More On Price Increases, Things to Think About

Many big name whiskies have gone up in price over the past few months: Macallan, Highland Park, Old Pulteney, Yamazaki, Bowmore, Glenfiddich, Laphroaig, and many, many more.  Most of these brands have also experienced shortages at some point during this period, leading them to seriously consider the amount of product they have available and what they need to charge in order to keep current profit levels sustained.  It's really just supply and demand - when the booze starts to run out and people still want it, can we afford to charge the same price?  Look at it this way: if you ran a company where you sold three hundred bottles of whisky per month for $25 a bottle, you'd be making $7500 a month.  What if, all of a sudden, you were only able to secure about 200 bottles a month?  Would you be content to make $5000 a month, or would you raise the price to $37.50 to cover your losses?  Would people still buy it if you did?

My question is this: when production on these whiskies catches back up, and supply once again balances out the demand, are prices on these whiskies going to go back down?  I ask this because, when prices on a brand go up, we retailers have to make our own decisions based on the same factors.  Do we raise our prices in response to their price increases?  If customers come into the store and see that Laphroaig 10 is no longer $35.99 but now $39.99, who are they going to blame?  Are they going to say to themselves: "What the hell?  K&L raised their prices!  I'll have to go somewhere else more reasonable," or are they going to make the connection that we had nothing to do with these changes?  I can tell you one thing - we are making a whole lot less per bottle this year than we were making last year because we don't want to raise prices on customers if we can help it. 

I'm betting, however, that once the market runs its course and the public comes to the realization that Highland Park 18 is now a $100 whisky, there's no way in hell it's going to go back down again.  Why would you lower it if sales don't slow in response to the increase?  Are people going to continue paying more and more each year for their favorite whiskies, or are they going to say "enough is enough" and look elsewhere for value?  I'm wondering when the "Netflix effect" is going to transpire.  How high can you go before the bubble bursts?  I'm still seeing tremendous value in the single malt whisky market: Bruichladdich 10, Benriach 12, Glendronach 12 and 15, Aberlour 12, Ardbeg 10 and Uigeadail, Kilchoman Machir Bay, and many other malts that are among the best we carry for the price.  Not to mention the return of great blended values like Great King Street, Bank Note, Highland Chief, and Islay Mist. 

I'm not trying to say that whisky isn't worth paying for because that would be foolish.  We all know there are some very special bottles out there in the world.  What I'm saying is that you can't pay $85 one day and then $105 the next.  That's what's happening right now, however.  It's not K&L and it's not the other big liquor stores either.  We're not raising the prices, we're simply reacting to the market. 

-David Driscoll