The inherent impossibility of accurately predicting whiskey sales five, ten, or fifteen years from now means that both shortages and gluts are inevitable. The best we can hope for is that both will be brief and mild.
So even though supplies are tight right now, it's appropriate to start thinking about the next glut.
Naturally, the whiskey guru downunder, Chris Middleton, has been thinking about this too.
"I’ve been closely tracking investment in new production capacities globally for some years now," writes Middleton. "In the U.S. over the past three years, over $430 million has been announced by the big eight distilling companies in plant and equipment for their distillery operations. Total capacity over the next five years may well double. Production may grow 50 percent or more over this period."
Middleton's records show that over a
similar period, scotch producers have invested over $3 billion and increased production
by over 20 percent. A
dozen new malt distilleries are being built and many more are being expanded or brought back into production.
Whiskey-makers in Japan, Ireland, and Canada are growing too. So are hundreds of new craft distillers in more than 30 countries. Total investment worldwide: about $4 billion. In the five major producing countries, aging warehouses now contain more than eight billion liters of whiskey at various ages. Meanwhile, the best estimate for consumer demand growth over the next five years is about five percent per year.
Consumers may welcome a glut, as they usually start with a price war. But if producers have badly overestimated their needs it will be bad for whiskey lovers, as companies turn away from whiskey and look elsewhere for profits. So let's all pray for a short glut -- something to take the edge off -- then back to the uncomfortable tightness we're experiencing now. And, as always, pray for robust growth in China and India, upon which all of this depends.
5 comments:
Nice to hear some actual numbers rather than the same old nonsense.
Here in MN, they dropped the LQ licensing fee for distilleries from $33k to $1300. States and the Gvmnt at large are looking at a cash cow and will milk it for all its worth. I predict there will be a brewery and a distillery on every corner in 5-7 years time. The Brew-stillery revolution is just beginning.
I have a feeling that the next glut won't be like the last one. The last one, the distilleries all filled bottles of their standard brands, or newly-created one-off brands, with whiskey that had spent a lot of time aging, compared to what's being bottled today. However, with things the way they are I have a feeling that the next glut will see more bulk whiskey being sold to eager NDPs and rectifiers, who know they can cultivate premium brands and expressions using extra-aged spirit for which the distiller may even be able to charge a slight premium price per barrel.
I don't think, for instance, we're ever going to see $15-$20 bottles of an 8, 10, or even 12 year old expression of a mainline distillery brand, the way we did 20-25 years ago. Instead, we're going to see $40-60 bottles of independent bottlings that may possibly even reveal that they are from Distillery X or Distillery Y using this or that mashbill.
All speculation, of course, but the one thing it seems to me that's different now from then is that there's a healthy NDP market springing up eager to source product, and an increasingly knowledgeable consumer base who is interested in the finer points of what they're buying and drinking.
I would welcome a $60.00 12yo.
It would be a better value than a $25.00 4yo.
And it would also be drinkable.
"I don't think, for instance, we're ever going to see $15-$20 bottles of an 8, 10, or even 12 year old expression of a mainline distillery brand, the way we did 20-25 years ago. "
Huh? I bought Elijah Craig 12yo last year for $20. Sure, it's higher now, but why would you talk about these prices as being 20-25 years in the past?
I was just talking to a few distillers about this. The market for premium Whisk(e)y is mostly for baby boomers and seniors. There is a small amount of hipsters who are into it; for the most part it's older people.
The people of my generation (the millennials and younger) mostly see it as a stuffy, old world drink, and for the most part, companies are reinforcing that image. But lots of youth are now embracing Cognac. Why? Through hip hop and brand imagey it stays relevant. It doesn't scream, "I just played golf and hunted geese in the mountains with my friend Nigel Edgeworth while wearing a white dress shirt with brown suspenders and am now going to smoke a $120 cuban just like I do every day!".
If all this booze is being laid down in casks now... who is gonna to buy it in several decades when it's all mature? The baby boomers will be elderly and probably won't spend as much. The seniors now will be dead. I think the glut screams that Whisky's image needs reinvention to keep it relevant with newer generations.
Sorry to be long winded.
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