Let’s take a closer look at cheap whisky. No, I don’t mean Johnnie Walker or Ballantine’s. I mean the really cheap bottles you find on the bottom shelf of your local supermarket selling for single-digit prices.
Some bloggers recently published El Cheapo Challenges, like Keith Wood of Whisky Emporium or Serge Valentin of Whiskyfun. Applying the high standards of single malt whisky rating to budget booze can prove to be very interesting.
I don’t want to do my own El Cheapo reviews here, but I would like to make it clear that a really cheap whisky can’t possibly be of decent quality. Why so? Just do some calculations:
What Makes Up The Price of a Whisky Bottle?
Let’s examine the different factors that influence the price of a bottle of whisky a little closer.
The cheapest whisky I have seen so far costs €6.59 in our local supermarket. It is a 0.7 litre bottle of blended Scotch called “MacIntyre”. I have heard reports about whisky being sold in Germany for as low as €5.79.
It is important to compare only prices from the same country because the alcohol tax is a very important price factor, and this differs from country to country. Also the VAT will be different among countries.
VAT in Germany is 19 percent; alcohol tax is €13.03 per litre of pure alcohol which translates to €3.65 per 0.7 l bottle with the industry standard of 40% ABV.
In our €6.59 bottle, €1.05 is VAT and €3.65 is alcohol tax. 4.70 of the 6.59 Euros go to the tax collectors, this leaves us with €1.89 per bottle that have to be split between
- Blending company
- Bottling and packaging
- Cask and warehouse
- Barley farmer
To produce one litre of alcohol, about 2 kilos of malted barley is needed. Malted barley costs about 300 Euros per metric ton or 0.30 Euros per kilo. Broken down to our 0.7 l bottle, the price of malted barley makes up €0.17.
I don’t know the exact prices for glass bottles, but €0.30 for a simple spirit bottle with screw cap should be a fair guess.
Even for big volumes, it is fair to assume transportation costs of at least €0.30 per bottle.
Only €1.12 is left from our €6.59 bottle now. And so far, neither the distiller nor the bottler nor the supermarket have made a single penny of profit. And there are lots of additional costs to cover like energy for the distillation, wages for the employees, costs for machinery and so on.
Given the fact that all Scotch distilleries are capble of producing raw spirit of good quality, the final quality of a bottled blend is basically determined by three things that all have in common that they get more expensive with better quality.
1. Ratio of Grain to Malt Whisky
I don’t know the exact figures, but I read about production costs for malt whisky in the range of €1 to €2 per litre of newmake spirit. Add a little profit margin for the distillery, and you will see that the amount of malt whisky in an El Cheapo blend has to be as low as possible. The cheap grain whisky from column stills will make up the bulk of the blend without any doubt.
Storing whisky in warehouses for years costs money. This is not so much the actual cost of supervising the maturation, but rather the fact that casked whisky is dead capital. The longer it matures, the more you have to demand from the buyers to make up for the fact that you could have earned money by investing your capital in the money market or in a government bond instead of spending it on making whisky.
If you want to sell your whisky as cheap as possible while still making profit, you are virtually forced to use strictly the legal minimum of 3 years for the maturation of your whisky. Each day longer will cost you a little money.
3. Quality of Casks
A good fresh sherry cask can cost several hundred Euros, a fresh bourbon cask is cheaper but its price will still not be neglectible. If you want to sell your whisky cheaply, you have to keep the costs for casks at a minimum. Obviously this means that you have to use old casks at the end of their life span that are basically written off and only have their calorific value left, i.e. the energy set free by burning it.
Don’t expect any sophisticated flavour notes coming from these zombie casks.
What is Left for Profit?
I honestly can’t make a detailled calculation of all the cost factors mentioned in this article. But if you add one and one, you will see that the final profit for distiller, bottler/distributor and supermarket will be only pennies of the shelf price of a bottle.
The only thing that counts here is volume. In order to be profitable at these prices, thousands and thousands of bottles have to be sold. But this seems to work quite well nevertheless. Otherwise our supermarket shelves would not be filled with these cheap whiskes at all. But as an educated customer you should always keep in mind that you will get what you pay for.