BRIC countries and elsewhere (my friends and family in Romania love the whiskies I bring them, and every year more are available for purchase locally). These are the consumers that Roseisle was built to deal with. You don't quite see them, but they are here, and they are not going away either! Most of them have a long way to go to single malts, but the 1% can surely afford them. And 1% of three billion is a scary number!

Roseisle at night (Source)
So from a pure demand perspective, things will never come back to "normal". You have more people vying for the same bottles from the same distilleries. If you want a bottle of Springbank or Laphroaig, today is the best time to get it. In five years you will compete with five times as many people for it. Sure, in five years maybe we'll all have moved on, to the new Kilchomans and the new Balcones, which is unlikely. Or Roseisle will shower us with whisky just as good as the Springbank, which is also unlikely. Or Laphroaig will have trebled its capacity, which is more likely, but also much sadder/scarier. The point is, your favorite single malt IS like first growth Bordeaux: a very special and specific product, with a great sense of place, character, and cachet, with limited production, and available to everyone who can pay for it. Oh, on the other hand, if your favorite whisky is Jack Daniel's or Ballantine's Finest, then you have nothing to worry. Right? I didn't think so!

The price will follow the same equation: more demand for the good stuff, which means higher prices. There will always be a vast range of prices. It's just that the definition of "good stuff" is going to change - and we see this happening under our eyes. Bottles that we still see today as regular, Old Pulteney 12yo, Glenmorangie 10yo, will climb one shelf up, with a price tag to match.

I'm not even getting into the fact that whisky is a quasi-monopoly, with a handful of companies producing four out of every five bottles in your bar.

The good news in all this is that whisky will continue to remain an affordable vice for you and me. If in the long run I drink, say, 2 bottles a month (much more than that and we should all be worried!), at $40/bottle this comes under $100/month. I could afford this even at $100/bottle. Also, for a low-priced alternative I put my faith in Glenlivet and Glenfiddich, that have been able to churn out single malts of excellent quality despite amazing growth in capacity. And that I can still buy for little money at my local Costco or Trader Joe's.

People like California for the mild climate, bountiful fresh food, and progressive lifestyle. I'm staying for the whisky!

Tomorrow:  Part Three - Blending Whisky