Whisky Advocate

Report: “U.S. wineries must adjust to a $50 ceiling.” Is whisky to follow?

November 27th, 2009

Decanter magazine reports here about a new study which shows the effect of the current recession on wine prices. One quote from the report says:

Wineries need to adjust to a ‘new normal’ of reduced spending power – among the very consumers who have driven recent growth in the market. For that segment of Baby Boomers who have seen their net worth drastically reduced and who have been the prime target of wine marketing for nearly 20 years, a US$50 bottle of wine is now permanently out of the question for a normal purchase.

It goes on to advise:

wineries to focus more of their marketing on the under-40s, pointing out that those aged 45-54 have seen their net worth fall by 45% over the past five years.

So, this leads me to wonder if the whisky companies will take the same approach to the products they produce and sell. Will we start seeing more lower-priced whiskies on the market? Will they ramp up their marketing efforts to a younger crowd who supposedly haven’t seen their net worth fall so much?

Or is the whisky industry more immune to the recession?

Your thoughts?

18 Responses to “Report: “U.S. wineries must adjust to a $50 ceiling.” Is whisky to follow?”

  1. That’s an interesting notion. I think the whisky industry is just as vulnerable as the wine industry in this regard. With baby boomers’ savings disappearing with the shrinking markets, marketers must turn to the younger generations with ever-growing incomes to purchase their products.

  2. I have definitely seen this trend. More middle age whiskey drinkers are looking more for value than prestige, & I have seen an increase in drinkers turning from Scotch to Bourbon where there is much more value for your buck.

  3. Eric Falardeau says:

    I hope they’ll do because people will turn to rye, bourbon, etc. Don’t get me wrong, I love Blanton and Jack D. Single Cask.

    But speaking only of the Scotch whisky industry, it is slowly loosing cutomers because they can’t afford to pay 100 bucks for each great bottle. And some are turning away angrily because there is so much great whiskies, but they are too expensive and made for the upper market (vintage, special release, etc.). You hear about them but can’t taste them. Reviewers rave about them, but you will never take a sip. It is often frustrating. And I think some people will slowly turns there head to less expensive drams to show that never took their customers for cash cows.

    Anyway, time will show. I, for myself, we’ll keep buying expensive bottle but less often.

  4. Iain says:

    I think the differentiator here may be how whiskey is consumed. Once a bottle of wine is opened it must be finished within a few hours (most wines, anyway). That’s not the case with spirits. Spirits may see this same effect, but I suspect it will be to a lesser extent. A $100 bottle of whiskey has a longer lasting impact than a $100 bottle of wine.

  5. Todd says:

    Yes, definitely. Prices jumped wildly on single malt scotch starting in 2005. I wouldn’t put a $50 mark on single malt, but unless prices go back to 2001 levels, my purchasing is going remain “very selective”. Sorry, no age statement sub-10 year old whiskies priced around $200 are not coming home with me, no matter what the peat PPM.

  6. CB says:

    I’d love to see more value-oriented offerings. So many of these super-limited, prestige bottlings seem like experiments to see what the market will bear. Rare and old doesn’t mean better. It just means rare and old. I’m for better.

  7. kallaskander says:

    Hi there,

    spending money is an issue. Not only in the US but in Europe as well. When you follow certain news tracers in the internet you will find that “premiumisation” is still an issue as well.

    Premiumisation has been the motor to push whisky prices to unknown heights and not only whiskies that have always been more expensive. Especially BRIC M countries where the customers were naive pricewise in the sense that they had no overview over prices elswhere in the world and where the prestige attatched to imported whiskies has justified high prices from the begining. In their wake the big boys and all others have used the premiumisation mechanism to rise prices for standard bottlings (10-16-18-20yo) readily and steadily in the rest of ther world.

    And they all say that premiumisation is not over even though there is a recession. Au contraire many are the global distribution managers who want to plough on to compensate for losses in the lower range market segment eg. non premiumatised standard bottlings.

    The galloping horse does show signs of fatigue.

    I think they will not let off before it falls down and dies.
    Shareholders and their interest will see to that.

  8. bgulien says:

    I think it depends on who is setting the price. I can imagine that the marketeers from the big multi-nationals can lower prices, to attract more people or keep customers from running away.
    Hoping that the future will be better.
    It’s harder for the independent distilleries or bottlers.
    They have a distillery to run and wages to pay.
    Lot’s of those newly re-started distilleries have a stock gap from the 80’s and 90’s, so they have to make the most from their existing stock, to pay the wages and to have some buffer for the time old stock is gone and only young stock is available.
    Kilchoman is a nice case: They produce tiny amounts of stock compared with the larger distilleries. Can they afford to set a sizable amount of casks away to mature further or are they forced to sell early to make some money to pay for the operation. That’s why they sell 3 year old for $90 and I will buy it.
    Maybe I am a romantic, but I am willing to pay extra, just to see them survive this recession. Else all the independents will be bankrupted out of the industry and you will be in the hands of the big conglomerates. A vision I don’t particular like.

  9. Louis says:

    Those distilleries that can get away with high prices will continue to do so. Macallan 12 and Laphroaig 10 have broken the $50 barrier. But this won’t work across the board. I wonder how well the new 16 year old Scapa and Longmorn 16 year olds are selling, at double the price of the older 15 and 15 year old (resectively)releases.

  10. Louis says:

    PS to previous post, sorry about the duplicate 16’s

  11. lawschooldrunk says:

    I can tell you one thing, John. I am becoming closer with store managers because I don’t want to pay full retail anymore! I hold off on purchases sometimes for three years until I see the bottles gathering dust on the higher shelves and start bargaining; i.e. on the balvenie rum cask that is taking up the space the madeira should be occupying (it didn’t sell well here). I would love to support the local store with full-price purchases but I just can’t anymore. (And, yes, I can appreciate that the costs are passed on to the stores by the importers, shippers, and distilleries and recognize that costs have gone up for everyone: oil, barley, etc.)

    We have to get the executive branch to change the 750ml rule to 700ml, and get rid of this stupid three-tier selling system the U.S. has. Or you can just bribe customs ;)

  12. John Hansell says:

    Over the next few to several years there will be a lot of new, barely legal, whisky coming on the market. It will be interesting to see how the whisky companies market it–and price it!

  13. Red_Arremer says:

    We will be seeing more low price offerings soon. Look how Ardbeg’s prices just dropped. How long do you think that Laphroaig will maintain the stupid splurge pricing on it’s 18?

    But will this be a good thing? I think not.

    I think that on the whole whisky business will divide between two things:

    1. Increasingly frenzied efforts to locate and bond with the richest and most influential leads (in the sense of individual rich/influential people or small groups of them) and unload as much premium product on them as possible.

    2. Increasingly methodical reshape ordinary whisky consumers into receptacles for cheaply produced, ultra-young, boldly flavored, higher proof expressions.

  14. Jason says:

    Mr. Hansel, I was wondering if you could elaborate on your comment about “barely legal” whisky coming on the market in the next few years. Intriguing. I think there is a growing market for value for money whisky, as others have noted.

    Personally, I am a scotch nut and do spring for some obscenely priced bottlings, but all my friends are even starting to drink blended scotch and bourbon. This trend will continue as single malt prices continue to skyrocket.

  15. Lew Bryson says:

    I think — I hope — we’ll see efforts to create more characterful blended whiskies. This is happening already, and I think that’s one way things will go to get value in the market.

  16. John Hansell says:

    Good point Lew. It’s so easy for single malt drinkers to overlook blends, but if they made more characterful ones (like Black Bottle), maybe more people would take notice.

    Then there’s that whole vatted/pure/blended malt category…

  17. Hey John,

    Speaking from the point of view of a retailer, it is our customers and not the distillers who set the trends. Whereas a year ago we may have seen an average bottle price of CDN$120 or more, this year the average is definitely under $100. I don’t think this necessarily means cheaper, younger whiskies, or even blends, but rather providing customers with better value.

    Better value more than anything is what is selling whiskies in my shop these days, regardless of the price or age of the whisky. Simply bottling a younger whisky or pushing blends does not mean the customer is getting better value.

    Rather than pushing blends or creating cheaper, younger expressions, I hope some of the bigger players like Diageo and Edrington will roll back the price increases they have been sticking consumers with over the past 5 years.

    Regards

    Andrew Ferguson
    Kensington Wine Market
    Calgary, Canada

  18. Peter says:

    As a Bay Area resident who knows a few people in the business of distributing wine, I would argue that the sheer amount of wines led, for too long, to an absolutely insane markup on the retail level that had no basis in real quality. I know that it’s been a normal occurance for a Sonoma bottle to get over a 700% markup from the distributer price when opened at a restaurant, which is entirely unsustainable in the long-term.

    My point here is that whisky is of a wholly different nature than wine, both in marketing and consumption. In that way, I agree with Lain (#4). Now, I think also that prices will have to drop for Scotch, because the US dollar is being destroyed internationally. This is the biggest risk, as I see it, for the consumer in the US (on all fronts, not just Scotch).

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