Things haven’t stayed the same.

Nothing ever stays the same. That is, unless you are dead. You’ll be dead forever, and that’s a fairly long time, but until you are dead, very little will fail to change over the passage of time. Perhaps the things that seem not to change are actually changing so slowly that we fail to notice; continental drift and the speed that my wife thinks that I plan and carry out DIY are great examples. One recent task that I’ve just completed took close to 8 years of gentle spousal reminding. Mind you I think the prompting me to start the task every six months was a tad excessive.

The passage of time is a tricky one to gauge. It didn’t seem so long ago in the 1980’s that as a young air cadet that I was humming the U2 song “With or Without You” to myself, whilst admiring the view in a glider close to sunset above Findhorn Bay. The Joshua Tree album that the song came from was to become one of my favourite albums, but it’s hard to imagine that it was released about 37 years ago. If only things were so pleasant for the whisky industry in the 80’s, for the industry had entered a decennium horriblis that would make the late Queen Elizabeth II not worry so much about the awful year she once had. Nonetheless, despite many mothballings, closures, demolitions and reopenings, the industry did indeed recover and has come back to rude health. Things aren’t the same now though, but this is just my opinion, as is what follows.

Whoever is reading this will have some sort of relationship with whisky – whether it be as a drinker, investor, collector or directly involved in the industry. One thing that ties all these together is the price of whisky, although two of these groups will be paying attention to potential resale values. But in the current ongoing cost of living crisis that seems to be dragging on longer than my DIY projects, all of these groups of people are continuing to feel the pinch. But with less disposable income and the inflation of the whisky bubble slowly losing puff, for those who have collated a collection of bottles now may be a good time to work out what the plans are going to be for the future. For the destiny of these bottles may not be as rosy as it looked when you first started. 

It is never easy to calculate what’s lies ahead, especially if the market is starting to become unpredictable, certainly for the collector or investor. Everybody has expected growth, but I think it’s been presumptuous that it would continue for nothing grows forever. You can’t look into the future using rose tinted glasses and very few collectors have the privileged information an auctioneer has when it comes to selling and buying bottles. One thing that will be sure and certain, there has to be a demand for the bottle that you have bought, otherwise your potential buyers are going to be few and far between.

It was the chance purchase of a Chivas Blend that led to an interesting conversation with an auctioneer that not only confirmed my previous advice given in this blog, but also led me to re-evaluate my spending plans. I had been telling him why I had purchased the Chivas Century of Malts blend, which was little more than a curio. I had enjoyed the sample I had reviewed in the past, though it wasn’t earth shattering. What I liked about it was the bottle and the fact that it may at least hold its value going forward, and wouldn’t be a bad drinker if need be. However, the conversation came down to this:- who is going to buy it?

Even though an auction purchase may not be a current bottling, it needs to be considered what fuels somebody to make such a purchase of whisky? There are many things such as an admiration of the brand, maybe it’s the style of whisky you like or just because you think it will generate income, but the auctioneer told me it’s his opinion that it’s marketing for a brand and the chatter it generates that drives demand, often carrying over for the brand’s discontinued bottles, despite them no longer being actively marketed. Ever wondered why Macallan is so popular, despite much of their whisky being no better (and often worse) than others? It’s down to the marketing.

Ever since the Macallan watercolour and line drawing adverts of the 1980’s appeared beside the Times Crossword, this had targeted a specific market – Quite educated, not stand-offish, who enjoyed a little joke,’ as the copywriter that was co-responsible for these adverts, Nick Salaman, described them. Or namely people that were highly aspirational and had (to be a bit more succinct -) money to burn. But at that time, Macallan was still universally seen as a decent whisky, with the standard off the shelf bottles being held in high regard. This to my mind was probably the most distinct way of making a Scotch whisky brand aspirational and exclusive through a targeted advertising plan in recent times. That same advertising has been reprised as the cover art for the Archival series Folios, however this seems to be more a plan to separate people from their money as an investment. Perhaps Macallan are quite happy that they have a no longer need to advertise to people who are quite educated, as that standard has slipped and the disposable income has risen. Like it or not, there is a strong demand for that brand based on its reputation for making good auction prices and perhaps some aspiring to be the sort of people who do the Times crossword.

Advertising and premiumisation of brands has been a topic amongst the chattering classes of social media for a while now. Generating a buzz will create demand – Bowmore linking with Aston Martin, Macallan with whoever chooses to prostitute themselves that month, Ardbeg with incessant releases, some brand owners whacking the prices up with no discernible increase in value and Glenmorangie with what seems yet another tale from their whisky storybook. Whatever we enthusiasts think of this constant bombast, the plain and simple fact is that it works. Despite the challenges the industry faces, let’s not be too ignorant of the fact that producers are still shifting shedloads of whisky and making a fortune (for now at least), regardless of a slowdown in sales and signs of a bigger slowdown ahead.

What has this to do with the auction market and where the industry lies now? Getting down to brass tacks, just as investors need to have an exit strategy having been brave enough to invest in a cask, the same considerations should be in place for those who collected or invested in bottles. Now’s the time to think beyond what is worth collecting and look towards who is going to buy them, for even the “safe” premium brands have taken hits in the recent downturn. There’s many bottles failing to make even the original retail price, and in some cases much less once extra fees are considered in getting your bottle to market.

The final character in this piece; those totally ignorant of the current market values. They can be spotted by setting unrealistic reserves on their bottles or overpaying for bottles that really have no business being charged so much for. In the former case, nobody can fail to be surprised when the bottle is left sitting on the shelf without a single bid. Bit like that bottle of Bells at the back of the cabinet nobody wants to drink.

Who will buy it?

With this in mind I’ve started to re-evaluate the situation with my collection. I’m a lot more reticent in describing myself even as a small level whisky collector. More realistically I’m a collector / hobbyist / accidental hoarder. The latter is easy to do when I buy bottles I plan to drink, only for it to take a place in the store. Despite having many bottles that could easily be described as desirable, my attention is moving to the bottles that were borderline collectible in the first place. It’s now more than likely that they’ll be getting drunk now, or given as presents. Thank goodness they were never being relied on in going up in value.

And thus we come to the crunch. I’ll repeat again – who will buy it? With a personal example; I can say that I never succumbed to the hype over Game of Thrones, but I did go down the Flora and Fauna route. Eminently more desirable than GoT bottlings in many cases, with the Blair Athol, Benrinnes and Dailuaine being the standouts from those still in production. The Clynelish 14 was surprisingly decent too, even without the later proprietary bottling at 3% stronger. But what about the other bottles? Some of them are rarer (or should I say less common) in their own right, but will anybody want a complete set? Perhaps for the set with all 17 white caps. But even if a buyer is there, will they pay the price I expect? That may be a longer wait. These were never marketed, and were never premium whisky, but given a few of the bottles now are rare and in higher demand than the others, they should realise a profit, but that’s not a guarantee at all.

The concerning fact is that nobody is alone in this situation. I bet even in my social media circles there’s more than a few of you that own more whisky than you can safely drink in your lifetime; unless you it’s required for a week long wake after your funeral to consume it all should that be your ultimate wish. I think everybody with a hoard, be it an intentional collection or an accidental accumulation of bottles, needs to start thinking of what the endgame will be. And this could be a problem for not individuals, but the whole industry. A recent report by the Scotch Whisky Association suggests that exports of whisky from Scotland have dropped 18% in value with a 10% drop in volume. While only India showed a significant increase in value, markets like the US, France and China have dropped. A 18% drop in value may not seem a lot but remove just under a fifth of a birthday cake and you’ll see it is a sizeable amount. But why should that bother us?

Where would I start? Because it should concern us.

Regular followers of the blog, or the Facebook page will know that I’ve been predicting doom and gloom for some time. Of course, anybody can predict something often enough and it is likely to eventually happen to some degree, which doesn’t make them a genius, only good at predicting inevitability. In the past ten to fifteen years, the industry has massively ramped up production. Diageo built Roseisle, Glenfiddich and Glenlivet expanded, other sites reopened, and others ramped up production; Macallan built Tellytubby land, and have since made it as impossible to get to by charging an extortionate amount to get in, see a distillery and then have the chance to buy its overpriced products, lifestyle items or have a bite to eat. At the time of writing, the cheapest entry price on the website was £80. That’s a very expensive tea and scone, which you’ll have to pay extra for. It’s this sort of cavalier pricing schemes that have encouraged other brands to be bolder in price raises, and those who aspire to the brand to pay them. Idiots.

The whisky industry has long cried out about the lack of aged stock as a reason for their going to NAS, using more refill casks, or prices going up. They soon will not be able to use that as an excuse for poor products or rising prices. With a background of falling sales volumes as the global cost of living crisis continues much longer than was anticipated, some have been caught on the hop. Producers clamouring for premiumisation and market position have raised prices. A recent example is The Glendronach raising an old favourite, the 18 year old Allardice to £195, has just made it unaffordable for many. Lets remember it was £75 in 2017, plus was using over aged whisky, along with no chill filtering. Has the cost of the whisky per bottle really gone up 160% in 7 years? No, it hasn’t. This in my opinion is marketing to the gullible by the greedy.

My opinion is that this tactic will come back to haunt producers using this and similar practices when people refuse to pay the engorged prices. Besides, now that consumers have been spoonfed by the industry that young whisky isn’t bad whisky, many more people see 5-8 year old being perfectly drinkable, and some producers with provenance are releasing this at good prices and good quality. Step forward Loch Lomond distillery and take a bow. This may at least give more volume sales and in theory will enable producers empty their warehouses quicker, but are the profit margins as good? The caveat here could be that some producers might think we’ll accept less and pay more. They’d do well to ignore that feeling as it would be foolish to try and convince the knowledgeable that a young whisky costs as much to produce as an older one. I’d say it’s much easier to make an older whisky seem premium to generate more profits.

The glass loch of bottles in the groaning shelves and cupboards of enthusiasts and collectors is something that will also play its part. Why buy whisky when many of us have some cracking drams in the stash? While I may not be cracking open the 1979 St Magdalene Rare Malts soon, I’ve got plenty more to be getting on with. Yet again, there’s another reason for many more people not to buy new bottles if they are in a similar position. This should worry the industry a bit as people will not need to consume at the same rate they once did.

To focus our thinking a bit more, I’ve an interesting tale to tell. At a table of friends enjoying a post-Aberdeen Whisky Festival curry, an acquaintance told me of an interesting anecdote that should focus the minds of all collectors who view their prized possessions as a potential pay day in the future. He told me of a relative who used to collect old tin train sets, and used to tell his family that it would be theirs and make a pretty penny in the future. He would later stop saying anything, as he had hit a problem – the people who were likely to buy his collection were dying off, and their collections were getting sold. So it has a double whammy; a saturated market with few buyers. Prices then start to sink faster than the Titanic. In whisky terms, lower secondary prices compared to RRP mean there’s a good chance fewer people will be relying on the retail market for their drinking whisky and simply buying from auction, supplied by those who bought high and are forced to sell low.

So what whisky bottles will sell? Impossible to say though we come back to marketing and hype being an indicator. Macallan, Ardbeg, Glenmorangie, Glenfiddich and Glenlivet spend millions annually for marketing. This keeps those brands in public consciousness. Springbank as well, although not as well known globally, will continue to do well due to the producers inability and refusal to increase production. These items are always going to sell, providing you’ve got a realistic knowledge of what to pay for them and expect to get in the future. Again though, just because they will sell, doesn’t mean to say you’ll make money – you need to have the right bottles, but what may be popular now may not be so sought after in 15 years. Factors will depend on the amount released, cask type etc. for instance I have a collection of the first three bottles that were released from Glenallachie distillery after Billy Walker took over. That could be argued as a selling point, but you need your buyer to know what he is looking at, and at auction you need two of them in competition. It’s more than likely not going to happen.

I’ve reached a point in actively advising people not to invest in whisky, be it bottles or casks unless you know what you are doing and can afford to take a loss. With news of exports being down, a cask investment could be a bad idea, unless you will bottle it yourself. Many overpriced casks will not now reach the values imagined. With availability of casks being increased, perhaps Indy bottlers can afford to pick and choose, but even some independent bottlers are struggling. Could a fall in prices come too little too late?

Similarly, the secondary bottle market may be following a similar trajectory. Picking up a 1980’s bottle of ten year old Glenmorangie for example, won’t make you rich, as there were so many of them produced. Neither will that 1980’s bottle of Bladnoch or Ardmore. That bargain at auction of sub £50 is that for a few reasons – nobody wants it. If it hadn’t made any increase in value over 40 years, it’s not going to, again due to the volume made and the fact that both distilleries are still in production, for now at least. Remembering my anecdote above, the people these releases were probably more relevant to people who are now dying off. Who will pay lots for standard, 40% chill filtered and coloured whisky that’ll be probably be suffering from old bottle effect? (I’ve yet to find an 80’s bottling that doesn’t), especially with a market full to the gunwales of fresh, vibrant whisky?Unless you are buying a niche bottle from the past with healthy demand, you’d have to find somebody who wants to buy it. Not only that, you need someone to pay you lots of money for your bottle. It would be easier to find a drop of unicorn pee in the Atlantic Ocean. That item will need to be something that is genuinely collectible, such as old silent distillery bottlings that were well regarded, especially rare ones, or something in genuine demand, I think we’d almost be better to start drinking what we hold.

I’m probably in the minority, but it is now getting tedious to hear of new distilleries opening or being planned. I have no skin in the game and very little insider knowledge, but I’m sure that if something of the opinions that I have voiced in this piece resonate with you, then you probably feel the same. New releases for me don’t offer anything new to the wider church of whisky. You’ll definitely taste something very similar somewhere else, possibly a lot cheaper as well. Marketing, premiumisation and greed have seen me want to just ignore the multitude of releases. It’s not that I want to become an iconoclast, perhaps I’m, along with many others are just getting fed up of being taken for granted by the wider industry. I’ll keep my interest in the distilleries that I value, but it’s my opinion that the industry is very much on the wane for a period. Hopefully we’ll see some more much needed correction, and I don’t think it will be a short period that it occurs over. While it’s unlikely there will be a similar bust of the 80’s, I’m sure some new distilleries, or those who heavily lean on one market are now worried. 

Indeed, it would be a very foolish strategy for brands to rely on price hikes to maintain profits on decreasing volume sales during a period when there’s a lot more whisky waiting and people don’t have as much cash to spend, and a collection to drink. It’s also tedious to hear of overpriced whisky releases with no idea as to how many have been put into the market, with companies hoping the diehard fans will bail them out. As Mark Wahlbergs’ character Mike Williams said to the BP company man in the film Deepwater Horizon “Hope ain’t a tactic”. And we all know how that ended. The industry should perhaps not rely on or abuse the goodwill and loyalty of its customers so much.

While this is just my personal view, and I’d be happy to be proved wrong, I think the spirits industry isn’t in a healthy shape, and I don’t know how far it will bounce back. I can only comment on how I see impacts of various economic and geopolitical situations that are now adding increased pressure on the bubble created in the whisky industry. Young people are starting to reject alcohol in growing numbers, often due to price and health concerns. You can’t easily hook a young person on an expensive brand if there are cheaper options. That’s where the marketing execs who cultivate a lifestyle image to lure people to perceived status that comes with their product. Increasingly, overseas domestic markets such as China are emerging, with their cheaper and lesser quality stealing volume sales from long developed markets. There’s a myriad of reasons that would make the primary and secondary pricing increases unsustainable for many brands in my opinion, and I’m far from the only one that thinks that way. A recent well written article written by industry insider going by the pseudonym Fletcher Findlay on Dramface (click here to read) explains a bit more in detail about the potential state of the industry. And when you feel you haven’t had enough doom and gloom, well known and not anonymous whisky writer Dave Broom also has some words of wisdom (link to article)

So, have fun while the party is still going. Spend wisely. Don’t assume you can collect and make money. Enjoy what you have – it may send a message that current prices are unsustainable to those who need to hear it.

Yours In Spirits

Scotty

Index of tastings here

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Photo Credits

All Photos – Authors Own apart from

Deepwater Horizon – (public domain / USCG)