Scotland Has Lost The Plot

It’s a downright awful time to be a consumer if you’re interested in Scotch whisky.

There’s a lot of underlying causes that have made Scotch an absolutely horrible buy lately, especially for Americans, and I won’t rehash exhaustive analysis by others or my thoughts on the latest whisky to be sold in an imitation boat or the constant and ever more garishly nouveau-riche eye that guides brand identity these days. The fact is that two things have just utterly decimated my interest in Scotch these days – and as an enthusiast with some disposable income I suspect I am late to the party on this one.

The first is selection. What’s that? Isn’t choice great? Of course it is. However, “selection” has become just a proxy word for a ceaseless stream of one-offs released in stunt casks with novelty finishes. You only need to have so many wine finishes before you realize that a great many of them add very little to the underlying spirit. So much attention is delivered to single-cask releases or one-off limited runs or something similar and there seems to be virtually no attention given to distillers’ core range, short of tarting up the packaging every couple years and maybe bumping ABV up a hair. If you were one of those who felt they had to catch every new experience, it wouldn’t take long before you were tearing your hair out in despair of ever trying to try everything.

Even more tiring is the ceaseless stream of bullshit that accompanies these releases. If it’s not some impenetrably bizarre “legacy of stone” pitch (I’m sorry, what in the actual fuck was that supposed to mean?), then it’s something that tries too hard, like a hashtagged whisky.¬†Intrepid distillers, take note: the correct answer is not to next release a QR-coded whisky. Here’s a general bit of advice – if you need three paragraphs to explain why you named your whisky “Dawn” in Gaelic and how that relates to what’s in the bottle, you are too clever by half.

For me, the breaking point came – to my surprise – from Glenlivet, of all distilleries. “Alpha” was first. $150 for a black bottle of… who knows what? Legally speaking it’s probably whisky, so we can guess at 3 years and at least 40% ABV, but who knows beyond that? What a tempting pitch.

I can have blind tastings with friends for less out of pocket and a higher likelihood of a fantastic whisky. If you see Alpha and think, “AT LAST! I, TOO, CAN HAVE A BLIND TASTING!”, I urge you to log off your computer right now and go meet people. This is a product that acts as a solution to a problem that doesn’t exist for most reasonably well-adjusted people.

The last straw though was only a couple weeks later with Glenlivet’s Quercus. A 17 year old single cask – breathlessly and reverentially noted for its maturation in an “American white oak cask”. You know, a bourbon cask. There’s at least a million of them made a year in America and Scotland buys them by the shipping container. There are distilleries that use them exclusively for all new spirit maturation. Almost every distillery uses bourbon casks, and they are a common sight on the independent bottler market. Hell, even Glenrothes did this as a groundbreaking concept in their Alba Reserve and had the decency to charge about 60 bucks for it. Glenlivet has decided somehow that a single cask of 17 year old whisky in an industry standard cask now somehow merits $300. Three hundred dollars. What cast-iron balls!

That’s a perfect segue into the other side: price. In the last three years or so, prices have increased by 40% or more on some really standard malts. I remember buying Laphroaig 10 for $29. Today, you’d be hard pressed to find it much under $45. Macallan 18 went from $130-140 to now over $200 in the last three years. These are serious, serious increases in price. Certainly some of the old, closed distilleries will only rise in price, but when the bread and butter malts continue to skyrocket or get replaced by NAS editions, it’s hard to swallow. Apparently this is being driven by the East Asian market – best of luck to the distilleries of Scotland; I hope for your sake they can maintain that demand level. “Emerging markets” are also cited as a cause for why prices skyrocket – I guess that’s a good thing, but when customers in the US are starting to get uneasy, I wonder how it’s easily justified in these markets.

The price to consumers is only one aspect of this problem. The other is the up-until-recent practice of ordering direct from the UK. Due to local changes in UK law, shipping through Royal Mail is no longer possible and you’re limited to other carriers – which has made the cost of single bottle orders nearly prohibitive and more at risk of being held by customs.

Perhaps if the US adopted the 700ml bottle standard we’d see a wider variety of bottles and perhaps at a lower price due to Scotland being able to streamline bottling operations and by keeping a single range of labels as well. I’m not holding my breath though.

So what’s an enthusiast to do?

For now, the answer seems to be to focus elsewhere. I’m not a brandy guy, so don’t expect me to follow that recent trend; as far as whisky goes, my attention increasingly will focus on the US, Japan, and Ireland, with other international options here and there. In the meantime I will enjoy the bottles I bought when they were far less expensive. Hopefully by the time I’m done, things will come back to earth a bit. (Edit: Now I’m seeing Yamazaki 12 in a couple places for $80 and Nikka 15 for over $100 – maybe it’s already too late for Japan?)

I certainly won’t be buying much Scotch whisky for a while. Maybe some here or there, but at today’s prices, my purchases will be far less. I hope you’re not feeling the squeeze, but if you are, hopefully things will correct sooner rather than later. If not, I hope you have a stockpile you can work through! I do, and I will.

 

39 thoughts on “Scotland Has Lost The Plot”

  1. HAHA! “driven by the East Asian market”. They’re sorry, not sorry. Poor bastards were stuck drinking moutai for so long thanks to communism you know…

  2. Japanese whisky seems to be having the same cost increases as Scotch. Maybe it’s just my area but I remember when I could get a bottle of Yamazaki 12 for under $30, now I can’t find it for less than $50. And the few new releases in the U.S. are even more expensive than that.

    Maybe the distributors will start bringing in the Japanese NAS bottles at reasonable prices but if they can charge more for 12 year old single malt than Macallan does (itself one of the trendiest Scotch brands out there) I see no reason to expect a change in business strategies.

    1. It’s a fair point, though there are still reasonable prices to be had. We’ll see if that holds; I’m momentarily cautiously optimistic just given how long they held out before bumping from $35 to $50 (and not floating it on the back of some redesign). It’s certainly the next one that would be pulled along on the wave that Scotland is riding.

      1. As a regular consumer of Japanese whisky, what little has made it to the states anyhow, I can clearly recall buying Yamazaki 12 at the grocery store in Michigan for the state minimum price of $36 a few years back… and Then I moved to TX, I was saddened to see here it’s always closer to $43-$45, but I still drank it.

        However, over time, I stopped buying it, not because the price – but when I’d make a liquor store trip for the “staples” (Yamazaki 12 was a staple), it was just rarely there. I’d usually hit up 2-4 different stores to find the best prices/selection, and Yam12 just didn’t show up on shelves anymore. I’d see the 18 on occasion for around $75-$85, and pick that up now and then as a “treat,”… but that too stopped showing up.

        Over time, even as more Japanese brands came into the US, it was harder and harder to find them – I was on watch lists for the Nikka 15, and it was probably close to 6 months after it arrived that I actually got some.

        My most recent favorite is Hakashu 12 – and it’s essentially become unobtanium – I’d have more luck landing a Pappy 15 than a Hakashu these days simply because the Hackashu is available in smaller quantities, and much more limited allocation. Granted, compared to Pappy there’s relatively little demand – it’s only about me and 20-30 other folks fighting over it (vs me and 5000 fighting for the Pappy 15). But I’ve watched the price per bottle creep up about by $7 over the last 2 shipments to the point where what was a $45 Hakashu is now $50 in 6 months, and Yam12 is now more like $55 – this assumes you can actually find them!

        Yam18 is now closer to $150, and again, with Nikka 15 it’s probably been 6 months since I’ve seen it – and no idea what it would be ($100?).

        Most of these Japanese releases don’t ever see the shelf (sound familiar)? I only get them because I ask for them and take as many as they’ll let me have.

        At a recent Whiskey event, the Suntory rep was there – he said that availability is stretched to the max. What had recently landed at the warehouse in California is it for the next 4-6 months (and it wasn’t much). These whiskies are fetching nearly double in the Asian markets as we are charged here, so most goes to them (duh…). His expectation is that the base expressions (Yam & Hakashu 12) will become more rare and likely reach $75 within the next 12 months.

        Last week I found a store with 6 bottles of Yam12 at $52! I felt like I’d scored some Laphroaigh 15 or some turn of the century (2000) era OWA. Rare – and reasonably priced! I left 1 behind ;-)

  3. I would stick with American whiskey at this point. Even Irish whiskey is going up in price. Redbreast 15 was $59.99 when it was introduced in the US four years ago but it’s now $72.99. Granted this isn’t as big a price jump as say Macallan 18 but I have a feeling the single pot still whiskies will be going up because it’s becoming a popular style. Heck, Sku just noticed Redbreast 21 is getting label approval.

    On a related note, K&L Wines revealed a piece of good news with LVMH stating they would not raise prices for Glenmorangie and Ardbeg for the rest of 2013. Granted there’s no promise in that statement and that line suggests that price increases may happen next year.

  4. It’s starting to happen with bourbon too. Take, for instance, Elijah Craig 18. A popular, very old single barrel priced at $50! Amazing price. Heaven Hill takes it away and brings out Elijah Craig 20, with a price tag of $130. Huh? 2 extra years for $80? Now, Heaven Hill, to the best of my knowledge, says the 18 is not permanently gone, just for a few years. Wonder how much the price will jump if and when it comes back out? Will it double? I know everyone’s already talked about this but it is a good example of this type of thing happening with American whiskey. Of course, the only real option is to just not buy the brands that are doing this, isn’t it? Don’t feed the monster. Problem is there are thousands of people out there who are buying it.

    1. Certainly, and there are all kinds of examples to be seen in every category. (Crown Royal for $200 or whatever the going rate is on XR) The Elijah Craig pricing was pretty ridiculous and seemed to be an attempt to establish a new price ceiling.

      I have no idea what the future holds there or where prices will go, but for the moment, at least bourbon still has a number of reasonably-priced offerings. It seems like the US is more interested in playing with proof or age than price, and I would suspect that for the moment there’s a bit more price sensitivity in bourbon.

      If not, well… I also have a fair supply of bourbon to ride out the storm. As it is though, bourbon distillers can absolutely clean the clock of Scotland in the $20-$45 price range, IMO. North of there it gets really muddy.

    2. Heaven Hill is also responsible for a wide selection of the tastiest affordable whiskeys on the market. Heaven Hill Bottled in Bond, Evan Williams Single Barrel Vintage, Elijah Craig 12, and now the newly released Elijah Craig Single Barrel 12, among many others. I do not begrudge them the opportunity to chip away at the higher end on an occasional basis. That, and the Parker’s releases are consistently worth the price asked.

      They are still my go-to distillery for affordable, quality whiskey in a number of disciplines. There are others much more worthy of your ire on price/quality, IMHO.

      1. I was simply using the recent Elijah Craig 18 and 20 goings on as an example of a large price increase in a short period of time in the area of American Whiskey. Yes, I know it’s a slightly different product, but still. I’m not the only person to bring this up. And I have no real ire towards them over it, I’m a big fan of Heaven Hill. I drink Evan Williams Single Barrel regularly and always look forward to the Parker’s releases. My suggestion was to not buy the brands that made the big price jumps if it was a problem for that particular enthusiast. And by brand in this case I mean Elijah Craig, not Heaven Hill, and in particular the 20 year old expression.

        1. Agreed, Matt. I bought my last three EC18s at $42.99 here in PA before they sold out. I won’t be buying the 20.

  5. Everything cycles. Prices won’t go up forever. Demand will fall and the distilleries will come crawling back for American forgiveness. There are still deals out there, but they are getting more rare. I purchased some really nice cask strength stuff from Binny’s and Party Source recently.

  6. The Scotch industry is dealing with an unprecedented recent uptick in demand, yet maturation cycles require a 10+ year lag in responding to significant changes in the market. While the cost of keeping a cask for ten years in a remote warehouse in the Highlands isn’t all that much (interest and rent), there is significant risk that the final product will be of questionable quality (every cask is different), and indeed there is perhaps even more significant risk that the market will collapse should the fickle customer’s tastes lie elsewhere.

    There are few industries similarly restricted. Raw materials processors are subject to exceptionally high upfront capital costs and very picky interconnected markets, but they can typically sell their product within days or weeks of producing it. The pharmaceutical industry is perhaps analogous, and they expect approx 99% margin on their product once (if) it goes to market.

    We’re also dealing with a luxury product – a product segment exceedingly subject to the forces of pure capitalism. Never be under any assumption other than distilleries are, first and foremost, factories in the business of making profit. Seemingly silly marketing campaigns are used only because they’re successful. Right or wrong, the vast majority of the whisky-consuming market isn’t inhabited by whisky geeks.

    1. Solid points. However, I would take issue with a couple points.

      Yes, historically there is roughly a decade before something is ready to hit the market; however the increasing push towards NAS whisky demonstrates that there’s a willingness to short-circuit that traditional delay to realize profits while the market is hot. Bruichladdich, while having established some decade-old-whiskies, seems to be releasing 6-7 year whiskies with regularity still. I’d highlight Kilchoman here as well, but to be fair, we’re still a couple years off the decade mark and who knows what their strategy will be. In their case, I think their younger distillate frequently is on the mark and has managed to provide a degree of quality that hasn’t required extensive use of gimmicks to justify it. (The cost, though, seems to have been creeping up noticeably of late)

      I certainly don’t wish the industry any sort of negative will; it’s a point in time where banking some additional profit may help weather the next downturn in a business where tastes and trends do change. If it’s a quality product, great. If we were swimming in great, young whisky, I don’t think I’d have been moved post what I did. I’ve had more than a handful of entry NAS whiskies lately to satisfy some curiosity and found a lot to be disappointed in.

      Certainly price increases mirror demand increases, but the data still butts up against pricing reality in a curious way. I showed two examples above of ~40% increases in price over about three years (and the industry says there were revenue gains of about 34% for the period of 2010-2012, attributed in part to Chinese demand). However, even last year’s 1% increase in revenue, actual units sold declined by 5%. In other words, the world paid more for less actual whisky last year.

      I don’t have any illusions about the role of whisky geeks or assign any romance to the industry, nor do I expect anything to come of this post – why would it? Why do I care and what am I trying to accomplish? As you point out, market forces are far beyond one snot-nosed blogger. This for me is voicing my frustration as a consumer: things are moving up in price and are further justified by meaningless adornments rather than a clear link to quality increase (or volume sales increase).

      1. Thank you for mentioning the drop in units sold. There was all this “Growth! Yay!” in the industry news, and the drop in units sold was brushed over. Unless a business constantly raises prices, they’re not going to increase revenue with that sort of decline.

        If you’re moving fewer bottles, then wouldn’t you want to be cautious about losing the customers who are still actually buying your product? Or are you going to bank big time on new markets. New markets with new money, many of which haven’t really nailed down the whole free market thing. It’ll be interesting to see what happens if units decline another 5% this year…

        1. That’s the problem with using top-line revenue as your measure of success; it really abstracts away a lot of meaningful and important insight into what’s going on. Seeing that to me showed that there was a breakdown in the fundamentals there.

          That ends up looking like those businesses who are “profitable” for a quarter based on a strong investment portfolio.

          As it is, the real story there is that an average 6.3% price hike was just barely accepted by the marketplace so as not to show a full slump in units *and* revenue. To me seeing an minimal increase in gross revenue against a slump in units sold says that the golden goose of consumer demand may be in trouble…

          1. Same is going on in beer. AB InBev reported volume declines of 4.5% but revenue increases of around 2%.

            It’s a house of cards.

  7. Canadian Whisky seems to have been totally oblivious to the price increases around the world but the ‘boom’ in the whisky business has shaken up the old boring distilleries and actually produced some interesting new bottlings.

    Problem is that general incompetence in the industry and government means that none of the ‘good stuff’ ever leaves the country.

    1. I was going to say, I regularly hear about interesting Canadian offerings (and the glimpses we get into more exotic/nicer Canadian whisky, e.g. via WhistlePig have been great) and invariably they’re for the domestic market only. It seems like Canada is practically an island unto itself at times with whisky. Would love to see some of the well-regarded offerings make their way south.

      1. To excel in the world of whisky, Canada has to come to terms with the fact that whisky can actually be bottled at more than 40% abv. That’s the major issue for me, though they seem to be slowly coming around as of late.

        Lots of potential there, however.

  8. That Glenlivet Quercus is, thankfully, an exclusive to The Whisky Shop and not a regular release. If it was, I’d expect to see it sitting on store shelves for a long time because for the loss of one year of maturation we can buy Nadurra for a much lower price.

  9. I’ve never seen a market with inflated prices pop as soon as I thought it would based on a logical analysis. Take whatever year you think the whiskey market will start to unwind and add several years to it.

    1. Oh, for sure. I’m probably the guy who jumped out of technology stocks in early ’97 if we’re drawing analogies here. Just getting a bit out of my comfort zone to consume as I had in the past.

      Fortunately, I can wait it out. And while Driscoll says I’m not buying ANY, it’s actually just massively reduced.

  10. I’m newer to whisky. On the one hand I understand the argument that it whisky is trendy and in a bubble. On the other hand, global whisky auctions are minuscule compared to wine auctions – rough numbers total $5m vs. $400m. Maybe whisky has further to grow as a collectible compared to wine?

    1. It’s possible, but the wine market is at least an order of magnitude larger than the whisky market. US sales of wine were $34 billion in 2012; Scotch sales in the US were $1.1B in 2012 according to SWA numbers. Now, expand that out to the rest of the world. Yeah, maybe it can grow, but can it grow THAT much?

      1. That is a large disparity in sales! I guess the holy grail for the Scots would be a big drop in the high Indian import taxes – given its huge market for whisky and less than 1% of current volume sold there being imports.

  11. Gosh, I’d love to get into Japanese whisky further, particularly the single cask expressions. But they’re even pricier than their Scottish peers. Three different 3-year Chichibu’s go for between 100 and 150 Euros from Europe!

    They were probably priced when the Yen was stronger (prior to the last few months), but will prices come down now that it has weakened? I bet Karuizawa pricing doesn’t drop.

    And I initially thought it was just Karuizawa that was pricey, but it seems to be closer to the norm for single casks from Japan. Would a 30 year old Yoichi (if they exist) go for less than 300 Euros?

    Definitely makes American bourbon seem inexpensive in comparison. Just need more people in the business like Jim Rutledge, who are focused on quality first.

    1. Not sure on the single cask market other than strictly observationally seeing that singles are much rarer from their market.

      That said, their standard expressions and occasional specials are pretty tasty.

  12. One further thought on market economics for whisky. Perhaps we should differentiate between two segments. People who buy the popular blended and single malt brands, and those interested in higher quality single cask expressions and the like.

    I could see the mass segment stagnating at times while the smaller high-end market continues to grow. Clearly the big brands with releases like the Quercus pitched as single casks are trying to exploit that demand. It’s a more risible version of LVMH’s evolution in marketing (and reportedly lower quality offerings) with the SMWS.

    Of course, throw another recession into the mix and all bets are off. Did demand for single casks from the indie bottlers stay strong during the financial crisis of 2008-09?

    1. It’s an interesting point you make, and it’d be interesting to track. It seems like there isn’t good enough data to outside observers to know with that granularity.

      What you can tell from the data available is that single malt as a category is 8% of production but 18% of revenue. Bottled blends are 72% of production but 76% of revenue. The majority of the remainder is bulk whisky production & sales.

      Now, again, the indie vs distillery thing is not cleanly broken out in the SWA’s public data that I found.
      2007-2008: 5% YOY decline in units sold; 8.2% increase in revenue
      2008-2009: 0.6% YOY increase in units sold; 2.5% increase in revenue
      2009-2010: 2% YOY decline in units sold; 10% increase in revenue
      That doesn’t really give a lot of clarity as to what (or where, for that matter) those increases came from.

      What we do know also is that for every year since 2007, stocks of maturing whisky have steadily increased.

  13. You’re focusing on the numbers, which clearly makes sense when measuring this stuff. :)

    Given that I’ve entered the geeky side of things with whisky appreciation, it’s hard for me to be objective. Can I extrapolate from my own experience to broader trends? Am I a relatively early adopter or late to the game?

    I have a friend who was given a membership in SMWS five years ago, but he wasn’t even aware SMWS was one bottler among many independents until I told him recently. And he’ll still just order from them rather than research other options – which takes a lot of work and interest. Especially in the U.S with less distribution available.

    Will most people never care about single cask/unique offerings, or is it a market that has yet to be properly exploited? What happens to the indie market when those bottlers have more difficulty securing stock in coming years? Will there be as much demand for bottlings from the 90s and on once the “golden era” stock of 60s and 70s bottlings has disappeared? I don’t expect answers from you, our faithful host, just some open ended musings…

    1. There are some fantastic single casks that have been distilled from the late 80s on. No doubt these will gain some currency when the few remaining 70s stock are largely gone, or priced similarly to the 60s stock these days.

      I’d imagine people will pick up on them. Heck, I’m a sucker for a good Clynelish and had been looking for single cask Glengoynes after an absolute earth-shaker of an ’87 single cask release from late 2011..

  14. One word: Glenfarclas! I bought the 10 the other day for less than $40. You can get the 12 for about $10 more. Both are amazingly good whiskies. Even the 17 (my favorite), 21 (also my favorite) and the 25 can be found for between $75 and $150. Am I already brainwashed or are those good prices for great whiskies? Aberlour offers some great whiskies at reasonable prices, too. It’s not that I disagree with the article in any way – I was laughing out loud in corroboration! – but I’m just pointing out that, if you can live with a plain bottle in a standard cardboard tube, there are some great distilleries out there that seem to be providing bottle well worth the asking price.

    1. Glenfarclas is for sure one of the winners in this category. Even their 40y was modestly packaged and sold for a downright reasonable $500.

      Aberlour – I’m still trying to find one I really enjoy. Another a’bunadh batch will probably be noted on here soon…

  15. Lucky for me, several Glenfarclases are among my very favorite whiskies. The Aberlours are a bit sodden and a bit less well-integrated by comparison, but I enjoy the 16 and especially the 18. The Glenfiddich 15 is another bargain out there. Lagavulin 16, another. I avoid the whiskies hidden under elaborate packaging primarily because I can’t afford them and often because they excite no interest in me whatsoever. I went to a Richard Paterson Dalmore tasting in Boston recently and the hype and pizzaz was so thick and cloying, with high production value short films and Paterson’s sophisticated clown from Madison Avenue act, I could hardly bear it. I’ve never tasted anything Dalmore beyond the standard expressions (I like the King Alexander III, but it’s way overpriced), but, for the working man, Sheep Dip (especially the limited 1990 release) may be his greatest accomplishment. He never mentions it at tastings, of course!

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