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1987 Mortlach 25 Year Old Faultline Single Cask Strength Single Malt Whisky IN STOCK NOW!


Monday
Feb202012

Consumer Value

While the last article I wrote was devoted to determining the value of a whisky's retail market price, what about the personal value of a single malt to the consumer?  Aren't some whiskies just worth the price simply because we like them?  NO!  Well, maybe sort of.  It depends on if you can get them or not.  Some people like Pappy 15 so much that they're willing to pay $150 per bottle just to get some of it, but that's an issue of availability.  The opposite can also be true.  The same person may love Lagavulin 16 so much that they're willing to buy cases of it, but only at the lowest possible retail price.  They'll spend hours calling every local store to see who's the cheapest.  Because Lagavulin is widely available, there's serious competition on pricing.  Because Pappy 15 is not, people try and get as much as possible for each bottle.  The availability of a whisky very much determines how much we're willing to pay for it, hence, why companies are switching over to small batch releases. However, what should these whiskies actually cost?

Obviously, the consumer is going to be of the mindset that whisky should cost as little as possible!  But, again refering back to the last article, we don't know exactly how much it costs to make each bottle.  What we do know is that large production is cheaper, but results in more product to sell.  You have to be sure you can sell that much whisky if you choose to crank it out in high volume.  Small production is more expensive, but results in a more managable amount of product for smaller companies.  For that reason, we can get Glenlivet 12 for $24, but we have to pay $48 for Glendronach.  What doesn't play a large role in the world of whisky pricing is quality.  For a company to claim that their product is simply tastier, and therefore more expensive, than other similarly-produced whiskies is pretty ballsy.  For consumers, however, quality is everything in deciphering a whisky's value.

Why pay double the price for Glendronach 12 instead of Glenlivet 12?  It tastes better!  It's more textural, it's rich and supple, the flavors are more complex, and the experience is more satisfying - to me.  It's more expensive because they're a smaller company than Glenlivet - they make less of it and it therefore costs them more to produce it, export it, distribute it, etc.  Shopping for whisky isn't too different from selecting produce at the supermarket - you might pay double for certain products, but they may taste a whole lot better!  Ultimately, it's up to the consumer to decide if the extra money it cost to make the whisky is worth spending.  It was very expensive for Kilchoman to make their 100% Islay malt, so much so that their 3 year old comes in at $100 a bottle.  Some people are outraged by the high price, while others applaud and support the effort gladly.  Quality determines the value of the whisky to us, the consumer, regardless of how much it cost the distillery to produce it. 

If consumer value in whisky is determined by subjective opinion, then what are the great objective values?  Using the formula from my last article, I can give you some examples of what I think are amazingly-priced products. However, one whiskey stands above them all as, to me, the ultimate value in single malt:

- McCarthy's Oregon Single Malt Whiskey $49.99 - Are you kidding me?  $50?  I've seen craft distilleries charge that much for their white whiskey.  Tuthilltown distillery charges this much for a HALF bottle of their one year old Bourbon.  Clear Creek distillery buys peated barley from Scotland, ships it over to Portland, makes precious little of a peated malt, and ages it for three years in Oregon oak before bottling.  Steve has very little space for aging at the distillery, so the availability is small because he literally can't store more than he has now.  Yet, it's still only $50.  He hasn't raised the price in years, yet as Steve perfects his craft, the whiskey only continues to get better.  The 2011 release was the best I have ever tasted.  This whiskey is expensive to make, it's older than most craft releases, it's rare, and it's of high quality.  Plus, there's no other American distillery making peated single malt.  Still.......$50.

We can argue value 'til the cows come home about what our personal favorite value whiskies are, but so many of these arguments will be based on subjectivity.  How many great values are there based on objectivity?

-David Driscoll

Saturday
Feb182012

Breaking Down Value in Single Malt Whisky

I've been having this conversation via email with a few customers lately, so I thought why not do a post about it here?  To me, this is a flawed argument to begin with, so know that I don't think about whisky in these terms, but it's something people should be aware of none the less.  There's the old adage that value comes from whatever you think is good, but that isn't always the case.  If you think a white whisky is worth $100, then should it cost that much?  NO!  Just because one person thinks something tastes good does not mean that it is good or should merit a higher price tag.  In my opinion, the cost of a whisky should be based on the following reasons:

- cost of production (i.e raw materials, time, labor, barrels, small batch vs. large scale, etc)

- length of aging (the longer it takes to make, the more valuable it should be)

- rarity/desirability (mothballed distilleries, small production)

- high proof vs. low proof (higher proof gets a higher taxation rate which drives up the cost)

- quality (ultimately the least important factor in deriving value, except concerning source)

Let's break each of these categories down:

Cost of production - What kind of grains were used?  Where were they sourced from?  Were they organic?  How much did it cost to distill each batch?  How much can be made each time the still is run?  A continuous still can pump out whisky faster and more efficiently than a smaller pot still, which in effect lowers the cost. What kind of barrels were purchased - new oak or used oak?  There's a big price difference between the two.  The cost of production should be the first step in determining the value of a whisky (unfortunately, the consumer will never know exactly what that is, but we can investigate!).

Length of aging - Should something that sat in a warehouse for ten years be worth more than something that only sat for three years?  That depends on the cost of production, of course!  Both costs being equal the answer is yes.  However, if something was made from cheap grain and mass-produced on a column still like a factory, should that ten year old spirit be worth the same as a ten year old, 100% Islay Kilchoman?  I don't think so.  Also, what kind of wood did it mature in?  Ten years in a fourth-fill hogshead isn't the same as ten years in a second-fill sherry butt or first-fill bourbon.  The barrel means everything in determining the value of age.

Rarity/Desirability - Are we dealing with a closed distillery here?  Port Ellen and Brora are expensive because they're no longer in production, plus they're highly sought after.  Ardbeg limited editions are rare because they decide to make less of each particular whisky, therefore they're highly desired, but the scarcity is created by Ardbeg - they chose to make less.  That lowers the value in my opinion, but if people want it badly enough there's no telling how much Ebay can drive that price up.

High Proof vs. Low Proof - This one is straightforward.  The higher the percentage of alcohol in the bottle, the higher the taxes paid on the whisky.  The higher the taxes, the higher the cost to make up for those expenses.

Quality - Ultimately this is the least important factor because it's the least objective (notice I didn't say "it's the most subjective" because quality isn't entirely based on opinion).  After calculating how much it cost to create the whisky, how long it spent in the barrel, the final proof of the spirit, and the amount of it there is to sell, the price of a whisky is finalized.  Quality doesn't come into play until the customer actually buys it.  If a company, distributor, or retailer were ever to raise the price of a whisky significantly because they thought it was better, it would really piss people off.  "Why do you charge more for Lagavulin 16 than BevMo?" Because I think it's better!  Yeah, right. However, quality does play a role when determining, say, which Macallan to buy - the distillery bottle or the independent release.

Ultimately these are the main components in any formula to determine value in a single malt.  What did I leave out?  Single barrel, for one.  Single barrel whiskies aren't inherently more valuable than vatted whiskies.  They're just more limited, which would fall under the rarity category.  That being said, however, I do think that great-tasting, single-barrel whisky is rare.  Most barrels that we taste are not as impressive as the distillery blends.  Independent bottling vs. distillery bottling is another factor I left out because I think it falls under the quality tab.  Macallan should have the best Macallan whisky, therefore their stocks should be worth more than Signatory's or Gordon & MacPhail's.  However, this isn't always the case and it's not an absolute.

The reason this whole conversation came about is due to the new Glenfiddich Cask of Dreams release and its $99.99 price tag.  There was some sentiment that whisky prices were getting too high and out of touch with the consumer.  I agree that this is an overall trend, but let's break down the case of Glenfiddich. 

Cost of production - new American oak barrels (not cheap),

Age - 14-16 year old whisky chosen from the distillery

Rarity/desirability - limited availability, high desirability

Proof - higher at 48.8%

Quality - very good, distillery stock

Let's look at some similar whiskies and see if the Glenfiddich price point is too out of whack.  Lagavulin 12 year old - $99.99.  Same specs as the Glenfiddich, but two years younger and maybe a higher desirability rating.  Either way, you're paying $100 for 12 year old whisky.  You could get 12 year old Aberlour for $35 or 12 year old Glendronach for $48, but neither are limited, nor are they high proof.  Our 11 year old Blair Athol cask came in at around $70, while our Glendronach 16 year still sells for $115.  Both are limited and high proof, like the Glenfiddich Cask of Dreams.  At 14 years of age, the CoD would fall right in between those at $100. 

Again, this isn't the best way of looking at whisky.  Ultimately, we could ask any producer if they could have made it for less and the answer could be yes or no.  That's like asking a business what their margins are - exactly how much are you taking us for?  No one's going to let us in on those numbers.  In the end, all we can do is evaluate what we know.  To me, the Glenfiddich Cask of Dreams isn't cheap, but it isn't exorbitantly priced either.  It's line priced with many whiskies of a similar production, age, rarity, proof, and quality.

-David Driscoll

Thursday
Feb162012

Higher Pricing

A good customer of mine emailed this to me a few hours ago, after I sent out the secret email newsletter featuring some hot new acquisitions:

"Hi David - is it my inattentiveness, or has there not been much in the way of interesting whiskies priced below the $85 and above range lately?"

To which, I replied:

It’s not your inattentiveness – prices are going up.  $100 is the new $60 for single malts.  They know they can get it, so they’re pricing it accordingly. 

This isn't an accident, folks.  Small batch, limited edition - it's the way of the future.  Limited quantity gives the producer the right to charge more, and the fear of missing out on something fantastic has the public in a hurry to go along with it.  I've said it before, and I'll say it again, every company has been watching Ardbeg, Pappy Van Winkle, etc, and the hype that accompanies the release of in-demand, but very-limited whiskies.  While formerly it was proper business sense to create something great and then make it as widely available as possible, this somewhat obvious logic doesn't apply to the boutique realm.  Look for 2012 to be the year of "limited release" where companies purposely make less of a product with the intent of making it more attractive to collectors.  The whisky machine is on to us - they know we want to try new things, not keep drinking the same old brands.

The problem is that the big-budget, limited edition malts have been damn good so far!  I absolutely love the new Glenmorangie Artein, and the Glenfiddich Cask of Dreams that I tasted today was superb.  I don't think the prices are too far off from where they should be either.  Believe me though, as soon as I see a cheap attempt to capitalize on this trend, I will call it out.  Until then......I guess we should be happy there are so many great options!

-David Driscoll

Thursday
Feb162012

Cask of Dreams?

Photo from msnbc.com MarketwireThere was a lot of PR surrounding Glenfiddich's newest limited edition release - the "cask of dreams."  They went on a big campaign around the U.S., literally rolling barrels of whisky through the streets of major American cities, where people could sign the barrels and record their own dreams onto the wood.  That's a great story, but it doesn't make the whisky taste any better, does it?  Luckily for Glenfiddich they've created a delicious single malt that lives up to the hype they've invested in it.  After transporting the decorated casks back to Scotland, the unused American oak was filled with whisky aged 14 years and older where it rested for three months, picking up more vanilla from the uncharred wood.  The barrels were then blended together to create a limited, 3500 bottle American release that's definitely worth any single malt drinker's time.  There's a lot of vanilla - a ton of it - but it's never overpowering.  Lively spices, sweet grains, high-toned fruits, and supple caramel all come at once, dodging in and out over the palate.  Everything stays completely in balance and the finish leaves trails of resin with cloves and rich oak.  Best of all, they bottled it at 48.8% which gives the whisky the heft it needs to battle all that flavor.  Glenfiddich never seems to excite the more experienced malt drinker, but I think that's all about to change.  This is much better than last year's Snow Phoenix, so they must be listening to feedback.  I think it's very well made and it makes me much more interested in tasting future Glenfiddich expressions.

We'll be getting 120 bottles tomorrow.  Email will go soon.  Grab 'em while they're here.  Should be about $99.99

-David Driscoll

Wednesday
Feb152012

Almost Ready....

Got the labels in the mail!

Went to the distillery to put one on a bottle!

Dave Smith tweaked a few things and we did the final tasting.

Now we just have to get it out of the stainless steel and into the bottle!  Friday is the day.

Faultline Gin by next week?

-David Driscoll