Tequila Breakthrough

Congratulations to K&L utilityman Jorge Valencia.  Today he became the first person in the world (besides the distiller himself) to taste a 21 year old Tequila.  Where did we get such a crazy, mind-blowing sample of something so old and so rare?  From Jacob Lustig, of course - the man behind the fantastic ArteNOM tequilas.  Enrique Fonseca, known as El Arquitecto in Mexico, is one of the largest growers of agave in Jalisco.  He's also the producer behind ArteNOM's añejo selection (ArteNOM sources each of their selections from a different distillery).  He's been eager to do something special with his tequilas for decades, but the right opportunity has never come along.  Jose Cuervo offered to buy all of it, but he declined to sell.  It was an all-or-nothing proposition and Enrique wasn't ready to give up on his dream yet.  He makes plenty of money from selling agave, so there's never been a need to bottle any of these super old expressions.  They've remained locked away in his warehouse, some for more than two decades.

Now, after keeping these tequilas to himself for so long, Enrique has decided that Jacob along side Haas Brothers from San Francisco are the right people for the mission.  That doesn't surprise me - Jacob knows more about tequila than anyone I've ever met and he's as puritanical as we are about quality.  He wants tequila with no additives - just agave, yeast, water, a still, and maybe some oak barrels.  Knowing how head-over-heels the staff went for the ArteNOM products, I begged Jacob to find me more amazing samples from Mexico that we could feature at K&L.  He came back from Jalisco with unopened samples of such a superlative quality that I was quite speechless. We gave the first sip to Jorge.

According to Jacob, the oldest tequila he'd previously ever heard of was an 11 year old speciman, also from Enrique Fonseca's collection.  No one else has tequila of this age sitting in barrel that we're aware of.  Today, we went through 3, 5, 6, 8, 14, 16, 18, and 21 year old tequila samples - some from first-fill Bourbon barrels, the older ones from second-fill Tequila casks.  They were incredible.  The 3 year was dynamic and complex in the best of ways - green apple, spicy pepper, balanced richness.  The 8 year old was the unanimous winner - candied orange, loads of clove and cinnamon, ungodly length on the finish.  The 21 year was everything you hoped it would be - ethereal and graceful, flavors of such integration that only present themselves after two decades in wood.  The best part - this will be an exclusive deal between Enrique, Jacob, Haas Brothers, and K&L. 

Want to know the crazy part?  These weren't rich, supple, creamy, oaky, smooth tequilas.  They were all pure, clean, focused, and fresh, but none possessed the silky texture we've come to expect from extra añejo Tequila.  How is it that a 21 year old tequila from Enrique Fonseca could be less rich than a two year old Tequila from a larger brand?  The same way that the 60 year old Cognac from Dudognon was less rich and supple than the six year old Cognac we tasted from a big house producer - there are no additives in these tequilas.  You've all tasted Bourbon before - even if you char the crap out of the barrel, you can oak a spirit to death, but you can't make it sweet and supple.  Something extra has to go into the extra añejo to make it taste like that.  The oldest tequilas available, the very ones we tasted today from El Arquitecto, are mature beyond anything the world has ever tasted, but they're not creamy or rich.  They're vibrant, exuberant, and alive with fruit and spice, balanced beautifully by the slow addition of mild oak aging.

What will they cost and when can you get them?  We're not sure yet.  The goal is late Summer/early Fall, but we still have a lot of work to do.  They won't be crazy expensive - we want them to be accessible.  These won't be luxury brand tequilas, they will be historical documents that attest to the potential duration of the agave spirit.  We think they'll be a very big deal.  Hopefully the tequila community is ready for what's coming.

-David Driscoll


Why All the Talk About Value?

What are you getting at, David?  Why do you keep posting articles on the blog, breaking down the qualities of a spirit, meticulously explaining every little detail about why whisky is priced the way it is?

I'm notoriously slow about getting to the point sometimes.  My wife is always telling me to hurry up with my explanations.  Jacob Lustig, the founder of ArteNOM Tequila, is the same way.  We both want to make absolutely sure that you're with us before we go any further.  We met up today about a super secret tequila project that we've been working on for some time.  More on this in a minute.

When David and I went to Cognac last month, we were shocked at how much boise is used to flavor the brandy.  If you didn't read those posts, it's completely normal for a Cognac producer to create a substance known as boise: a maceration of sugar, caramel, flavor additives and oak chips that sits in low proof brandy until it becomes a dark and sweetly-concentrated liquid.  Boise is the reason that some VS Cognacs are brown and supple, while other XO Cognacs are straw-colored and light-bodied.  It's not the wood aging, people.  It's a totally normal practice to alter the flavor of a spirit through chemical compounds.  Companies need the product to be consistent and they want it to appeal to a large audience.  There's nothing wrong with these products at all.  Many of them are totally delicious.  But if VS Cognac only has to be two years old, what are you really paying for?  The brandy or the boise?  Trust me, it doesn't taste the same without the boise.  It's not even close.

Cognac is not the only world-class spirit to allow flavor additives.  Tequila is just as notorious.  There's no such thing as a soft, supple, rich and smooth one year old spirit - at least I've yet to taste one.  Nevertheless, we've all tasted anejo tequila that goes down like silk.  It's not natural.  But who said it has to be?  There are plenty of wonderfully tasty tequilas out there that have vanilla flavoring, banana-concentrate, or other unorganic flavor enhancers to round out their profile.  It's completely legal.  That being said, should they cost $100?  What are you paying for - the tequila or the flavor enhancer?

When I sat down with Jacob earlier this morning to taste samples of potential K&L exclusive tequilas, this was the main subject of discussion.  Jacob's source (more on this in a later post) has devised a system for pricing his tequilas by taking into account the cost of agave at the time of production and the amount of time they've spent in wood, with interest added on per year.  He takes a small cut for himself, but ultimately he's not thinking "what can I get for this?"  That's the difference between the producers we're looking to do business with and some other luxury-driven companies.  Our model is based around sourcing unmodified spirits of quality and distinction, with the intent of selling them at a fair and accessible price.  Other models are based around creating something "smooth" and attempting to convince the public that it's more valuable because it tastes better.

Fritos corn chips taste good to me, but they're not worth $40 a bag because they're not expensive to make.  I'm beginning to think that many "luxury" brand spirits might also be quite inexpensive to produce.

So, again, why the need to break down value in a spirit for the K&L readership?  Because soon we'll be bringing in new exclusives of Cognac, Armagnac, Calvados, and Tequila that don't necessarily taste like what you're used to.  There's nothing going into these bottles except distilled spirits that were aged in wood - period.  We're bringing in extremely old Cognacs, but they don't taste as supple as some of the younger releases from larger brand names.  We're bringing in tequilas much older than five years of age, but they won't taste as sweet or as smooth as some of the one or two year old brands on the market.  Nonetheless, the younger, brand name products will cost the same or more as our older, unadulterated exclusives. 

Some people might taste an eight year old tequila from us and say, "This isn't smooth or rich! What the heck?"  Some people might taste a thirty year old Cognac from us and say, "What the F? Where's the sweet caramel finish?"  That's my worry.  The luxury brand market has consumers convinced that wine and liquor are expensive when they're smooth - the less alcohol you taste, the better it must be.  Unfortunately, this is entirely wrong. 

Alcohol should only be expensive if it's costly to produce, old and rare, or high in proof - period.  Yet, there are plenty of brands that are hell-bent on convincing us their product is expensive because it tastes better.  What makes it taste better, however?  Is it the extra time in wood?  Is it the quality of the barrels?  Is it the quality of the raw materials?  The expensive distillation process?  WHAT IS IT??!!'s caramel coloring and sugar?  That's it? That's why it costs $100?

So what's the point?  The point is: know what you're paying for.  When our new exclusives hit this year there will be some people who go crazy for them.  Others will be merely satisfied.  A few may be entirely unconvinced.  However, no one who buys any of our Cognac, Armagnac, and Calvados from Charles Neal, or our Tequila from Jacob Lustig will have overpaid.  No one will have paid any more than what the product was worth based on what it cost to make it, bottle it, label it, and import it.  Whether it's worth that price will be up to you. 

-David Driscoll


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


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


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