But all of that is a really macro, big picture, view of prices. What we as consumers see on the ground here doesn't reflected those changes. For instance, between 2008 and 2014 the worldwide exports of malt whisky increased in price by 12%. During that time, the prices we saw at American retailers tripled that rate. So, why are our prices going up faster? Keep in mind that the numbers I'm getting from the Scotch Whisky Association are for the value declared at the time of export from the UK (and it's in GBP not USD). By the time we see the bottles on the shelf the importers, distributors, and retailers have further increased the price for their own profit.
Now we've just begun 2016. That "almost 2%" drop I mentioned above was for all whiskies exported to the US in 2014. In the first half of 2015 (*hinting at Friday's post*) scotch whisky exported to the US dropped almost another half percent. But the single malt prices we see every day continue to rise. I will be focusing on this single malt price inflation today.
As I wrote last 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
I encourage you to check out my shared Google Doc at this link. There's a lot of info to be seen and it's probably more directly useful than the rest of this post, so enjoy!
A few words about my methodology:
There are some important changes to the data this year, compared to last year. Firstly, there are more whiskies! While 3/4s of the products listed measure prices going back to 2007, there's a large number of products for whom there was either no data for January 2007 or it was unreliable. Last year I had selected January 2007 data because '07 was the first year of the so-called whisky boom, and it was the earliest data that Winesearcher listed. For the whiskies new to this list, I am going with their January 2011 data for three reasons. Firstly, 2011 was the second (and largest) whisky boom year. Secondly, I already had the 2011 prices listed for the other whiskies, which I used to show periodic price increases. Thirdly, 2011 is the earliest data that Wine Searcher now lists.
Because mushing together a 9-year price change percentage with a 5-year price change percentage is not responsible mathematics, I am including a new metric to bring the numbers closer together: Multiple of Inflation (or MOI if you like). MOI takes the total price change and divides it by the US's inflation (CPI) rate over the related period of time (9 years or 5 years). For the whiskies that start with the Jan2007 data, the inflation was 14.5% (or $1 in Jan2007 would be worth $1.145 today). For the whiskies whose data starts with 2011, the inflation was 5.5% (or $1 in Jan2011 would be worth $1.055 today).
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
Please feel free to peruse this list here or on the Google Doc to your very heart's desire (I think you can bookmark the Google Doc as well). You're also welcome to ignore the analysis below, but there are a lot of fun graphs down there, including two that are shaped like pie.
ANALYSIS
I will start with 2015 as that is more immediate (and new-ish!). Plus I'll be able to compare exact percentages.
The Consumer Price Index (CPI) inflated all of 0.5% in 2015, so a January 2015 dollar is worth $1.005 today (January 2016). Meanwhile, if I take the average of all of the 161 whiskies in the spreadsheet above, I find that the average single malt had a price increase of 3.95% in 2015. That is eight times the rate of the CPI. That's a lot and that's fast. If a whisky's price moved eight times the rate of inflation for the past nine years, that would be like having your $40 whisky from 2007 now going for $86 in 2016. But there really is no "average" single malt. There are different age statements, companies, and distilleries. So here's how 2015's price boost breaks out:
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| click to embiggen |
Here's a breakdown by distillery:
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| Note: distilleries with only one whisky on the list were removed for accuracy and clarity purposes |
Yes, Talisker and Macallan lead the way, by quite some distance, with Highland Park in third. All three of these distilleries have a number of long-aged whiskies on the list and, without exception, all greatly increased in price. I don't have much of an explanation for Aberfeldy and Hazelburn, but it's nice to see their results. For the record, 30 of these distilleries had price increases greater than the CPI, 8 has increases less than the CPI.
By looking at the distillery chart, you can start to get an idea which companies are behind the overall price increases...
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| Note: owners with only one whisky on the list were removed for accuracy and clarity purposes |
That was 2015, a relatively small period of time. Let's take a look at the entire window captured in the pricing spreadsheet, from 2007 (or 2011) to today.
Again, the idea is that there is no "average" whisky here because whiskies from different distilleries, different owners, and with different age statement increased at different rates. Let's start with the Increase-by-age-statement chart.
Meanwhile, if you look at the left half of the chart, you can see an effort has been made to keep the prices of younger whiskies from inflating too much. Starter single malts creep up in price slower in order to not scare off too many regular customers, thus establishing the first pricing tier. Of course, every party involving the pricing are making it difficult for anyone who wants to move up to the next rung of a favorite distillery's range. A once a year splurge no longer buys what it used to. So why splurge on whisky?
But again, not every distillery is upping its prices at the same rate.
First of all, kudos to the 1/3rd of the owners who have raised their prices slower than the rate of inflation! It's unfair to lay equal blame on Arran, Bacardi, or LVMH(!) with the likes on the right side of the graph. J&A Mitchell (Springbank) sits as low as it does because their regular range (included in the list) hasn't changed in price much, though their limited edition items (not in the list) have almost doubled in price. Meanwhile, J&G Grant (Glenfarclas) sits at the average/mean again. Emperador inherited the sins of United Spirits. Diageo doesn't crack the top three since, other than Talisker, the rest of their distilleries' increases were relatively moderate. William Grant has Glenfiddich's and Balvenie's older bottlings. And then there's Edrington. Edrington, Edrington. It's not like they have only two whiskies on this list unfairly bringing their average. They have fourteen.
So if I take all these years and all these whiskies then find out who's responsible for what part of the price boost pie by weighting the amount of products from each producer...
To be fair, again, the responsibility for these price increases does not fall entirely on the producers. Importers, distributors, and retailers leave their own (sometimes) invisible footprint on the final price. Some of these companies feel like they can inflate the price of brands which are marketed as luxury. This is why one can find a bottle of Macallan 18 selling for $195 and $325, or Glenfiddich 40 selling for $3500 and $5000, at stores in the same city.
The one question I leave you the consumer with is how do you put a price on the importance of this brown liquid? What's your breaking point? How do you feel about the pricing tiers separating you from your favorites? Okay, yeah, I know it sucks. But do you think these price changes are motivated by actual market conditions? Maybe that was more than one question.
I think the price of scotch is a problem that extends to the blends when it comes to the aged brown spirits available worldwide. Can producers maintain an illusion of luxury or romance when the quality is not competitive at the price point? I'll look at this further on Friday's post and then wrap it up with some stats from the first half of 2015.
