What is Value? - Scarcity

The second major trend driving this change is the perception of scarcity, whether that's the artificial scarcity of designer vodkas or the very real scarcity of closed distilleries. The marketing departments of the spirits industry have stoked these perceptions, making increasingly grandiose claims for the exclusivity and rarity of their products. But it's difficult for consumers, especially those who are relatively new to the field, to judge how true those statements are, let alone how much they matter.

One of the main axes for scarcity is age. While many distillers and bottlers may be trying to convince the buying public that age is just a number, it's still a number with power. Well-aged spirits from top-tier distilleries command almost rabid desire. This is stoked by the fact that few distillers were running at full capacity 20-30 years ago and many were closed or nearly shuttered. Much of what was produced in decades past has already been bottled during the early-2000s when distillers' warehouses were overflowing with aged spirit that they wanted to move out the door. Ardbeg is probably the poster child for all of these forces, with even 20 year old malts commanding stratospheric prices ($400-1000) when they come to market. Many other distilleries and bottlers are also pushing ultra-aged malts that are many decades old with accompanying sky-high prices, even for distilleries with no broader following or where the spirit itself is an over-oaked mess.

Age statements are valued more than ever, exemplified by the increasing number of single malt whiskies over 50 years old that are coming to market and Diageo's Orphan Barrel line of hyper-aged bourbons. Single malts over 40 years old and American whiskeys over 20 years old were, until fairly recently, little more than curiosities. The bulging warehouses of Scotland and Kentucky disgorged them with increasing regularity during the early-2000s, often at rock bottom prices as demand existed only among a small coterie of connoisseurs. While many were good, that was largely because the distillers and independent bottlers had so many casks and barrels to choose from that they could be relatively picky about which ones were actually bottled and offered for sale. The quality of these whiskies helped to usher in the rising interest over the last handful of years as word began to trickle out. But as new drinkers began searching for good spirits, the stories were often incomplete - many assumed that age was the critical component in the quality of the whisky, rather than the artificially deep stocks. Thus prices for aged dated spirits have risen exponentially - whiskies now regularly come out with price tags over $10,000 and American distillers can often double or triple their prices by increasing the age statement on a bottle by a couple of years. While it is true that stocks of aged spirits have been significantly depleted in recent years, the price tags don't necessarily reflect the quality of the spirits. Single malts can often become thin or over-oaked in the cask, while bourbons are even more sensitive and can become overly woody in their teens.

Scarcity is even most real when it comes to 'lost' distilleries. Many were shuttered during the 1980s and 1990s as drinkers worldwide turned to beer and wine over spirits. While underappreciated at the points when they were closed, many of these distilleries have seen renewed interest over the last decade. In Scotland, Port Ellen and Brora have gone through the greatest change in perception - during the 1970s and 1980s they produced whisky primarily for blends, with little attention paid to them as single malts. In recent years bottlings from these distilleries have reached a floor of roughly $1000 per bottle, at least ten-fold more than what they would have gone for fifteen years ago. In America this is best represented by the Stizel-Weller distillery, which operated from 1935 until 1992. While its products were largely well-regarded during its history, the distillery was caught up in the same 1990s slump. Barrels from the distillery continued to be released annually under the Van Winkle label at a range of ages. During the last handful of years these have gone from being relatively unknown but appreciated by bourbon connoisseurs to being easily the most sought-after American whiskeys on the market. In both cases the prices are driven as much by the mystique of drinking spirits from distilleries that will never produce again as it is from the inherent quality.

Even if a distillery isn't closing, once standard releases can become scarce either if demand ramps up far too quickly for production to keep up or because of past gaps in production. This can be seen recently in the Japanese distiller Nikka pulling many of their age dated single malts from the market as their warehouses simply don't contain enough aged whisky to keep bottles on retailers' shelves. Another recent occurrence was the announcement by Glendronach that their popular 15 Year 'Revival' expression will be temporarily not be released due to a supply gap. In both cases I have witnessed any number of posts from people excitedly noting the bottles they've been able to stock up on, often at already inflated prices. Accompanying these posts are those who have not yet succumbed but are wondering if they should seek them out before it's too late. There is little discussion of whether the experiences of drinking these whiskies is great enough to justify paying over the odds or buying multiples - the fact that they are disappearing is sufficient justification.

The apogee may be 'limited edition' spirits, where buyers believe that there is only a small chance of being able to try a new expression and are thus willing to pay significantly over the odds for it. From vintage vodkas to the annual releases of the Buffalo Trace Antique Collection, Pappy Van Winkle, and Four Roses Limited Edition Single Barrel and Small Batch, to the vaunted Feis Ile special editions put out by Islay distillers (and some independent bottlers wanting to get in on the action), people are making vast expenditures of both money and time as they seek to get their hands on them. If it's not a 'limited edition', then it's a 'single cask' or a 'small batch' that represents a particular flavor profile that will purportedly never be seen again. Distillers are waking up to the fact that many buyers are becoming completionists who want to try everything from a numbered series and are increasingly adding this information to their bottles. Aberlour A'Bunadh, Booker's, Laphroaig 10 Year Cask Strength, Evan Williams Single Barrel, Glenlivet Nadurra 16 Year, and even Ardbeg Uigeadail - which has bottling dates, but no official batch numbers - have all become intense foci for aficionados, who scrutinize releases for differences in character and quality.

Lost amidst much of the competition for limited editions are the questions of whether they are any good and whether they are actually rare. There is the underlying belief of limited editions that the distillers are bottling their best casks, whether as single casks or small batches, with the best flavor profiles, justifying the expense. And every time something new comes out, there are definitely lots of voices declaring it to be the best thing ever put out, or at least something superlative. For people who are new to the spirits world, it's hard to not get caught up in the hype. Single casks are in many respects the ultimate limited editions - once the cask is emptied, that's it. But the fact that a single cask has been bottled it no guarantee of quality - casks bottled by the distillery stand a somewhat better chance of being good as the distillers have a brand to maintain, but, especially from independent bottlers, some will be outright stinkers and a decent number will simply be unremarkable. With small batch releases, it's not so much that the quality will change radically from batch to batch, but that each one will be noticeably different character, being composed of a smaller number of barrels or casks than the more standard releases. But this is sorely complicated by the fact that the term 'small batch' has no defined meaning in either legal standard or even industry practice. One release may represent a small handful of casks blended together, while others may be tens or hundreds of barrels, small only in comparison to the swimming pool-sized batches put together for more standard releases. Even runs labeled as 'limited editions' have experienced a significant amount of bloat in recent years, with outruns reaching tens of thousands of bottles. This gives lie to the term 'limited', but is masked by the rabid demand, with bottles quickly flipped online for multiples of the already high retail prices that rise in tandem as the distillers seek to get a greater share of the prices bottles go for on the secondary market.

Underlying much of the increased demand seems to be the mounting fear of missing out. The money must be spent now because a particular expression will either be more expensive or completely unavailable tomorrow. But this gets to the heart of the question of value - what is the opportunity cost of buying the latest new release? Put another way, the question I ask myself whenever I buy something new is "What else could I buy with this money?" I have a limited amount of money and, perhaps even more importantly, liver capacity with which to consume spirits. There is simply no way to try everything, much as we might like to. One experience will always be a trade-off in missing another.

Accentuating the fear of missing out is the tendency for humans to convince themselves that they aren't suckers. The bottle that you just dropped hundreds or thousands of dollars on must be good, because there's no way that you'd throw away money on something mediocre. It's that much easier when a bottle sits on the shelf, awaiting some fabled day when you will finally open it and experience its glory. And part of the process of convincing yourself that you're not a sucker is egging others on, because if someone else is willing to pay that kind of money for a bottle, then it must be good. Right?

An important question that often goes unasked is discussions of scarcity in the market is how many of the bottles that are purchased are actually drunk? If the answer is 'most', then scarcity is real because the supply is literally disappearing. But with rising prices in the secondary market, many buyers are sitting on their purchases, waiting for them to appreciate in value. Lately I've been hearing more people make comments to the effect of "I can't afford to drink this bottle", not necessarily because they paid too much for it but because the resale value is so high that they feel like they can't justify drinking it. Those feelings put us in a position where many are relying on the chain of greater fools,  creating significant risk for a bubble. Even a slowdown in appreciation may lead many to sell before prices actually dip, creating exactly the situation that they fear.

Even when people aren't buying with the intention of selling, they're buying to stock up. The fear that expressions will disappear, as discussed above, or simply decrease in quality is real. I regularly see pictures posted of people purchasing multiple bottles or even cases of a single expression. If people genuinely prefer a particular expression and supplies are tight or it will actually be pulled from the market, this is not necessarily irrational behavior. But as with people pushing purchases for the sake of investment, this tends to create a positive feedback loop as panic buying creates more panic buying.

The only way to escape these traps is to let go of the fear. Accept that you won't get to try everything. Drink what you have instead of accumulating either for the sake of accumulation or because of the fear that something won't be available tomorrow. Accept that there will always be good things to drink, even if they aren't the same as what you've had before. Accept that drinking alcohol is in and of itself unlikely to be transcendent. Accept that spirits are just beverages to be enjoyed.

As with novelty, the solution to scarcity is to broaden your horizons. Yes, unless you are filthy rich, you're never going to get to drink 1970s Ardbeg (though you can probably sample a bit if you tour the distillery), Port Ellen, or Brora. Stizell-Weller bourbon and old ryes are basically gone. But that doesn't mean that there aren't still good things to try at reasonable prices. If you like scotch, try distilleries without the big brand names. Macallan may be out of reach, but sherry bombs from Glenfarclas, Bunnahabhain, and (to a slightly lesser extent) Glendronach are still excellent and affordable. Ardbeg and Laphroaig are becoming increasingly expensive, but peated Bunnahabhain and Ledaig offer just as much smoke at much more reasonable prices. Speyside is full of distilleries without the name recognition of Glenlivet or Glenfiddich that still produce excellent spirit and command a much smaller premium for well-aged expressions. And if you want to get really slippery, 'teaspooned' malts where a small amount of whisky from another distillery was added to a cask so that it can no longer be labeled as a single malt exist for big names like Balvenie, Glenfiddich, Glenmorangie, and others that will also be at a much smaller premium than single malts carrying the bigger name.

If you're into older American whiskey, your options are, at first glance, much more limited. Aged stocks are genuinely tight at this point and command commensurate prices. But if you're willing to look across the Atlantic, a number of options present themselves. Old grain whiskies from Scotland, which are generally produced from corn or wheat, share a lot of characteristics with bourbon, especially if they are aged in first-fill barrels or hogsheads. Compared to the big names from Stizell-Weller or Heaven Hill, it's still possible to find grain whiskies that have spent two to three decades in the cask for not a lot of money. As I noted in the post about novelty, armagnac is another choice as many of these can be wood-driven spirits in a fashion similar to bourbon and, again, expressions that have spent two or more decades in oak can still be extremely affordable.