Why Whisky Isn’t Wine

by Oliver Klimek on December 8, 2012

I’m afraid I have to pick up the topic of whisky prices yet again, at the risk of boring some of you. But David Driscoll’s Thursday post on the K&L Wines blog brought up an interesting comparison between whisky and wine that I think needs further examination.

The bottom line of the article is that by comparing the price developments of whisky and top-notch Bordeaux wines there could be concluded that there in fact may not ne a speculative bubble in whisky at all and whisky prices may continue to rise steadily. David Driscoll’s central argument is that time has shown that no matter how high you raise the price, there will always be some people around willing to pay it.

I beg to disagree. On first glance, the argument makes sense. First Growth Bordeaux prices have climbed to ridiculous levels, but still the top châteaux sell their wine easily. And whisky prices have been going up and up bolstered by strong demand even for very expensive bottles.

But there are two fundamental differences between the whisky and the wine market. Firstly the wine market is huge, much bigger than the whisky market. There are many thousands of producers across the world, and the top class Bordeaux wines only make up a teeny tiny little fraction of that, much less than the ‘premium’ single malt whisky segment that is giving us a headache right now compared to the entire whisky market.

For this reason I don’t think the First Growth prices have too much of an effect on the market of ‘affordable’ wine. There are shitloads of wines below $/€/£ 20 per bottle, and not all of them are plonk, while in single malt whisky we can see a definite rise in anything but the most basic expressions, fueled by the laws of supply-and-demand.

The second difference is even more striking, and probably also more important for answering the ‘bubble’ question: The correlation between price and quality is much greater in wine than it is in whisky. I am not sure if you can find many €20 bottles that can match Premier Crus – if at all. But it is not unusual to find a €50 single malt receiving the same score from reviewers as a bottle ten times as expensive.

When studying the results of the Malt Maniacs Awards 2012, you see that indeed most of the top scorers are old and expensive single cask bottlings. But this is by far not a one-way street. The quite affordable Elements of Islay Pl1 and Yamazaki Shery Cask bottles managed to get the same 90 point score as the much more expensive old Longmorn and Glen Grant, for example. And it also works the other way round. Some rather expensive bottles only managed to get a silver or bronze medal. For example the latest Talisker 25 yo (price: €250) received 85 points, the same score as the Lagavulin 16 yo retailing for €50.

As long as the top wine makers can back up their prices with top quality, they are unlikely to come down again. I agree with David here. This is less a speculative bubble than a self-contained bubble the producers and ther wealthy clientele live in. But when whisky prices and quality don’t match up, the air gets thinner and thinner the more the prices rise. Sooner or later whisky buyers will jump off the ‘investment grade/luxury/ultra premium’ bandwagon again when they realize they can get the same quality for only a fraction of the price. The Emperor’s New Clothes wasn’t written without a reason.

{ 8 comments… read them below or add one }

two-bit cowboy December 9, 2012 at 6:00 pm

Spot on, Oliver.

I enjoy some of David’s rants, but recently he’s been on this ” … as I get older …” kick that’s grown a little, well, old. David was in junior high when Bordeaux became fashionable. Perhaps he needs a few more years in the cask before attempting the type of conclusion he’s drawn in his post.

Reply

Oliver Klimek December 9, 2012 at 7:16 pm

It may not be visible in the article very well, but I really enjoyed reading David’s thoughts. They are utterly valid, but I guess we just have to agree to disagree on this issue. In the end what we are doing here is all just an elaborate kind of reading the coffee grounds ;)

Reply

two-bit cowboy December 10, 2012 at 7:43 am

I’m not sure we disagree, Oliver. Coffee grounds, tea leaves, I’m not a believer in “seers” of our future.

Reply

Oliver Klimek December 10, 2012 at 7:50 am

I did not mean to disagree with you, I was referring to David.

Reply

Oliver Klimek December 9, 2012 at 6:31 pm

I just noticed David Driscoll posted a reply to this article on his blog: http://spiritsjournal.klwines.com/klwinescom-spirits-blog/2012/12/9/why-whisky-could-be-bordeaux.html

I guess it really comes down to from what angle you look at this. As his blog does not allow comments, here are a few more thoughts:

Indeed premium Bordeaux and premium single malts are just niche markets. But in comparison premium Bordaux has a much smaller market share than single malt. All single malt whisky has a share of about 10% of the whisky market (counted in bottles), I would suspect the 15+ yo category to be around 0.5 to 1% of the total whisky market. I am by far not a wine expert, but I doubt Grand Cru Bordeaux comes anywhere near that in the global wine market. I do believe that the Grand Crus are sort of living in a parallel universe. Their prices may have an effect on the segment just below, but not really on the premium wine market as a whole.

Regarding scores, David wrote “I don’t think Robert Parket really believes that the Fonplegade and the Cos are on the same level. However, if you just look at the points you might think otherwise.” I specifically mentioned the Malt Maniacs scores because they are averages of 10 tasters from blind tastings, so they are as neutral as you can get and they indeed mean the whiskies are on the same quality level.

And there is another difference I did not mention in my article: The “second” wines of the top chateaux may cost less than the real thing, but they still are bloody expensive. There is no “entry level” Chateau Haut Brion you can pick up for $15 in the supermarket around the corner. In whisky this is totally different. You can get affordable single malt whisky from ANY distillery, even the ones whose prices for the high end bottles are going over the moon. Macallan, Dalmore, Lagavulin, Glenfiddich etc. Only the long closed distilleries like Brora or Port Ellen are an exception for obvious reasons.

So I stand to my point that the premium whisky market is a very different beast than the premium wine market and it is very difficult to draw parallels. I won’t say it won’t happen like David predicted, but it also may well turn out differently.

Reply

David D December 10, 2012 at 3:21 am

Thanks for posting this Oliver. There are indeed entry level Haut Brion wines, they’re just listed under different labels. I wrote a follow-up entry about these wines to clarify. You can pick up entry level wines from any Bordeaux producer just the same. It’s all exactly the same as whisky. I think in the end I’m just trying to point out that prices may have more to do with perception that simply supply and demand. When we actually get out of this perceived shortage we may not see prices change one bit. I don’t know what I actually believe, I’m just throwing stuff out there for us to chew on.

I appreciate the response and I think it’s great to see people reading and writing prolifically from different view points. I hope we can do this more often! That is if I’m not getting too…..stale……old……like a two-bit blogger.

Reply

two-bit cowboy December 10, 2012 at 8:05 am

Ah, you do follow Oliver’s posts. You’re not getting stale, David.

Many times in the past few months I would have enjoyed logging a most positive reply to one of your posts, but, alas … it’s not possible so I’m glad to make your acquaintance here.

We’re in a similar business, but four differences are volume, variety, market, and marketing. Where yours is the English Walnut, mine’s but a sunflower seed (and I’m perfectly happy). I know folks who shop in your store. They offer nothing but good words. We share similar frustrations too, including your recent let down from a false promise.

One thing I considered as I read your Bordeaux / whisky bit was beer. I’d be most interested to hear your and Oliver’s thoughts on the state of that product as regards past vs present prices and availability.

Reply

politicalidiot December 11, 2012 at 6:39 am

I think you are both right. I think there will always be nouveau riche fools who want to part with their money for very old and long unavailable bottlings, not because they necessarily enjoy whisky, but because they think it is an “investment.” However those markets will ebb and flow and for the most part a few will always be popular ex. Macallan or PE. However, like everything collectible, premium bottlings will pop and deflate. I’ve seen it a hundred times. It is the natural order of these kind of markets.

Reply

Leave a Comment

Previous post:

Next post: