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.