A Closer Look At Whisky Inflation

Lamenting about rising whisky prices has become a regular pastime in whisky blogging circles, and this place is no exception. So I think it is time to have a closer look at how much prices have actually increased over the last years.

Whisky becoming more expensive has two reasons. Firstly there is the obvious price increase of standard bottlings over time, as can be expected because of the general inflation which is currently meandering around a rate of 2% per year. Increases of excise duty also have an effect on whisky prices, naturally.

The second type of whisky inflation is much trickier: Replacing old bottlings with new and different ones that don’t allow you to do direct comparisons. A very recent example is the new Macallan Gold that is replacing the 10 year old Sherry and Fine Oak expressions. Psychogically such moves can have a definite impact, as can be seen in the discussions that usually evolve after such a new bottling has been released.

Quantitative comparisons are only possible with bottlings that have not changed over the years or only marginally, for instance with a change of ABV. Wouldn’t it be nice to time-travel ten years into the past and see the whisky prices as they were back then? Too bad we can’t really travel back and buy cheap whisky to take back home into the present.

But there is an internet equivalent of a time machine: The Wayback Machine of the Internet Archive. It has saved snapshots of millions of websites, refreshed at certain intervals, a herculean task indeed. Of course not all content changes of any site are documented, but for our purposes this is more than enough.

In the following table I have compared today’s prices of The Whisky Exchange with their prices from late 2002 for a range of standard bottlings. The third column is the expected 2012 price calculated from the 2002 price with cumulated UK inflation (pretty exactly 25% over ten years) and the increase in UK excise duty (approximated to £2 for drinking strength and £3  for cask strength). The fourth and fifth columns indicate the difference of the actual 2012 price to the expected price in pounds sterling and percent.

* Bunnahabhain 12 was changed from 40 to 46.3% ABV in 2011.

As we can see, the picture is pretty mixed. Roughly half of the bottlings are more expensive now than could be expected after inflation and excise duty increase while the rest is actually cheaper than projected.

One trend is clearly visible though: Entry level bottlings have been rising less than special or older bottlings, often they are less expensive now than expected. Laphroaig and Ardbeg are significantly more expensive now while the Johnnie Walker blends have been quite modest in their price development. Blends are a cutthroat market, so big price increases are out of question.

Ownership changes can have different effects. Edradour has become relatively cheaper after the takeover by Signatory while Glendronach has become rather expensive now.

The biggest price hikes are seen for older expressions like Balvenie 21, Glenfiddich 30 or Macallan 18. These prices cannot be explained by rising fuel or grain costs. It is supply and demand that are the driving forces behind them. The industry has been testing just how expensive they can make their old bottles while still selling them while keeping the entry level bottles at reasonable prices in order not to deter the casual drinker.

This trend is in full swing now, and only if the speculative bubble on the secondary market will burst or deflate – and I am convinced it will, just when is the question… –  we may see it easing up. As long as collectors or investors pay crazy prices at whisky auctions, the industry – logically – will continue to push the bar for the high end single malts.