Tuesday, December 11, 2007

Like Day Follows Night

...price increases follow supply shortages.

Because of the whiskey aging cycle, sales increases can't always be matched by supply increases. It is a nice problem to have and American whiskey producers haven't had it for a long time, but they do now. More and more brands are on allocation and we're starting to see higher prices at retail.

Two things we probably need to get used to are: less availability of long-aged whiskey at bargain prices, and higher prices for American whiskey across the board.

One bright spot is that we probably can expect to see more frequent deals on mainstream premium brands such as Knob Creek. With Knob Creek especially, since that is how Beam operates.

What we are seeing now is cyclical, though that may be small comfort since this expansion could be a long one. If China, India and some other markets develop as they are expected to, there could be supply pressure on whiskey for the next decade.

Producers are moving cautiously, in terms of both price and production increases, so a major backlash seems unlikely. At least here in the USA, American whiskey remains a bargain compared to other aged spirits. Higher prices will have an effect but it is hard to predict what that effect will be.

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