...where distraction is the main attraction.

Friday, March 17, 2017

Scotch Market in Flux, Part 3: Single Malt Prices in the USA

If you've made it this far, I hope you don't think I'm going to tell you that whisky prices are declining. But thank you for clicking over to Part 3 of my Annual Scotch Whisky Report anyway! (Part 1 is here and Part 2 is there.)

The price list has grown longer and wider this year. So though there are words above and below the spreadsheet, I know you're here for the spreadsheet.

As I write every year, here's some background on the data below:
I am using Wine Searcher's Average Wine Price system, selecting only US retailers.  Their site has an explanation behind how they arrive at averages.  To summarize, they do not include auctions; all prices are adjusted to 750mL bottles; they remove the highest and lowest 20% prices in order to correct for pricing errors or egregious retailer choices.  Aside from the ability to scroll through pricing history, Wine Searcher's big draw for data purposes is their retailer count.  For instance, if you search for Johnnie Walker Black Label they'll actually stop their listings at 500 retailers.  Their system has over 350 450 500 retailers selling Talisker 10 (extra love to the folks still selling it at $49.99).  So Wine Searcher is pulling from a very large data set.  And, anecdotally, their site has proven very reliable and accurate in my searches for beers, wines, whiskies, brandies, etc.  But please note, this is not an advertisement for Wine Searcher.  Their Average Wine Price history requires a paid subscription and I've been known to mooch off of other people's accounts from time to time.

I encourage you to check out my shared Google Doc at this link. It may be easer to follow, scroll through and filter(?) than it is here.

Three paragraphs about my methodology:
I'm using a similar methodology as last year. There are 179 whiskies listed in total. Thanks to my spreadsheet, I have data back to 2007 (the first year of the so-called whisky boom) for 116 of them. Last year I added a bunch of additional single malts. At that point Winesearcher only had data as far back as 2011, which just happened to be the most successful of the "boom" years. There are 39 of those malts in the list. This year, I've updated the list with 24 more malts. Winesearcher only has January data as far back as 2013. So I've added an additional column with all the 2013 prices. (Also, RIP Benromach 21, Benromach 25, Clynelish DE, Glengoyne 17, Strathisla 12 and Scapa 16. There are too few retailers selling those malts, so the average prices are no longer reliable. Expect the RIP list add another 12 more malts next year.)

Because directly comparing a 10-year price change percentage with a 6-year price change percentage with a 4-year price change percentage is crap math, I'm using the same metric as I did last year to measure the increases: Multiple of Inflation (or MOI).  MOI takes the total price change and divides it by the US's inflation (CPI) rate over the related period of time (10, 6 or 4 years).  For the whiskies that start with the Jan2007 data, the inflation was 17.1% (or $1 in Jan2007 was worth $1.171 in Jan2017).  For the whiskies whose data starts with 2011, the inflation was 8% (or $1 in Jan2011 would be worth $1.08 in Jan2017). For the whiskies whose data starts with 2013, the inflation was 4.2% (or $1 in Jan2013 was worth $1.042 in Jan2017).

The color-coding is based on the MOI, as follows:
Dark blue = price actually decreased, thus a negative MOI
Light blue = price increased between 0 and the actual rate of inflation
Green = price increased between 1 and 2 times the rate of inflation
Light pink = price increased between 2 and 5 times the rate of inflation
Fire Truck Red = price increased between 5 and 10 times the rate of inflation
Black = price increased more than 10 times the rate of inflation


There are going to be fewer charts than last year, as I try to do my best to avoid comparing apples to Ledaigs. Let's take a quick look at the price increase between January 2016 and January 2017.

The Consumer Price Index (CPI) inflated 1.5% in 2016. When finding the average of the 179 whiskies from the above spreadsheet, one finds the average single malt had a price increase of 4.35% in 2016. In 2015, whisky prices increased 8 times the rate of the CPI. In 2016, these single malts increased slightly less than 3 times the CPI. While prices increased slower, they still increased considerably faster than the country's consumer goods and services. On the other hand, that percentage increase is considerably less than the 14% increase in price/liter of Scotch whisky exports to the United States.

But as I've found in years past, whisky age categories don't see their prices change at the same rates, so there is no "average" whisky. So here's how each age statement group's prices went up in 2016.

Note: this is the only chart to use percentages
In the big picture, this chart shows us what we've seen in previous years. The older the whisky, the faster its price goes up. The 25-29yo category was particularly excitable thanks to huge jumps by Highland Park 25 (again) and Macallan 25 (again). Also, one can no longer just write off the NAS category because it is now the second largest "age statement" category on the spreadsheet, with 31 separate whiskies. The NAS whiskies' prices are now going up at the same rate, or faster than most starter single malts with age statements.

Actually, just for kicks. Here's another chart of the age statement categories by whisky count:

Yeah, let that NAS count sink in for a moment. Then consider the fact that number does not include all of the NAS bottlings that have come out over the past three years. NAS will probably be the largest category in the spreadsheet within the next two years.

Anyway, back to rising whisky prices.

Let's take that Average Price Increase idea and see what has happened over the past 10 years, using the MOI metric.

What shocks me is how incredibly tidy these numbers turned out. As each category increases in age, its prices escalate at a greater rate.

Again this does not mean 8 to 10 year old whiskies barely went up in price over the past ten years. It means they went up in price at almost the same rate as the US consumer price index during the same time period. General price inflation was up more than 17% during the past 10 years, so the price of the average 8-10yo common single malt in the US has gone up somewhere between 18% and 20% during that time period.

As a whisky consumer (though barely a consumer at this point), I think it's reasonable for a popular single malt's price to go up slightly faster than inflation. There was a great increase in demand for single malts in the United States during over the past ten years. That's why I don't sweat the price increases in the green range in the spreadsheet. It's when single malts start doubling, tripling or quadrupling the rate of inflation that a certain nerd starts writing a post called "What Was the Scotch Whisky Boom?"

When it comes to 25+ year old single malts, the industry seems to have moved as a whole to create and expand an ultra-ultra-luxury whisky market. They're still searching for the ceiling.

Younger, cheaper single malts are going up in price, but at a gradual rate. The rise in teenage whisky prices seemed to have calmed down in 2016. But long-aged whisky has moved into another solar system, a place where a single malt twice as old can cost 20 to 30 times as much.

Remember, the influence of importers, distributors and retailers on these prices cannot be overstated. The price per liter (in GBP) of exported Scotch went up 2% in 2015, about 4 times US inflation, while these single malts' prices rose 4%, or 8 times inflation. In 2016, that price per liter (in GBP) went up nearly 9 times US inflation (before the pound dropped) in the first half 2016 alone, but our single malts' prices rose under 3 times inflation for the year. As I've referenced, inflation will cause price changes, as will swings in exchange rates.

The price still goes up in Scotch whisky's most lucrative market because American humans keep buying expensive booze. The best some of us can hope for in the near future is a plateau to form on the line graph. In the meantime, you don't have to buy that one whisky bottle over there, but the fact is, someone else will. Are you okay with that?