Whisky Bubble? We're Never Going Back

I've written extensively about how escalating whisky prices are not making consumers happy. I know a good amount of customers who have been priced out by their favorite whisky companies, forcing them to look elsewhere for something they can more comfortably afford. Shortages of stock. Shortages of barley. Mass consumption. A rise in interest. Asia. There are plenty of explanations when it comes to why your favorite bottle is either impossible to get or costs an extra twenty bucks. They don't have enough to sell you and those who want it are willing to pay extra. Supply and demand. "David, I can't afford these prices anymore!" I hear it all the time.

However, most of you know this already. Many other whisky writers have covered this topic as well. What I want to consider today is the very realistic possibility that prices are never going to go back down and in all likelihood will continue to creep higher. While we're basing our bubble speculation on other historic whisky crashes, or the housing and mortgage crisis (previous examples of overextension), I'd like to suggest what is perhaps a more accurate comparison: Bordeaux wine. I read a lot of comments from whisky fans who write things like, "I can't wait until this bubble crashes so I can get my Pappy when I want it." That's what Bordeaux fans said about the first-growth wines ten years ago and guess what: it's only become worse and there ain't no crash comin' in Bordeaux. I still don't think we've seen the ceiling yet.

Back in the early 1980's people were drinking first growths and second growths without worry. They weren't inexpensive, but they weren't outrageous either – no different than what the Van Winkle or A.H. Hirsch bottles ran in comparison to other Bourbons on the market ten years ago. A bottle of Lafite might run you $40 to $50. Cos de Estournel might be $20 or less. Pichon-Lalande maybe $15-20 or so. When wine sales started to pick up in the 1990's, the prices started to pick up as well. Bordeaux fans were not happy about this. Our own expert, Ralph Sands, heard nothing but anger from his long-time K&L customers. "We can't afford these bottles anymore!" they would say. "We're being priced out by the Bordelais!" The same factors that affected the whisk(e)y market were at work in Bordeaux: supply, demand, a renewed interested, more money, better quality, Asia, all of it. Bordeaux became fashionable, trendy, and a sign of wealth. It became a status symbol again. People were willing to pay more money for wine because wine was important.

Flash forward to today. Despite a recent lull in Bordeaux sales, the prices are still higher than ever. $15 for a bottle of Pichon-Lalande? Try $230. Fifty dollars for a bottle of Lafite? Try $700. The math says that $10 in 1980 had the same buying power as $28 today. This isn't just basic inflation at work here. Prices in Bordeaux never went back down, they're not going down right now, and they're never going to go down again. There is no bubble in Bordeaux because the whole thing has turned into a luxury contest. Are Ferraris going to go down in price because there's a recession? Sales on Lamborghinis? I don't think so. Are the same customers who once enjoyed Bordeaux for a reasonable price going to ever be able to afford Cos de Estournal again? Nope. Ralph talks about it all the time. "I lost ALL my best customers when this happened," he told me yesterday. He had spent years cultivating a list of enthusiastic customers who he shared his advice with, but they soon had to look elsewhere for value. Ralph now has a totally new enterprise that he runs as a side gig to his K&L job. He flies out to Hong Kong once a year to do Bordeaux advising for enthusiastic Chinese customers. There's a gigantic Bordeaux movement going on in China with the new economy and they love their red wine.

Whisky prices may never go back down again. Personally, I think this is a certainty because, like the Bordeaux market, there are other people out there willing to pay. Just because we're getting priced out doesn't mean that whisky isn't advancing into an entirely different socio-economic bracket, rife with money and the ability to throw it around at will. I haven't gone into much detail here, simply because I'm writing this while eating cereal before work – I don't have much time for specifics right now. However, I've been listening to Ralph talk about the changes in Bordeaux over the last two decades and it all sounds very familiar. It sounds exactly like what's happening in the whisky business. The same changes, the same complaints, and the same end result.

Bordeaux prices are more expensive than ever. No going back.

-David Driscoll

David Driscoll