$100 is All We Know
"When I was your age, whisky used to cost a nickel. My mother would send me down to the store to fill up the family jug and, if I lost that nickel along the way, there was whoopin' a waitin' for me when I got home."
Sure, Grandpa. Whatever you say.
Things are changing faster these days. I love those new cable TV commercials where the kids can move the TV into the other room, while a ten year old talks about the old days before wireless DVRs. Some people like to reminisce about the old days, while others just like to whine. For many of us, the "old days" of whisk(e)y values were just a few years ago, which makes the transition even harder. However, I'm wondering if the talk about a whisk(e)y bubble is beginning to sound like those grumpy old men who aren't ready to deal with the new age of modern consumerism. I'm included in this group, so don't shoot the messenger. I'm just positing some ideas that we may want to think about. We might like to comfort ourselves with talk of "when all this hype dies down and I can find George T Stagg again," but I don't think we're ever going back to that. That's what people say who wish things were otherwise, but aren't.
An economic bubble is defined as "trade in high volumes at prices that are considerably at variance with intrinsic values." They occur when the value of something is inflated beyond what it's actually worth and will pop when prices rise so high that they can no longer be sustained – either because the current economy won't allow it or because people simply refuse to pay. The sub-prime mortgage crisis hit after banks issued huge loans based on inflated housing prices to folks who didn't have the money to pay them back. Netflix, on the other hand, saw its customers simply balk at the rising cost of service. They were forced to lower prices after customers started canceling their accounts en masse. Neither of these scenarios are about to happen with the $50-$300 whisk(e)y bracket that I'm focusing on.
Wikipedia's profile of the term economic bubble has this to say:
Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often conclusively identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst. Both the boom and the burst phases of the bubble are examples of a positive feedback mechanism, in contrast to the negative feedback mechanism that determines the equilibrium price under normal market circumstances. Prices in an economic bubble can fluctuate erratically, and become impossible to predict from supply and demand alone.
It's interesting to actually look up what some of the key characteristics of a bubble are in order to help determine whether we're actually going through one or not. I had a lot of people tell me I was wrong about the Bordeaux analogy, but that's not necessarily my opinion. I'm just throwing ideas out there. That being said, I still think the Bordeaux comparison is totally legit, mainly because of the generational divide that has taken place between myself and the older guard at K&L. I look at Cos de Estournal and think, "Wow, that's good wine. Maybe I'll splurge." Ralph looks at Cos de Estournal and says, "$150! Are you kidding? I used to get that for less than $20!" I don't remember a time when Cos was below $100, so it doesn't seem outrageous, much like a new generation of whisk(e)y drinkers out there doesn't know that Macallan 18 used to be $80. They don't know that in 2010 you could find a multitude of 15+ year old Bourbons for way under $100. They're new to the game and they have a totally different frame of mind. They're fine with the current status quo because it's all they know. To them, prices are high, but acceptable and Pappy is always impossible to find.
Now I'm basing the above statements off of what I see in the store every day. It may be a California phenomenon, but national sales numbers would say otherwise. The main people I hear who are worried about whisk(e)y pricing are the people who have been at this a few years or more. It's not a common theme among the younger clientele I serve. Bourbon is a better example of this current craze than single malt, so we can't blame everything on the Asian Scotch whisky market that's getting overly excited. For the past week I've had dozens of people drop by the store in search of "nice" Bourbon – meaning expensive. Unfortunately, there's nothing really all that expensive to be had because it's all sold out. I try and send them home with a bottle of Four Roses Single Barrel or maybe a Blanton's Single Barrel, but even $50 to them seems cheap.
"Don't you have anything that costs more than $100? You know....something......nice?"
There are new customers coming to me on a daily basis who don't want to spend under $100 for anything and it's not just because whisk(e)y is trendy. I don't think we're simply going through a whisk(e)y fad, where it's cool to drink whisk(e)y now, but won't be in another few years. Ten years ago people thought Thai food was a fad, but it was merely something new. Now we're eating South East Asian food everywhere and Pho has become a daily thing for many westerners. People hadn't been avoiding Thai food because it wasn't hip, they simply didn't know anything about it. Now it's ubiquitous and normal and generations of American kids grow up eating it every week. It's not some strange, mystical experience anymore because there's more information out there and a greater variety of experiences. Whisk(e)y is the same for many people. They're discovering a level of quality that goes beyond Jack Daniels or Dewar's and they're finding that they like it. Now that they like it, they're willing to pay a little extra to get it. The same thing happened with designer jeans ten years ago. $100 for a pair of jeans? That's crazy! Wow, these actually really fit well. Maybe it isn't so crazy.
$100 is becoming the new floor for many spirits customers. Despite what you may think, it's not just a group of mis-informed, trendy, or foolish people throwing their money away on overpriced whisk(e)y. People are willing to pay more for good spirits if that's what good spirits cost. A bottle of wine lasts just a few days, but a bottle of booze can last for years. People think about that when they throw down $100 on a single malt whisky, after finding that the wine they wanted costs nearly the same. What we may be witnessing is not necessarily a bubble, but rather a market that has realized they've been underpricing their product.
If a new generation of whisk(e)y drinkers is fine with paying $100 a bottle, why would you ever go back as a producer? Sure, there's a whole group of drinkers that will bitch and moan and complain about the way things used to be, but they're no longer relevant, are they? Forget perceived shortages, or scarcity, or any of that stuff. If the price of good whisk(e)y becomes $100, then that's what it costs regardless of any rational justification. No amount of blogging, writing, complaining, or reminiscing will ever change that trajectory. Didn't we learn that when we rolled our eyes at our grandparents?
Sure, grandpa, gas used to cost a penny and you had to walk ten miles to school in the snow. I get it.