The Market Reacts

Lots of feedback via email after yesterday's post! Thanks to all of you who offered up support and varying points of view.  I really enjoyed reading through them and I learned a great deal about what's on the mind of customers all over the country.  I'd like to take a few minutes to address some of the concerns reflected in these emails:

You can't fight the rising cost of things.

This is entirely true. Gas is more expensive than it was last year. Concert tickets for the Rolling Stones cost me $60 in 1994 (and that was for the 3rd row center at the Oakland Coliseum), but now they sell for thousands.  A bottle of Chateau Latour was $25 in the early 80's, yet the 2009 sold for $1500 on pre-arrival. Believe me, I'm not some curmudgeon who is trying to fight inflation. I'm also well schooled on supply and demand.

That being said, no whiskey has had more demand and less supply than Pappy Van Winkle Bourbon. Yet, the last time I looked, the price for each expression has been roughly the same each year (maybe a few dollars more here and there). The Buffalo Trace Antique Collection bottles are all the same price as last year.  The new Flaming Heart is the same price it was two years ago. Ardbeg continues to sell like crazy, yet I haven't changed the prices in years.  In fact, the last time I changed the price on Ardbeg was to lower it. I'm totally fine with a whisky adjusting its price tag to fit in with the market, hence why the recent increase on Laphroaig 10 isn't that big of a deal. 

That being said, small market adjustments are not what we're seeing in all cases. Some whiskies are looking to exploit the market.  They're looking to cash in while the market is hot.  Remember when a house in Modesto was selling for $600,000 a few years ago?  That house was never worth $600,000 but realtors had some people believing it was.  With so many brands keeping their prices consistent, why do some companies believe their whisky is worth more now?  Is it actually worth more, or are they just trying to convince us that it is?  I knew people who sold their houses in Modesto for ridiculous prices just to see if they could.  Are some whisky companies doing the same?

As someone who works with whisky, am I not cashing in on this as well?

I'm not looking to work at K&L for a few years, make a ton of money by jacking up the price of whisky, and then cash out before the market crashes.  Even if that were a realistic option (which it isn't), David and I have worked too hard over the past three years to build this department into what it is now.  If companies continue to drive prices higher and customers eventually decide to get out of the single malt game, that affects me. If we are indeed inflating a bubble and that bubble pops, then we here at K&L pop with it.  I don't want that to happen! I'm passionate about keeping whisky affordable, not because of some idealistic socialist belief that everyone should be able to afford every whisky, but because my livelihood depends on it.  Plus, I love putting great bottles in our customers' hands and hearing about how much they enjoyed them. I'm definitely a big tent kind of guy.  I want everyone to come to the party.  When I hear customers say "I feel like I'm being priced out by my favorite whisky company," that's disconcerting.  It should be disconcerting to whisky companies as well.

Don't worry about the big brands, keep up your single barrel program!

I wish it were that easy!  Do you know how many barrels we had to pass on this year?  Many, and it was because of their price tags.  The independent, single cask market is completely connected to the brand market and an overall increase in price will inevitably affect our ability to go to Scotland and find great whisky.  If the retail price of Macallan 18 hits $200 a bottle (which it most definitely will within the next few months), then why shouldn't a 21 year old, single barrel, cask strength Linkwood cost $200?  Obviously, we're selling our 21 year old Linkwood for $125 right now, but I have a terrible feeling that next year's trip to Scotland is going to yield this kind of response.  Two years ago we sold a 1974 Ladyburn from Signatory for $300 a bottle.  They wanted $900 per bottle wholesale for the same whisky this time around.  That's a 300% increase in less than a year. 

Whaa! Whaa! Cry, Cry, Cry!  That's the market, so live with it.

Hey man!  I'm just looking out for you.  If you want to pay $600 for the new Lagavulin 21, that's your choice.  $1000 for the Jefferson's Ocean?  Yes, you heard me, $1000.  We made $900 of extra profit on that bottle (which we then donated to charity).  If the prices keep going up, I'm certain that some people will keep paying them.  However, I don't love my job because of the salary.  I think about my job in the morning, while I'm here at K&L, while I'm driving home, while I'm eating dinner, while I'm sleeping (I dreamt last night that I had to deliver a booze order and I couldn't find it!), and again when I wake up. I love my job because I like helping people.  That's the same reason I loved being a teacher in Chinatown.  I loved helping little kids learn how to read, spell, and add.  Once all of the everyday people get priced out, I'm really just a stock broker at that point. I'm not as interested in doing that. 

-David Driscoll

David Driscoll