Scotch Ain't Dead Yet, Part 3: 2015 and The New Normal

Having experienced two stomach viruses (and maybe a poisoning) over the past three weeks (including 3 hours hooked up to an IV yesterday), and thus enjoying all of three fluid ounces of single malt over the past four weeks, I arrived at this series finale feeling as if I'm looking at all these whisky concerns from the outside.

Scotch is a commodity and there are A LOT of publicly traded corporations (nearly none of which are Scottish) involved in getting it to our whisky cabinets.  All of these interests make decisions not out of the good of their hearts, but to increase the Accounts Receivable line on their balance sheet.  And no matter how many gorgeous photos of cask-packed warehouses and weather-molded old Scot faces or articles waxing romantic on alchemy or crystal clear Highland water sources are published by marketing divisions, the producers, bottlers, importers, distributors, and retailers are all just trying to keep their jobs and figure out how to manage what has turned into an international billion dollar industry.  To paraphrase the Vulcans, "The needs of the many outweigh the needs of the few, and if you're a long time whisky fan you can go fuck yourself."

Part 3 did indeed become a little longer than I had intended (again).  Here's how it's structured: First, I have a moderate-length thought piece (read: data free bitch session).  Next I do some analysis on the one good bit of 2015 data released by the SWA, concluding with two charts(!) reflecting on the 2014 and 2015 numbers.  And then we will all go and have ourselves a good healthy weekend, okay?

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Tiers of Scotch, Tears of Grief

Scotch whisky had a bad year in 2014.  Export values and volumes fell relatively abruptly after a few decent years.  At the heart of this decline was a £424million drop in exported blended whisky.  Single malts sales continued to go up, as did their prices, but that could not stop the overall drop.  And as the numbers showed, many more people are leaving blends than are picking up single malts.

I want to look at this from an angle we whisky geeks rarely discuss.  Most of the drinking world, including people with and without considerable means, rarely spend more than $25 on a bottle of booze.  So keep that in mind: $25.

Think about what blends are widely available at $25.  Johnnie Walker Red Label, Dewar's White Label, Cutty Sark, J&B.  Think about the quality, the flavor, of those blends.  I'm not talking about back in the day.  I'm talking about right now.  Right now, they are awful, awful, awful drinking options.  Yes, one could argue, they're not made to be neat sippers.  But their raw junk content can be tasted through cocktails, ice cubes, water, club soda, and Coca-Cola.  And they are amongst the ugliest choices for shots.

Think of the quality gap between Dewar's and Old Grand Dad 114.  Or a barely 3 year old Red Label and a 12 year old rum.  They're about the same price.  And, again, if shots are the game, Jameson's, Paddy's, and Tullamore Dew make for a softer (dare I say, smoother) experience thanks to their third distillation.  Hell, I'd do a shot of $25 vodka before I'd do one of Cutty.  Clan Macgregor anyone?

But most clearly, when it comes the $15-$25 pricing level, bourbon whiskey has scotch whisky beat by miles in scotch's largest export market, the United States.  Even in Europe: Buffalo Trace, Bulleit, Maker's, and Wild Turkey can be had for less than €30.  A similar situation exists in a number of Asian countries as well.  Bourbon's character is loud, sweet, and oaky.  And not scotch oaky.  Kentucky summer oaky.  When it comes to the quality within the price range that appeals to most people, scotch cannot compete with bourbon.

Back to scotch.  Where do people with inquisitive palates go when they want to move into single malts without spending much more?  (And let's not call it "graduating" into single malts. Tens of millions of blend drinkers would happily beat the life out of every last patrician single malt sipper who described them as a lesser person.  Let's demean the whisky, not the people.)  For $5-$10 more, maybe there's Speyburn, Glen Moray, and Tomatin.  The average price of Glens Livet, Morangie, and Fiddich are near $45 now.  Many of the new NAS bottlings are at that level or higher.  That is not the same as spending $25.

So once again we arrive at the tier problem, mentioned in Part 2.  Ten years ago, single malt drinkers were able to move around a brand's range with small price steps (think $50→$75→$100→$200).  Today, it's $50, $200, and $1,000.  The mobility is vanishing.  On a similar note, the financial significance of the jump from $25 to $45 should not be overlooked, and I think it has.  Maybe the Red Label drinker can find Black Label on sale sometimes, but if he's just looking to relax or get a comfy buzz (the original draw to this drug) then he can find many non-scotch options at the lower price ranges.  That guy represents most of the drinking planet.  If you can't meet his needs then he will go elsewhere.

Of course, the corporations who own both "elsewhere" and scotch aren't hurt as much as we wish they were.

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And now, some 2015 stats

Welcome back to 2015!  Lemmy Kilmister, David Bowie, and Alan Rickman are all still alive and......goddamn it.

(source)

I was able to stiff upper lip it for the first two, but not when Sheriff Colonel Brandon Jamie Marvin Gruber Lazarus Snape left us.

I'll start this section over again.

Welcome back to 2015!

The Scotch Whisky Association released their "First half of year exports" 2015 document almost two months before they published the final 2014 export tallies.  What the report does not tell us about is single malts or blends or stock or production or the UK or most countries really.  It's a two-page list of the Top 20 export markets in volume and value.  If you think that doesn't sound like much on the surface, you're right.  BUT.  The Top 20 export markets were responsible for 75.6% of the total export value in 2013.  In 2014, they did 76.8% of the business.  Thus what happens to the Top 20 is mostly representative of what's going on with the entire market.  I encourage you to download the short PDF and follow along.

I'll take a look at 2014 for a sec, so that I can set up 2015.  In 2014, scotch's export value was 7.3% lower than it was in 2013.  (For the top 20 markets, the loss was about 6%.)  The first half of 2014 was really rough for the top 20, the value dropping 9.25% lower than the previous year's first half.  The largest market, the US, dropped 16% on its own.  The second half was less brutal, showing a 2.57% drop compared to 2013's second half.  The US dropped just a percent.  I've looked at previous documents and it appears as if the second half of every year is better for sales than the first half.  But that also means that each year there are higher expectations for the second half.

In the first half of 2015, the top 20 export markets dropped 1.7% in value compared to that difficult first half of 2014.  But that 1.7% wasn't evenly spread out.  The top 9 markets all suffered losses.  Meanwhile only 3 of the next 11 were down.  The top 9 fell 3.75%, while the next 11 were up 4.75%.  Singapore, the third largest market, appears to have stabilized a little after an awful 2014, being down less than 2% compared to the previous 46% drop.  China had a major rebound, growing almost 46% and launching itself onto the list.  Meanwhile Taiwan gave back some of its big 2014 gains.  Panama and South Africa, which had bad second halves last year, had bad first halves this year.  And Golden Boy USA was down almost a half percent in the first half of 2015, as opposed to the 16% tank last year.

While the larger markets struggle to match last year's weak numbers, the smaller markets (within the top 20) are mostly not having that issue.  I'm sure there are some analysts who are keeping hopes up by reminding everyone of a stronger second half.  But then again, if every year (including last year) has a stronger second half then the numbers still have to top that.

Decoding the volume sales from this document is difficult because the SWA for some reason uses a different metric than on their year end data.  They use "70cl BOTTLES @ 40% alcohol by volume" as opposed to "Liters of Pure Alcohol" (LPA).  So it's not the same as the data from my Part 1 graphs.  In any case, using this other measurement, the volume sales for the top twenty in the first half of 2015 was almost identical to the first half sales in 2014.  I'm talking about a 0.02% difference.

The one thing I find totally fascinating is the decline in value per bottle:
1st Half of 2014 vs. 1st Half of 2013: -8.3%
2nd Half of 2014 vs. 2nd Half of 2013: -3.6%
Overall 2014 vs. 2013: -5.8%
1st Half of 2015 vs. 1st Half of 2014: -1.7%
1st Half of 2015 vs. 1st Half of 2013: -9.7%

I'm not sure what happening here, but it's a real thing.  The value per LPA metric has been dropping annually since 2012 as well.  Here are some more value per bottle declines in the first half of 2015:
Spain: -19%
Singapore: -8%
Japan: -13%
Mexico: -15%
France: -4%
United States: -0.6% (though, as we saw in Part 2, this is not being reflected at the retail level)

Scotch whisky at point of export is getting cheaper.  Looking at 2015 in a bubble, since we'll have no official word of malt vs blend sales for eleven months, one wonders if malt (the more expensive sibling) sales dropped as blends (cheaper) grew.  But if we look at historical numbers, the value/liter of blends have been dropping steadily since 2012: £12.12 to £11.55 to £10.69.  Perhaps they continue to drop?  Are lower quality blends and younger (or NAS) single malts being sent out in larger quantities?

I'm not sure of the answer to those questions, but what we're seeing in The Big Picture is a market correction.  For the export market as a whole it's a return to the numbers of the Old Normal, before the big 2011 jump.  For the US market, it's a return to the totals from before the sizable 2013 bump.

To help, here are some visuals.  These are my Part 1 charts now extended to 2015 utilizing the percentages from the first half of the Top 20 export markets (which represent 75-80% of the entire market).  Again, these are not the final 2015 numbers, just an estimate based on what's been reported thus far.

What I'm not seeing here is a crash or recession.  I'm seeing a calming, some plateaus, a stabilization of volume sales, and an easing in the value per liter of scotch.  Perhaps I can even spot a market establishing a new normal, not as high as the heady days of just yore, but much stronger than a decade ago.

As I showed in Part 2, whisky consumers in the US aren't seeing this play out.  Because there are so many separate moving pieces in this country's daft multi-tier liquor sales structure, there are many companies involved in the price inflation, and I'm not sure which one will be the first to back down.

Of course, we whisky fans can back down first, but how much of a dent will that really make?  It's the new single malt drinkers, the ones who came to whisky when it was hottest, who have a different vision of the value of whisky, who will have to stop buying.  But why should they?  Talisker 18 is great, hasn't it always cost $150?

Scotch Ain't Dead Yet, Part 2: The very much alive pricing of single malts in the USA

In Part 1 of this series, I included a section that highlighted the drop in whisky exports to the US in 2014.  Declines happened in volume, value, and price per liter.  Price per liter for scotch whisky exported to the United States dropped by almost 2%.  But keep in mind, that includes both malt and blended whiskies.  Because malt whisky's price/liter (worldwide) went up 1.45% that year, it's quite possible that prices on exported single malt to the US went up a little.

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.

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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 350 450 retailers selling Talisker 10.  So they are 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.  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.

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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:

click to embiggen

This shouldn't come as a total surprise to many of us.  Old whiskies continue to go up in price very quickly.  What's happening here is a separation in pricing tiers.  The NAS, 8-10yos, and 11-13yos increased at almost the exact same rate (1.70% to 1.78%), while the further right/older you go on the chart the quicker the price balloons.  17 to 24 year old whiskies are being established on one level, 25 to 29s on another, and 30+ on its own.  These are tiers of luxury.  We'll return to this subject throughout.

Here's a breakdown by distillery:

Note: distilleries with only one whisky on the list were removed for accuracy and clarity purposes

And here's the same chart using the MOI metric rather than percentages, just to get you used to it.

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...

Note: owners with only one whisky on the list were removed for accuracy and clarity purposes

What this chart doesn't take into account is how many single malts each owner has on the price list.  So if I weight the numbers by taking that into account, we can see who is responsible for the overall price increase:

So, perhaps all companies and all distilleries are not equally guilty in price gouging...

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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.

Though another year passed and I added that 2015 data and I altered my methods, this year's chart looks almost identical to last year's chart.  Though it's more balanced than the 2015 graph, we're still seeing the movement towards the luxury pricing tiers by scotch whisky producers, distributors, and retailers.  Of the 19 whiskies on this list that are 25 years or older, eleven of them doubled in price.  A few even tripled and quadrupled.  Is this really due to scarcity or is it a psychological ploy?  Only the producers know.  And if people are paying the price, then the increases will continue.

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.

Even if you enlarge this chart it's still pretty crowded, but I included for completists.  To clear up the data, I'll include only the distilleries that have multiple products in the list...

Good news first.  There are eleven distilleries whose single malts' prices increased slower than the rate of inflation.  Yay!  If you're looking for a midpoint on the chart, it's Glenfarclas whose rate matches the overall average of 2.7 (which is in the 28-32% range).  Most of the distilleries to the right of Glenfarclas, especially those with the biggest increases, will probably not be much of a surprise to many of us.  Most of the distilleries with the largest average price increases are the distilleries that have established long-aged (read: ultra-luxury) single malts on the market: Macallan, Talisker, Glenfiddich, Highland Park, Glenlivet, Balvenie, etc.  Now let's see how this reads when comparing the distillery owners...

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...

Edrington's products make up 8% of the whiskies of the list, but are responsible for 24% of the overall price inflation.  Meanwhile, The BenRiach Distilling Company's products make up 7% of the list, but are responsible for 2% of the total inflation.

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.

Scotch Ain't Dead Yet, Part 1: Export Volume and Value

Reports of Scotch's demise are greatly exaggerated.  For some of us the idea of an industry collapse brought more than a little schadenfreude and many hopes for a decline in prices.  For others, including the authors of a truly baffling online petition for the Scottish government to protect the industry, there was fear that 1982 was upon us again and dozens of distilleries would fall.  But there hasn't been a crash or a precipitous crippling plummet or even a belly flop.

There does seem to be a steady drip drip drip decline.  I resisted quoting last year's financial analysis and calling this series "What is the Scotch Bust?" because there is no bust, yet.  But I will keep that title in my back pocket for next year or the year after, in case the trickle turns into a loch.

This year's trilogy will structurally mirror last year's.  Part 1 focuses on the export volume and value numbers published by the Scotch Whisky Association.  It's the post with all the cute minimalist charts.  Part 2 will be the newly updated and expanded US prices for single malts.  More whiskies!  More rows!  More columns!  More graphs!  Part 3 will include final analysis and conclusions and 2015 numbers and I really hope to make it briefer than last year's tome.

All of the data from my Excel charts here can be found in the SWA's Publication section, where the reports for 2009 through 2014 are available.  They just, literally two days before New Year's, published the 2014 numbers...

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Welcome back to 2014!  The value decline seen in 2013 not only continued in 2014 but became steeper.  Export volume decreased, as it had in four of the previous six years.  And very curiously, the price per liter of exported whisky dropped below 2013's, 2012's, and even 2011's average.  Single Malt sales worldwide continue to soar, meanwhile blend sales are sinking.  Aged single malt stock is draining, but production has ramped up at a much higher pace.  And in scotch whisky's biggest export market, the United States, volume sales experienced a large decline, even taking value down with it.

EXPORTS

First, the big graph.

As with all of these cromulent charts, you should click to embiggen

Though I include this mostly for completists, one can very clearly see the spikes in 2007 and 2011, the boomiest of the "boom" years.  But one can also see the dips that follow during the succeeding years.  Because there's very little point of reference here, I'll take a look at the gains since 1980 and add in the value and price per liter:

Last year I wrote about the plateau that had formed in 2012 and 2013.  Plateau no more.  Volume (liters) fell 3%, Value (£) dropped 7.3%, and even the value per liter declined 4.4% (or 7% since 2012).  So you don't have to squint to see most of this, let's zoom in from a different perspective and take a look at the growth and decline since 2007:

All three of these lines (volume, value, and value/volume) fell to their lowest levels since 2010.  Since 2011 was the biggest sales year in scotch whisky history, we're essentially at the point before the big shoulder formed.  If the declines continued in 2015 and the totals drop below 2010 levels, one could argue that that may be a cause for worry amongst the beancounters.

Before I delve into what was behind this decline. I wanted to include the next two charts which each contain possibly the saddest lines that a whisky chart could contain.

UK citizens are not drinking the very whisky made in their country.  And by the looks of this trend, they're very determined to not drink it.

But the rest of the world is drinking it.  Maybe a little less than we just were.  Let's see what's behind that drop.

MALT AND BLENDED WHISKY SALES

Last year, I focused solely on sexy sexy malt whisky.  But it's not the driver of the decline.  In fact malt whisky sales continue to grow.

To quote from last year's post, "Reading books and magazines and interviews, a whisky fan will come upon quotes that single malt whiskies make only up 5 or 7 or 8 or 10 percent of whisky sales."  And, man oh man, not only were those stats false a few years ago, they're not even relevant now.  If we're talking about value (as corporate financial reports occasionally do), malt whisky has now crossed the 25% marker.  It's no longer a niche, no longer a nerdy little corner of the market.  I wouldn't doubt if malt sales wind up doubling over a period of 8 years (2008-2016).

So if malt whisky sales are on the rise, then what's going on?  Well, this is where numbers need some explanation, because it is here where the decline occurs...

So you can look at the above chart and see two things.  Firstly, it confirms that malt volumes are blasting off.  Secondly, it appears as if blend volume sales are treading water.  They go up and down a little bit each year, percentage-wise, but don't appear to move too much.  In fact, they're within 0.09% of where they were in 2008.

But here's the thing, even though the handsomer of the whisky siblings, MALT, is growing quickly, the other sibling, BLEND, is still really really huge.  So even the smallest percentage decline in blend sales can drag everything else down with it.

As in, "Whoopie, malt sales increased by 4.7 million liters in 2014!" "Yeah? Well, blend sales dropped 16.7 million liters that year."

Or, "Yay for malt whisky value jumping £103 million in 2014!" "That's quaint. Blends lost £424 million in value in 2014."

I don't know what lunatics are having that conversation, but the point is that blends lost a lot of drinkers in 2014, and no matter how many of them moved to single malt it's nowhere near enough to make up for the loss.  Blends are the gravity behind the fall.  Even the value per liter of blends dropped 7.4% in 2014 (almost 12% since 2012), while malt went up 1.5% in 2014 (32% since 2010).  I'll write about this further in Part 3 on Friday.

AGED MALT WHISKY STOCKS

With malt sales still growing nicely and the price/liter nudging up, it's clear what's in demand.  How's that supply going?

Here's the bad news:

Sadly, the SWA data doesn't provide granular data for ranges on whisky older than 10 years, but I can say the following: the amount of >10year stock in 2014 is 37% lower than it was in 2008. Let me see if I can find some positivity here......the annual rate at which the volume of >10yo stock being drained has dropped since 2010.  In fact, the volume drained/bottled in 2014 was almost 10% less than was done in 2010.  Thank you, NAS bottlings!  Sorry.  :(

Here's the good news chart......or maybe not?

That is a truly insane boost in production.  The amount produced in 2014 is double what was in 2004.  I'm talking 142 million liters more.  And that's just in 2014.  Whisky sales are not, nor ever have been, growing at that rate.  So, when you hear concerns from people within the whisky industry about a whisky glut, this is what they're talking about.  I mean, whom do the suits think is going to buy all this whisky?  The Americans?

EXPORTS TO THE UNITED STATES

Whew, I had to sweat to find a segue there.  But it's a good one, because here is another driver of the downturn.

If one reads the industry commentary about which export markets were responsible for the drop in sales, you'll hear about the cutbacks by the Chinese government and the embargo with Russia.  These are pretty good excuses.  But those two markets added together carry but a fraction of the export weight that the Yanks do.  The USA remains the biggest whisky export value market by far (nearly the size of the next three markets combined).  And whisky exports to America stunk in 2014.

Volume, down 6.7% (or almost 9% from the 2011 peak).  Value, down by 8.6%.  Even the price/liter dropped (for the first time on this chart) in 2014, by 1.9%.  Those volume and value declines account for almost a quarter of the the entire export drop in both categories.

Because the SWA doesn't provide more granular data than this, one can only speculate what's going on.  As you'll see in Part 2, retailers' single malt prices continue to rise, so I'd be willing to bet that blend sales have also fallen off sharply in The States.  And maybe people aren't buying the more expensive bottlings whose prices are rising exponentially faster than the rest.  You'll see what I'm talking about in Part 2 on Wednesday.

---

Yes, 2014 was a crap year for the scotch whisky industry.  The biggest export market had a bad year (as did the former third largest, Singapore).  Export value, volume, and price/liter fell noticeably.  UK consumption continues to vanish into oblivion.  And export losses were entirely due to a 16.7 million liter (£424M) decline in blend sales.  Meanwhile, sales of malt whisky continue to blossom, stemming a bigger mess.  Optimism has spurred a major increase in malt production, which will either fuel a future boom or give whisky drinkers A LOT of long-aged whisky to consume over the next two decades.

That rough year wasn't without precedent, in fact export volume fell more precipitously in 2012.  Even single malt sales fell in 2012 (and again in 2013).  Export volume had a bigger fall in 2008 than it did in 2014.  What happened in 2014 that has drawn attention is the fact that exports' value fell along with the volume.  That doesn't occur frequently, but value also fell in 2013, 2004, and to a greater degree in 1998.  These are things that happen in markets.  There are good years and there are bad years.  2014 was a bad year, but what remains to be seen is: Are we seeing a trend?  One year does not equal a trend nor do two years.  The "Scotch Boom" was hyperbole, and perhaps we should wait before we announce doom as well.

On Wednesday, I'll take a look at single malt prices in the US, which *spoiler alert* continue to rise.  So sharpen them pitchforks.  On Friday, I'll mix all this stuff together, sprinkle it with some helpful 2015 data, and bake a whisky cake full of analysis.  You may need to wash it down with a glass of something.  I hear bourbon's pretty popular.

Single Malt Report: Kilkerran WIP 7 Bourbon Wood Cask Strength

If you've read one or all of my Kilkerran reviews, you may have quickly noted my enthusiasm for this Glengyle-produced single malt.  I love the stuff.  It's one of the few whiskies that gives me hope, reminding me that new great whisky is still being made in Scotland.  And though they keep calling each of their whiskies a "Work in Progress", we shouldn't keep holding our breath for the final result.  Each of these WIPs are good to excellent right now.

But the WIPs will end, allegedly, this year as the 12 year old will enter the market.  I wonder what color the label will be.  Here are the WIP colors thus far:

WIP 1: White label
WIP 2: Gray label
WIP 3: Light green label
WIP 4: Beige label
WIP 5: Blue label (Bourbon Wood & Sherry Wood)
WIP 6: Pink label (Bourbon Wood & Sherry Wood)
WIP 7: Dark green label (Bourbon Wood CS & Sherry Wood)

Sure there are some questions.  Will they release two whiskies again: an ex-bourbon and an ex-sherry?  Which will have aged better?  Will they have a cask strength version of the 12?  Will they throw in an NAS CV like Springbank?  How about a port cask?

It's fun to speculate, but it's even better to drink what's already here.  And here is WIP 7, an 11 year old single malt, aged in former bourbon barrels and bottled at cask strength (or a high batch strength, more likely).

Sorry, I can't find a photo of
the sample bottle. So here's an official
bottle shot.

Distillery: Glengyle

Owner: Mitchell's Glengyle Limited

Brand: Kilkerran
Region: Campbeltown

Age: 11 years (2004 - 2015)

Maturation: ex-bourbon American Oak barrels

Alcohol by Volume: 54.1%
Label color: Dark green
Limited release: 6000
Thank you to smokypeat for the sample!

NEAT
Immediately upon nosing it, I involuntarily released a simian grunt of approval.  That forest floor note in the nose has become like a welcoming old buddy in every new WIP.  The peat reads larger in this edition than any of the previous ones, maneuvering back and forth between BBQ and salty seaweed.  Perhaps that's due to the bigger ABV?  My notes read "rocks!". So apparently I smelled rocks.  Notes of apples, pears, and vanilla roll about in the background.  With lots of air, notes of fresh cherries and mango develop.

In the palate an intensely aromatic fruit note merges with the peat and malt and earth and salt. Big fruity and almost floral esters coexisting with the grunge.  A bold herbal bitterness and spice.  Hints of almonds and dried apricots.

A very long finish.  Moderate sweets and spices.  A little bit of vanilla and sugar.  Forest floor, malt, peaty residue, and a hint of blossoms.

WITH WATER (~46%abv)
Bringing the alcohol level down to the previous releases, the whisky becomes reminiscent of those WIPs but again with more peat in the nose.  There's seaweed, dirty hay, lemons, and roses.

The palate gets a little sweeter.  Very aromatic in the mouth, without being perfumy.  I wrote "Battle Flowers".  I was apparently getting poetic, as it must have reminded me of my Mathilda Rose.  Anyway, it's richly malty with just a little oak.

Rocks and soil and flower petals in the finish.  Herbal bitterness and whispers of peat smoke.  Limes in sugar.

CONCLUSIONS
How much did I like it?  Well, I never buy more than one bottle of anything (because money), but I bought two bottles of this.  It didn't hurt that I found a place that had priced it incorrectly.  Sorry, but they've since fixed that.

If you liked WIP 5 and/or 6, you'll like this one too.  It's fruitier and peatier than those, and has a thicker texture.  Some of that may be due to the higher strength.  But yet there seems to be less oak and more vivid spirit in this one, even with water added.  It's rich without feeling like it's been produced or prettied up.  Whatever it is they're doing, they need to keep doing it.  My goodness.

Once again, Kilkerran reigns as my favorite autumn whisky.  But, you know, it probably drinks just fine in the winter too.

Availability - It's around but slowly disappearing...
Pricing - this edition will run $70-$90 in the US; similar in Europe when factoring in shipping
Rating - 90

A tour of Westland Distillery and its whiskey

I knew more about Westland's reputation than its whiskey when I traveled to Seattle this past November.  In fact I'd never even tried the stuff.  It was one of those situations wherein the more I'd hear people raving about the whiskey, the less I'd want to try it.  I'd say about 90% of the American "craft" (or new small business) whiskies I've tried are whiskies that I never want to drink again.  Each whiskey had plenty of hype ink in books, magazines, and online.  Each whiskey was terribly disappointing.  And when I heard that Westland was only making single malts, I was even less enthused.  The only American single malt I found to be recommendable up to that point was McCarthy's Oregon single malt.  But when my Seattle friend, James, said he'd scheduled a tour of the distillery for us, I was genuinely interested to see how Americans were making single malt.

The night of our Seattle arrival, James brought out two single malts: Longrow 11yo 'Red' Shiraz Cask and Westland single cask 16.

The Longrow was so-so, though I always expect Longrow to be better than so-so, especially at this whisky's price.  The Westland was......very good.  It wasn't just another six-month-old tiny barrel quickie whiskey.  It had 4+ years in an ex-port Hungarian oak cask.  It was rich, thick, spicy, and very drinkable at its high ABV.  Now I was really looking forward to the tour.

The next night we Ubered over to the distillery.  If you go to Westland, I highly recommend taking the Experience tour, like we did, rather than just doing a tasting at the bar.  The tour is very casual and as informative as you'd like it to be.  In our case, I asked a zillion questions.

Westland Distillery was started by two 20-something year old guys, Emerson Lamb and Matt Hoffman, in 2010.  Financially, it is backed by the Lamb family's extensive old wealth (specifically Enterprises International) from the lumber industry.  With this solid backing, Lamb and Hoffman wanted to spearhead the creation of an American single malt industry.  They bought a former crane factory south of downtown Seattle and turned it into the current distillery.  They built two large dunnage warehouses in Hoquiam, WA, for their barrels.  In October 2013, their products first started hitting Seattle shelves.  Today they have three whiskies -- American Single Malt, Peated Malt, and Sherry Wood -- in their regular range that are distributed across the country, as well as a rotation of single casks that usually stay local.

The thing I appreciated the most about Westland is how completely open they are about every step of their processes.  This is more common in the American craft brewing industry than the scotch whisky industry, which keeps mum about any detail they can't turn into a marketing ploy, as if they fear some random dude is going to recreate Lagavulin from scratch in his garage.

Westland has three malt bills.  First is their most common, the 5-malt bill.  Made up of 70% pale malt from East Washington, 10% Munich Malt from Washington, 12% Extra Special Malt from Wisconsin, and a little bit of Brown Malt and Pale Chocolate malt from the UK, this mix is what goes into the American Single Malt as well as many of the single casks.  Then there's the Washington Malt bill, which is made entirely of the pale malt from East Washington.  Finally, there's the peated malt which they get from Baird's in Speyside, peated at 55ppm.

After experimenting with 27 different yeast strains, Matt (the Master Distiller) went with Belgian saison brewers yeast.  I can confirm it has fruity results.  They have a 5,000 liter mash tun (using 66ºC water) and 10,000 liter fermenters.  Their fermentation time is 5 days, which is much longer than most Scotch distilleries.  The resulting beer is 8%abv.

Their pair of pot stills, fashioned by Vendome and allegedly the largest west of the Mississippi, have the capacity for the installation of rectifier plates.  They have no set cut points, instead it's all done by nose and palate.  They redistill the heads and tails, so it's sort of a 2+ distillation process.

They use a number of casks.  They have ex-oloroso hogsheads and butts, ex-PX hogsheads and butts, ex-bourbon barrels, new American oak with different levels of char, Oregon oak, and the aforementioned Hungarian oak.  And with different sorts of casks, Matt uses different fill strengths.  Their warehouses are not climate controlled, so the oceanside weather affects the maturation.  Their target age range is two to four years.

Though there's only 200 casks in the warehouses right now, there's storage space for more than 3200.  Their daily capacity at the distillery is 5-6 casks.  The batch size for their regular range was 20-30 casks at first, but due to the expansion of their distribution the batches are now 50 casks.

So after all that, how is the whisky?

At the end of the tour, they pour the regular range, but while we were in the blending room we had a chance to sample a few single casks.  Cask 281 spent most of its life in a #3 char new oak barrel but was finished in a first fill Oloroso barrel.  The sherry was quite potent and whisky tasted much older than its 31 months (maybe even 8 extra years).  Cask 283 was massively peaty.  At 61%abv and 24 months in a first-fill ex-bourbon barrel it could easily compete with Kilchoman quality-wise.  Cask 313 was a whisky that had spent almost 3 years in a PX hogshead.  It was a dense desserty thing and though I'm usually not a PX fan, I liked this one the best of the three.

When it comes to their regular range, I think the American Single Malt is fine, not much more than that.  The Peated Malt is good, at least the equivalent of McCarthy's.  There are no too-young sharp edges, the peat is moderate and pleasant, and the oak stays back.  But it's the Sherry Wood that impressed me the most of the three.  It's quite a creation, utilizing six different cask types, the 5-malt bill, and a little bit of the peated malt.  The result is something that feels much more deeply matured than its 26 months.  I hope they can continue to match that quality in future batches.

I do have to say, though, the four single casks I tried all topped the regular range.  The very first Westland I had, Cask 16, the night before the tour, remains the best.  Its quality gives me a little bit of hope that something good will come from the American small distillery rush.  Eventually the market will thin out those who can't (most folks), leaving those who can (probably very few) to establish a successful American independent whiskey industry.

Happy New Year, whisky-wise and otherwise!

I'm sending many wishes of happiness and success to all of you, my excellent readers!  I begin the new year under the weather and thus in the middle of two weeks without booze and caffeine and fat and dairy and, oh god, happiness.  Luckily I have a few whisky things in the queue to post over the next two weeks.

As the reviews return, I'll continue with grouping them by themes or distilleries or countries.  In my reviews, going forward, I'm only going to comment on the color of a whisky if it's of interest, for instance if a pale whisky is very sherried or a dark whisky is spirit heavy or, you know, DiageoGold™.

source

I've also discovered (or actually MAO discovered) that my reviews are or were (for about five weeks) being republished in their entirety on a scraper website under the website's name, without my knowledge or consent.  I'm taking a few steps to prevent this from happening again.  Good times, y'all.  So to my readers viewing this post on other sites, welcome to Diving for Pearls!  I highly encourage you to head over to Diving for Pearls where the photos actually show up, the jokes make more sense (sort of), the reviews are more numerous and searchable, and the ads non-existent!

And finally, in personal news, my daughter will be going to daycare/school for half the week, every week, starting tomorrow.  I'm excited and nervous about it.  Meanwhile, I'll be going to back to fiction writing, again, with my newly expanded life.  I'm excited and nervous about it.  The planet has turned and the sun in the sky.  I'm excited and nervous about it.

Cheers!

Ghost of Whisky Yet to Come? Kavalan Solist Sherry Cask S090122079 Taiwanese Whisky

I skipped right over Ghost of Whisky Present because I'll be damned if I have to drink Laphroaig Select again.

To the future!

There are so many new whisky distilleries being built all over the world that I've given up trying to keep track of them.  With the Scotch whisky undergoing a market correction, and American whiskey probably doing the same within the next few years, I'm not sure there's a market for all these new distillers.  In Scotland alone, 20-30 distilleries were greenlighted (and more than a dozen older distilleries expanded) during the peak of the market and are now producing their spirit while export numbers continue to shrink.  Who's going to drink all this new stuff?  The Chinese and Indian middle classes?  I wouldn't bet on the Americans.  The newbs can price their whiskies as luxury -- you know, avoiding the shrinking middle class -- I suppose, aiming for the US wealthy, but that sector is pretty larded up already.

One new distillery whose single malts arrived at just the right peak time is Taiwan's Yuan Shan Distillery, producers of Kavalan single malt.  Their single casks hit the international market in 2011-2012 to much critical acclaim from both the everything-is-always-amazing crowd to the oldschoolers.  That high regard has continued right up through this year's Malt Maniacs Awards.  Thus Kavalan has established its roots before Nu Whisky arrives, giving it a better chance in whatever form the market takes next.

---

I have consistently disagreed with all the Kavalan raves, not to be a contrarian dick but because I actually had the opportunity to try six of their whiskies in 2013 and was completely underwhelmed.  Their $100 40%abv NAS whiskies were crap when neat, possibly only good for cocktails.  The $150 4yo single bourbon cask was a hot mess disliked by most of the folks at the tasting.  The $175 6yo sherry cask was so-so.  The $150 5yo Vinho barrique was decent.  The 6yo Fino cask was actually close to GlenDronach quality, but it was priced at more than $300.  Thus I had no idea what all the fuss was about, and was happy to not be tempted by very expensive whisky.

More than two years have since passed and $150 for barely legal whisky has become more prevalent and is, sadly, no longer shocking.  Positive reviews from more reliable sources, such as a couple Malt Maniacs who have relatable palates and also an actual maniac, inspired me to give it another go.

Distillery: Yuan Shan Distillery
Owner: King Car Group
Brand: Kavalan
Region: Yuanshan, Taiwan
Type: Single Malt

Age: 6 years (January 22, 2009 to March 9, 2015)

Maturation: "Sherry Cask", probably a sherry butt

Alcohol by Volume: 57.8%
Limited Release: 559 bottles

Samples purchased from the Whiskybase shop

NEAT
Its color is cherry syrup.

Enormous sherry on the nose: walnuts, raisins, dried cherries, and cherry snow cone syrup.  Soon a beef broth note develops and expands.  Maybe some mint too.  After 20+ minutes it picks up an earthy dried hay note and maybe some fresher fruit.

The palate has big sticky grapey sherry (almost a PX).  Chocolate and a mild herbal bitterness.  Hints of burlap and soil.  It's quite hot, but still drinkable.

Grape jam and dark cherries in the finish.  Caramel and chocolate (or maybe mocha?).  A little of the palate's decent bitterness.

WITH WATER (46-48%abv)
Raisins, vanilla, and baking spices (cinnamon, nutmeg, and cloves) on the nose.  A little more fresh stone fruits now.

The palate still has an ethyl bite.  Taste-wise there are raisins, plums, maybe limes too.  A little peppery and a slight mineral note.

All sherry stuff in the finish.  Plums, grape jam, and black pepper.

This is good sherried whisky.  Due to all of the heat and humidity near Taipei, the whisky feels like it's several years older than your usual 6 year old Scottish single malt.  And the sherry is loud Loud LOUD.  Since Kavalan isn't held to the SWA's laws, I wonder if the producer utilizes paxarette or includes a generous quantity of sherry right in the cask at the start.

Like Tuesday's very different whisky, the nose is the star of the show.  The palate (and definitely the finish) feel muted after the nose's technicolor vibrancy.  But it swims decently, which is nice.  Overall this whisky might be close quality-wise to Glenfarclas 15 and GlenDronach 15, at least on the nose.  That's the positive side of things.  (For a very positive opinion, yes, see MAO's review from last week.)

On the other hand, if you're in the US, getting your hands on a bottle of this will cost you around $150 (with shipping), and that's only while the Euro is weak.  To me, the quality and price still do not match, probably by a factor of two.  But if spending $150 on a bottle of tempered brown poison is a regular occurrence for you, then have at it.  It's good.

Availability - Europe only
Pricing - $150+ if you're having it shipped to the US
Rating - 87