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We have spent years in spirits retail, and one of our 'favourite' customers of all time walked in and demanded to buy a bottle of 50-year-old whisky. We were more than happy to sell one to the customer but unfortunately not at the price they demanded to get it for. With some amusement over the exchange of words, we tried to explain to him why he couldn't get a bottle for £100 - taking to account that most 50-year-old whiskies cost more than £20,000.
But why is whisky so expensive? It is a simple question with an extremely complicated answer that sometimes consumers have a hard time understanding - not to mention losing their interest quickly when they realize that there isn't a simple answer. Truth be told, a lot of people only see the price and don't care about 'the why'.
A price of a whisky has been determined by multiple factors, and in this article, we wanted to try and simplify most of them. So the next time someone asks you the question, you can bore them to death like we've done several times.
P.S. We've never actually killed anyone with our rants even though Duncan has come close on multiple occasions.
'Is whisky more valuable than oil? Yes, it is, but it doesn't take litres of whisky to get you going.'
Age of The Whisky
One of the major factors affecting the price of whisky is its age. The age stated in the bottle has to count for the youngest whisky inside. For example, a label with an age statement of 15 years means that the youngest whisky has been aged at least 15 years, but it does not mean that all the whiskies inside are the same age.
Aging whisky is a long process with no immediate payback. It is a huge investment from the distillers to wait for years, or decades, to finally sell their product. With a 50-year-old whisky, they have waited for half a century for the payday. Also, during the extracting maturation around 2% of the spirit in a cask is lost due to evaporation. This means that less whisky is left in the cask to sell over the years.
So next time you drink a whisky that has been aged for 25 years, try to remember where and how old you were when the whisky was distilled and put in a cask. It will surely put things in perspective. Can you appreciate the time it took for the whisky to reach your glass?
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Age of The Bottling
In whisky, it does matter when a bottle was released. It's fair to say that a whisky bottled in the 60s will have greater value than one bottled in the 2010s due to its rarity. For example, a bottle of Johnnie Walker Red Label from the 60s sells for £275, but one bottled last year only costs £20.
All whiskies will go through a natural development affected by innovations in distilling and aging methods, and character changes under new Master Distillers. Some brands like Black Bottle have also changed their blend makeup, and older bottlings have a more prominent smoky character compared to the new recipe.
Sometimes even an event like distillery mothballing will have a significant effect on price. Whisky distilled before the closure, or from certain years, can have different characteristics and therefore be valued higher. Also, many whisky brands have been discontinued and have become desirable due to a lack of availability.
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Grains
Single Malts are made by using 100% malted barley. The malting process is expensive and time-consuming, which will affect the price of whisky. Grain whiskies can be made by using any (mostly) unmalted cereal grains, and therefore the cost of ingredients is lower. Most best-selling blended whiskies have a high grain whisky content, making them more affordable than many single malts.
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Cask Choice
Around 72% of the taste of whisky comes from the cask, so choosing the right wood and the right cask size is extremely important. But, not all barrels grow on trees (they do really. You know - wood). Some casks are harder to come by and cost more - affecting the price paid for the final product.
For example, sherry butts are at least five times more expensive than ex-Bourbon casks. Since sherry takes years to reach maturity while the demand for whisky has skyrocketed, there has also been a shortage of ex-sherry casks for years. Many distilleries are committed to using sherry butts due to darker, sweeter notes in the final product that many consumers find appealing. Distilleries are willing to pay more for the characteristics produced by more expensive barrels, and whisky lovers will always be willing to pay more to get their desired fix.
Whisky makers are also experimenting more with different casks after The Scotch Whisky Association allowed a wider range of ex-spirit casks to be used for maturing whisky.
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Distillation Method & Bottling Strength
Most whiskies are double or triple distilled in batches using copper pot stills. Grain whiskies are distilled by using a column still that can be run continuously. As a result, more spirit is produced with less hassle, and a higher ABV and purity can be reached.
Unaged whisky is many times put in casks at an ABV of 63.5%. Over the years the strength will go down with evaporation (in warmer climates it will go up with magic). When whisky comes out of the cask it will still have a high alcohol content often exceeding 50% - depending on the time spent in a cask.
Most whiskies have to have a bottling strength of at least 40% ABV, and many producers choose to water down their whisky to get to the desired ABV that will affect the taste. When a whisky has been bottled at "Cask Strength", no water has been added after maturation resulting in more prominent and fiery characteristics. It's needless to say that the turnout of bottles per cask is greater when the water has been added - hence a jump in price when the ABV is left higher.
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Release Size
The number of bottles made available can have a huge effect on the retail price of a product. When a single cask is bottled and released the number of bottles can be anything from 1 to ~400 depending on the age, and the size of the cask. Most core range bottlings are made in batches that can be made by combining hundreds of casks. It's fair to say that single cask releases are more special than run-of-the-mill bottlings - and more expensive due to their rarity factor.
For example, Diageo released two cask strength bottlings of Port Ellen 1979 40yo whiskies in 2020 - Port Ellen 1979 40yo Prima & Ultima, and Port Ellen 1979 40yo 9 Rogue Casks. The difference in value per bottle is around £2,000. The Prima & Ultima version was a single cask release with 436 bottles, and the Rogue Casks a small batch release with 1380 bottles made available. The result - Prima & Ultima Port Ellen is valued higher because there's less to go around.
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Packaging & Presentation
We have sometimes wondered which one costs more in particular releases: the whisky itself or the packaging.
The presentation can add significant value to a whisky. It does matter if the box or bottle decorations are handmade, or if the bottle is made by Baccarat or Lalique - crystal glass makers. With the collectors market for whisky thriving, bottles designed by jewelry makers, encrusted with diamonds, or plated with gold and silver, add value and wow factor to the release. Also if you're paying thousands of pounds for your whisky, nothing is more disappointing than getting it in a fragile cardboard box. Not only because the whisky won't be properly protected but because some of the expected eye-candy value has been lost.
Johnnie Walker Blue Label is a good example of a brand that keeps releasing limited edition design bottles that cost more than normal with subtle changes in the recipe.
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Distillery Reputation & Cult Brands
Some whisky distillers and distilleries are valued over others. It's needless to say that brands like Macallan and Johnnie Walker are highly sought after. With a reputation that has taken years to achieve with vigorous marketing and building of a brand, there are names that anyone in the world would recognize. Product placements on social media, movies, and TV can boost a brand's reputation, not to mention celebrity endorsements that are becoming more common.
Some distilleries and brands like Pappy Van Winkle, Ardbeg, Port Ellen, and Brora also have a cult following. Port Ellen and Brora are closed distilleries that have managed to catch the attention of whisky lovers to the extent that they have now been resurrected to make good of their famous names. Sometimes an event like 'Pappygate' can boost up the already valued brand's reputation, proving that any publicity is good publicity.
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Quirks
With innovations in whisky and the never-ending competition between producers, quirks have become the new frontier. To offer customers "something special" companies have chosen different techniques to entice the public interest. Some of the past tricks used include releasing extremely old whiskies, commemorative bottlings, sending whisky to space, using an uncommon cask, releasing a limited event-based bottling, or even releasing capsules of whisky.
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Popularity & Rarity
When a whisky distillery or a brand reaches certain popularity, getting you're hands on a bottle can turn out to be nearly impossible. This does not necessarily mean that the distiller is holding back stock just to mess with consumers or to artificially increase its value. Even though the producer might have amped up their production, to make the whisky available today, they would have had to predict the growth of sales some years ago. The question of "why don't they just make more?" can be easily answered by noting that "they are and will, but are you willing to wait another 10 years for the whisky to be ready?"
The most famous example of running out of stock to meet the demand in recent years has to be the case of Japanese whiskies. In the mid-2010s Japanese whisky (starting with Yamazaki) experienced an unforeseen jump in sales which resulted in significant price increases, lack of availability, revamped releases, and ultimately the resurrection of the whole Japanese whisky industry.
Some distilleries choose to produce only a certain amount of whisky per year. For example, Springbank distillery in Campbeltown, Scotland is only releasing batches of whisky a couple of times a year knowing that all their whisky will be sold. Therefore it seems that this highly sought-after whisky can only be found half of the year.
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Available and Existing Stock
So, what makes brands like Karuizawa, Brora, and Port Ellen so expensive? It's all to do with availability and existing stocks. Since these distilleries do not produce any more whisky (to their old reputation) there is only a certain amount left in the world. There will come a time when all stock will be gone and these whiskies will only live on as memories of something that used to be available. With the rarity of the whisky left comes a high price.
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Assumed Market Value
Distilleries like Macallan have become so sought after that they can control their assumed market value. They can price their whiskies as they please - sometimes a lot more than their competitors would for the same type of release - and still have people lining up to buy them.
Assumed market value is highly connected to the distillery's reputation, availability, and the age of the whisky released. For example, a Yamazaki 18yo costs around £950 these days, while a bottle of Glenmorangie 18yo will set you back only around £95. Both of them are considered to be in their expected price rackets. Although the Yamazaki can be deemed as overpriced by flavour, people who wish to buy one are happy to spend the money because it is expected.
For many, the price also has a huge impact on the tasting experience itself. Drinking a whisky worth thousands of pounds is assumed to be a mind-blowing experience. In reality, the whisky doesn't have a say in how it's priced - people do.
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Secondary Market
For those of us who wish to drink their whisky, the secondary market has become a plague inflating the prices of whiskies. No doubt collecting limited releases has become a new side hustle even for the non-whisky-loving community. Some editions are so highly sought-after that people are entering ballots for a chance to buy one, only to enter it into the next available auction to make a profit. These so-called flippers have made sure that the secondary market of whiskies has thrived in the past 5 years or so. Many whisky lovers are left to lick their fingers while flippers laugh all the way to the bank.
Some auction houses have also in the past bet on the whiskies on sale to artificially inflate the price of certain bottles. Unfortunately, many retailers base their current prices to reflect the secondary market, therefore creating a cycle of inflating the price with expectations of value.
One of the most famous cases of inflated prices by auctions is the case of Pappy Van Winkle. To this day, Pappy Van Winkle 23-year-old is released with a recommended retail price of around £250. People quick or lucky enough to get it at that price might enter it into an auction and sell it for £3,500 making a great profit. But the bottle was bought by a retailer who then nearly doubles the price to ~£6,500 to make a profit. And voila! A £250 bottle becomes a £6,500 bottle. Who ultimately is the "winner" here? Not the Van Winkle family, nor the consumer who wishes to drink the whisky.
Image by The Whisky World
Tax
'In this world, nothing else is certain except death and taxes"'- Benjamin Franklin
We saved the most obvious price enhancer for last. Everywhere you look, there's taxing involved. You are paying taxes when purchasing, importing, exporting, or manufacturing and selling products.
In the UK, the tax on alcohol is 20%, but producers pay a certain amount of excise tax. In fact, around 74% of the price of whisky is just tax. In the US, the federal tax on spirits is $13.50 per proof gallon (which is defined as one gallon of liquid that is 50% alcohol), plus taxes set by different states. In some countries in Asia, the overall tax can range from 30%-100%, increasing the retail price significantly.
Image by The Scotch Whisky Association
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