Astute observers will have noticed that the rising interest in spirits has coincided roughly with the radical increase in economic inequality in developed nations over the last few decades. But the question is whether this is cause or coincidence - I would argue that they are at least partially related.
Spirits largely languished during the 1980s and 1990s, possibly as a reaction to the liquor-soaked decades that had preceded them. Distilleries closed and a glut of stock was established in the aged spirits world as producers were unable to find many willing buyers. The resulting low prices made quality spirits accessible even to folks of relatively modest means.
This began to shift in the 2000s, as interest in spirits grew in tandem with the cocktail revival and both broke into the mainstream around the housing collapse. While much of this is simply the cyclic nature of interest in drinks, the exponential rise in prices and concomitant decrease in availability of single malts and American whiskey are likely to have been driven by broader economic trends.
The obvious element is that the increasing concentration of wealth at the top has created a class of people for whom money is literally no object. For those with hundreds of millions or billions in the bank, spending thousands or tens of thousands on a single bottle of spirits won't even make a noticeable dent in their net worth. This effectively unlimited wealth makes it possible to bid up the prices of exceptionally rare spirits to stratospheric levels. With the rapid appreciation of many expressions they can even convince themselves that these mega-expensive bottles are investments like their other assets. The rising prices have a trickle-down effect on the rest of the market as distillers and retailers raise prices to capture profits that had been going to secondary market sellers and convince everyone else that they must be worth the now-inflated prices that were once within reach escape the grasp of less affluent buyers.
The other end of the market is a more complicated situation. While simple supply and demand factors explain much of the changes in prices, the question is what drives that demand since there are only so many rich people in the world and they can only drink so much. My personal belief is that the rise of high-end spirits owes much to the reduced circumstances that many people find themselves after the financial collapse of the late-2000s. Put simply, while traditional status markers such as homes and cars have moved out of reach for many, budgets can still stretch to encompass other luxury markers. So maybe you're stuck renting and taking Uber, but you can cover a $20 pour at the bar or a $100 bottle to show off to your friends. Brands have capitalized on these desires with increasingly grandiose claims of rarity for their new expressions, touting everything from 'lost' casks (from large corporations with legal obligations to keep track of their stock) to rococo production techniques that make the bottles seem difficult to obtain (often from distillers with little experience but good marketing chops), while keeping the prices just within reach of the average person with a bit of disposable income.
The real question is whether this is all sustainable. There are already indications that scotch whisky distillers are pricing themselves out of the low end market, with blend sales - making up the bulk of their profits - slipping. While sales of higher priced single malts are helping to keep profits from tumbling too far, it is unclear whether a $50+ floor is realistic over the long term when it is generally accepted that most spirits buyers consider a $25 bottle to be expensive and much more to be a splurge. American whiskey seems far healthier at the moment, with prices and sales continuing to rise with not apparent limit. While many of the once-staple bourbons in the $20-30 range have moved up-market, there are still good things to be had that that magic price point, albeit of often decreasing quality and selection. The increased production coupled with a shorter amount of time necessary to bring aged whisky to market (3-5 years for bourbon vs. 8-12 for single malts) may help to keep supply and demand more evenly matched, though the fetish for elevated age statements will likely continue to pump up that end of the spectrum. More broadly, it's unclear whether interest will be sustained if the steadily improving economy makes home ownership available to a broader section of the populace again and redirects their spending habits. As they say, time will tell.
Wonjo Agujjim (Seoul, March 2023)
5 hours ago
Great, insightful post. Thanks, Jordan.ReplyDelete