Whisky prices on the rise: a view from Japan

Post by Stefan of Tokyo Whisky Hub.

Since Diageo announced the pricing for its 2012 special releases, there's been consternation (to the point of outrage) and debate over what has driven this price hike and where it will lead not only the serious-but-financially-limited whisky enthusiast but the industry at large over the years to come. The most illuminating - to me - of these debates is taking place on the Malt Maniacs & Friends Facebook page. Rather than add to the debate in general terms, I though it would be interesting to offer two case-studies of price hikes in Japanese whisky aimed at the connoisseur that may be less dramatic in absolute increase, but equally if not more pronounced in relative terms.

For the first case study, let's turn to a recent Ichiro's Malt release. Most of you will probably have missed this as it was a limited, numbered release of - brace yourself - 24 bottles and was gone in no time. There were actually six different types --sherry butt (see above), chibidaru, ...-- each of which came in a limited run of 24 - modeled on the prototypes Akuto-san brought to the Tokyo International Bar Show / Whisky Live in May of this year (see our report of this event for a more detailed discussion). The original price for these bottles was 12,500 yen (125 EUR / 160 USD). Obviously, we're talking about a 3yo whisky here.  Now, to put this price in context, let's look at prices of Chichibu spirit/whisky - all single casks and at cask strength - over the last 3 years: - Single Malt Newborn (Bourbon Barrel / Hogshead / Double Matured / Heavily Peated): 4,000 yen - Single Cask 2008/2011 Bourbon Barrel for Whisky Live Tokyo 2011: 7,500 yen - Single Cask 2009/2011 Peated for Whisky Live Tokyo 2011: 8,500 yen - Single Cask 2009/2011 Virgin Oak for Takashimaya Nihonbashi: 6.825 yen - Single Cask 2009/2012 for Tokyo International Bar Show: 8,000 yen The next step in this list would be the set of 24 ltd.ed. releases, accompanied by a 50% price hike. Logic dictates that - if you're looking for an increase in profit for a comparable product (all Chichibu whisky/spirit is young by definition, so you can't go down the road of releasing older whisky with a bigger profit margin) - you need to make it more limited, appealing to that most human of instincts to want something more if (one imagines) somebody else wants it too and if one perceives there to be less to go around. Some may feel the 12,500 yen price tag to be a bit extravagant for a very young whisky, of which - relatively speaking (i.e. regardless of the size of the distillery) - there should be plenty to go around. Fast forward a few weeks, and a bottle of the 2009/2012 Sherry Butt 24-ltd.ed Chichibu goes for 21,500 yen (275 USD) on Yahoo auctions. The signal this sends is obvious: people are willing to pay much more than 12,500 yen for such ultra-limited editions. If I were Akuto-san, I could only interpret this signal in one way: in less than a month, somebody is making much more profit from my products than I am making by putting them out in the first place. Food for thought, I should think.

The second case study is slightly different in its details, but the bottom line is the same. Some of you may remember my Karuizawa Rouge Cask post: in a nutshell, these are Karuizawa malts (all distilled in 1995) that spent their entire life in ex-red wine casks. Originally available at the distillery only, they were sold - as late as last year - for 4,000 yen for a 480ml bottle - converted to 700ml that would be a little over 5,800 yen (58 EUR / 73 USD). Enter the 16yo Karuizawa for Shinanoya released last month and sold out before it could even reach the website.

This was a single cask bottling, distilled in 1995, matured in an ex-red wine cask, making this in effect a Karuizawa of the "Rouge Cask" type. Original price tag: 12,900 yen (130 EUR / 164 USD). Fast forward a few weeks and the first bottle to appear on Yahoo auctions goes for 20,800 yen (210 EUR / 264 USD). Again the signal this sends is obvious: if the original price had been higher, maybe it wouldn't have sold as quickly, but the profit would have ended up in the pocket(s) of the distributor and/or retailer, rather than speculators on the auction circuit.

It's clear from these two examples (and I could have given many more from the Japanese whisky scene) and from similar world-wide trends that whiskies aimed at whisky aficionadoes are starting to become prohibitively expensive for most people who were fans-of-the-first-hour, or who jumped on the wagon when there was still room. It's natural that this leads to a whole spectrum of reactions, mostly negative ones, from the consumer's side. On the other hand, can we really blame the industry for reacting to a situation that we - as consumers - have created, i.e. increased demand and the concomitant sky-rocketing of prices on the secondary market? Let's not fool ourselves: what's irrational is not the industry's reaction to the situation, but the consumer's impulse that it responds to (and creates to a certain extent, of course - it's never one-way traffic). To quote Serge Valentin, "people who buy these bottlings are not only seeking deals - it's like with all toys for boys, watches, cars, shoes... it's not all rational." The question is whether or not - and if so, to what extent - developments on the whisky-collector front will influence the pricing strategies of independent bottlers (which is not a problem in Japan, obviously) and the prices of entry-level and mid-price whiskies in the long run.