Difference in price

[JohnyyGuitar]

What is it that accounts for the big differences in the price of scotch ? And I don't mean old or rare scotch, just the everyday stuff.
Say for example a 10 Year, like Speyburn and a Talisker. What is Talisker doing that makes it cost 2-3 times as much ? Sure it tasted better, but does it cost that much more to make it and way ? Or are the prices more based on "what the traffic will bare"...and that people are just simply willing to pay more for it, in which case they are raking in some hefty profits.

[Thesh]

http://en.wikipedia.org/wiki/Supply_and_demand

[JohnyyGuitar]

Cute, but not quite. I'm certain that is more than true in old bottlings.

But to use your point (supply and demand). One would deduce that Talisker cost as much to make as Speyburn. But people 'demand' more Talisker and Talisker makes less.......and Talisker rakes in the bucks with huge profit margins. But the last time I went to the liquor store I could of had all I wanted of Speyburn or Talisker, there didn't seem to be any shortage one way or the other to me. Seem to be plently of supply all the way around.

So, supply and demand is only part of the story and a simplistic answer.

Surely, with all the marvelous intellect that sprews so abundantly about this forum from every nook and cranny someone must have more brain power than has been shown to date.

[Deactivated Member]

Supply and demand is the answer, end of story. Econ 101! Everyone took it, everyone passed the test, everyone promptly forgot what it all meant.

Producers of whisky, and every other commodity, set their price according to what they know the supply is, and what they believe the demand will be. If the price is too high, stock will accumulate, and the price will have to go down. If the price is too low, there will be shortages. When, as happened with Lagavulin a couple years back, there is a surge in demand as peaty Islay malts became popular, and a shortage of supply (because the producers could not foresee the surge in demand sixteen years before), the price inevitably goes up. In an ideally responsive market, it goes up to the point that there as many people willing to pay the price as there are bottles available. (In point of fact, there were shortages and rationing, so obviously Diageo did not raise the price enough.)

There is plenty of Talisker and Speyburn on the shelf because the price for each has been set to match supply and demand. The laws of supply and demand are as immutable and predictable as those of gravity, force, and motion; you can try to manipulate them, say by holding back product to artificially raise the price, but the consequences are predictable and inevitable (see OPEC, 1970's). In fact, the most effective way of manipulating price is to try to create higher demand (see marketing; China, India). In any case, any producer of any commodity wants to sell all of his product at the highest price possible, and sets his price to do just that.

"Sure it tasted better," you said of Talisker. There you go--you aren't the only one who thinks that! More people want Talisker; ergo Talisker costs more (given equal supply). Economics is complicated, but this is that simple. Did you know that the same model car, built in the same place, will have a different price in Canada from the price in the US? The only difference is the automaker's perception of the different markets.

[JWFokker]

Demand is an elusive factor when it comes to luxury goods. The demand is regulated solely by the desire of the market for the product. It's rather difficult to accurately gauge the desire of the market for something as subjective as a particular flavor of whisky. Personally, I quite readily accept the cost of Talisker. In fact, I buy more Talisker than any other single malt. Certainly, whiskies such as The Dalmore offer a better value per ounce (by a factor of 2), but there is no accounting for personal preferences. Though I quite enjoy The Dalmore, I'm willing to pay twice as much for an equal amount of Talisker 10. Illogical, but regarding products that have few quantifiable aspects, value is a largely individual and nebulous perception.

[Deactivated Member]

Actually, JW, I think demand for luxury products is more purely measurable. It gets stickier when the commodity is something you gotta have regardless of price, like bread and gasoline.

Think I'll have some bread and gasoline for breakfast.

[JohnyyGuitar]

My dear sir, MrTattieHeid
Thank you for the lesson in economics, I never knew any of that. And to think what a waste of all that time and money in college and I didn't learn such basic knowledge.
Perhaps you might also pontifiate on why economics is called the "Dismal Science"
Supply and Demand is, yes Econ 101, as such a very broad statement to explain a very complicated and unpredictable market place. If matters were only so simple and true, we'd all be rich.
Surely you don't suggest that Talisker is as cheap to make as Speyburn. Without doubt the makers of Talisker would say it cost more to make because it is a quality product, are you suggesting they would be lying ?
So than let me rephrase my orginal question......and put this silly notion of Supply and Demand to rest.
I think we can all (most) agree that Talikser is of better quality than Speyburn....yes ? yes...then
What are the quality issues that increase the cost to make a fine scotch verses a mediocre one, and to what degree does that dictate the final price. ?
And with that my dear sir it is now your chance to shine and let us all know what you do or do not know about the making of a fine wiskey, scotch wiskey. And I trust it is a dram more than your profound insights into economics.

[Deactivated Member]

Surely you don't suggest that Talisker is as cheap to make as Speyburn.

I don't know, I don't see why not, and it doesn't matter.

[Lawrence]

My dear sir, MrTattieHeid
Thank you for the lesson in economics, I never knew any of that. And to think what a waste of all that time and money in college and I didn't learn such basic knowledge.
Perhaps you might also pontifiate on why economics is called the "Dismal Science"
Supply and Demand is, yes Econ 101, as such a very broad statement to explain a very complicated and unpredictable market place. If matters were only so simple and true, we'd all be rich.
Surely you don't suggest that Talisker is as cheap to make as Speyburn. Without doubt the makers of Talisker would say it cost more to make because it is a quality product, are you suggesting they would be lying ?
So than let me rephrase my orginal question......and put this silly notion of Supply and Demand to rest.
I think we can all (most) agree that Talikser is of better quality than Speyburn....yes ? yes...then
What are the quality issues that increase the cost to make a fine scotch verses a mediocre one, and to what degree does that dictate the final price. ?
And with that my dear sir it is now your chance to shine and let us all know what you do or do not know about the making of a fine wiskey, scotch wiskey. And I trust it is a dram more than your profound insights into economics.

Johnny, I don't think you need to be sarcastic to Mr. T., we're all friends here.

I'll bet that the cost of making Talisker and Speyburn are quite close and the cost is simply determined by demand. Talisker does not use an extra expensive process to make their whisky, right now people just want more Talisker than Speyburn and Diageo are taking advantage of that. I quite like Speyburn though.

There is more demand for Talisker than Speyburn and since you've already stated that you have an education then you know the rest.

[hpulley]

Being on Skye, it may be a bit more expensive to ship in supplies and ship out the product but it would be similar to Islay, Arran, Orkney and any other place which generally had to be shipped to the mainland. I know a case where a small distillery on Islay has a 20 case minimum for private orders because of this while the distilleries attached to bigger companies with large mainland warehouses are happy to ship me a single case. Thus Talisker may be a bit more expensive but a fairer comparison would be Macallan and Speyburn and I doubt there is much other than the marketing and advertising budget to set those two apart on the expense sheet. Distilling fermented malted barley is pretty similar no matter where you are, once the costs of bringing in material is factored out.

Harry

[JohnyyGuitar]

Thank you 'hpulley' finally an intelligent response. Now that was the kind of insight I was trying to illict from this post.
And I do think mr Taddie-whatever was just blowing me off with his simplistic Supply and Demand because he had nothing better to say.
I sorry but his tone touched me as bit arrogant, be it so or not.
With that behind us perhaps we can move on to a more meaningfull discussion.
Perhaps someone can comment on the use of barrels, I've heard it said some makers only use the best, and that they cost more......Mr Taddie-whatever, I'll throw that one to you....as of yet you haven't so much as given us a the slighest hint of you vast knowledge concerning the making a fine scotch.
Another aspect I might suspect plays a key role in the making, is that some distilleries are more automated than others or make large quanities verse a small outfit that still does much of the work by hand. This is very true in many other business. Where things are still done "by hand" and you pay for it. commets ?

[JWFokker]

It seems to me that you're not looking for the real answer, merely one that is close enough to your preconceived notions of what it should be. MrTattieHeid is one of the more knowledgeable members of the forum and if his answer doesn't agree with whatever you want to hear, that's too bad. There's no reason for you to be insolent, particularly when you display your ignorance of the entire whisky making process. The only person who is posting with an arrogant tone is you. Learn about the production process and the market and you'll realize that his posts are correct.

[Wave]

Skye unlike Islay & Arran has a bridge that connects to the mainland so shipping supplies into and sending it's product out of Talisker can't be any more expensive than any distillery on the actual mainland. I agree wholeheartedly MrTattieHeid (Gee, I'm surprised! ), It's supply and demand.

Another aspect I might suspect plays a key role in the making, is that some distilleries are more automated than others or make large quanities verse a small outfit that still does much of the work by hand. This is very true in many other business. Where things are still done "by hand" and you pay for it. commets ?

By that then should Laphroaig be the most expensive Islay since they do their own maltings? Should Bruichladdich be the cheapest because they do their own bottlings? It is true that some distilleries are more automated than others (Caol Ila comes to mind as being highly automated) but that is just as far as from milling the malt to distillation. All spirits whether it be from an automated or more of a hands-on distillery still has to sit in a warehouse for an X-number of years before that product is ready to bottle and sell. Every distillery I've toured (22 in all, Talisker included) have all the same basic steps of turning malted barley into spirit. From milling the malted barely, the extraction of sugars from the grist in the mash tuns, fermenting those sugars in the washbacks, the 1st distillation to make the "low wines" and finally to the spirit still that turn out the finished spirit. Some use to do a 3rd distillation but that is becoming extremely rare in Scotland now. Really I see no difference whether a distillery is automated or not, moneywise. You either have a larger (and not by much) workforce to handle the workload or you have a service crew on call to take care of breakdowns.

Another aspect of the supply and demand, Glenfiddich which is inexpensive and readily available makes most if not all of their whisky for single malts whereas Talisker and many others make a large portion of their whisky available to blenders and only a smaller percentage is set aside for single malts, sometimes like Dailuaine as high as 99% for blenders to 1% for single malts.


Cheers!

[JohnyyGuitar]

It seems to me that you're not looking for the real answer, merely one that is close enough to your preconceived notions of what it should be. MrTattieHeid is one of the more knowledgeable members of the forum and if his answer doesn't agree with whatever you want to hear, that's too bad. There's no reason for you to be insolent, particularly when you display your ignorance of the entire whisky making process. The only person who is posting with an arrogant tone is you. Learn about the production process and the market and you'll realize that his posts are correct

You couldn't be farther off base, of course I'm showing my ignorance of the whiskey making process THAT'S WHY I POSTED THIS THREAD SO I COULD LEARN - ie WHY IS SOME WHISKEY MORE EXPENSISE THAN OTHERS.
And for that I got people looking down there noses at me to the tune of "Its supply and demand you idiot now shut up and go away, case closed"
Quality products cost more to make in virtually every endeavor, my curiosity simply lead me to inquire how, why and if that applied to scotch making too, that I willingly admit I know nothing of.
While a few of you continue to jump and pile on me, a few others have been more civil and gracious in their offerings, and so thank you kindly 'Wave' and 'hpulley'. you are gentlemen in spite of the online company you keep here.

PSS: I've noticed a re-occuring theme about some of these forums. New guy ask question, Old Poster(s) blow you off, New guy stands up for himself ....Old Poster(s) get all bent out of shape.

PSS and it's about now i want to scream SORRY I ASKED

[Oliver]

I don't know about this this "crush the new guy kind of mentality" ... though I did feel a certain "crush the guy who thinks differently" kind of vibe on a few ocassions
Anyways, I agree that just saying "supply and demand" is not an adequate answer to your interesting question --far from it. Those fellows think that taking econ 101 has made them economists, lol!

Price -- especially in the 'luxury' or high end segment -- is also about perception, not just supply and demand. Think Johnny Walker Blue for example. Why is it so expensive? NOT because of demand, to be sure! Is it because it costs a lot to produce, blend and distribute? Again no. The stuff contains a lot of grain whisky and no great malts either. Still its outrageously expensive... And this high price leads a lot of customers (and members of this forum) to believe it is a great blend... It is perception. And image. You are, you must be, a well to do, privileged man on the town if you drink JW Blue (for example) ---Why, the advert says so! And -- perhaps more impotantly -- so does the price!
A purchase price that's elevated means to a lot of average customers (and again, sadly, to posters here) that the given product is rare and therefore very very good. Usually this is false.
It's the old Seinfeld joke about limited editions: Limited to how many we can sell you! But, sushhh, don't tell Tattiheid the chief economist of these parts(!), he's the proud owner of a limited edition Ford Explorer,

[JohnyyGuitar]

Price -- especially in the 'luxury' or high end segment -- is also about perception, not just supply and demand.

I'll buy that, no poun intend...................

It seems there is more at play than Supply and Demand, and from others have commented the process of making and ingredients used don't seem to justify the discrepencies of price, or so it seems unless some can throw more light on that.
I was, rightly or wrongly, thinking of it in the same terms as wine making, where the cost of high quality select grapes are an issue as well as newer oak barrels verses old used, or even aluminum vatts, can all be issues in the end price point.
And on that note, I'm off to pop a few corks, seems I've popped a few here. cheers

[Wave]

Think Johnny Walker Blue for example. Why is it so expensive? NOT because of demand, to be sure! Is it because it costs a lot to produce, blend and distribute? Again no. The stuff contains a lot of grain whisky and no great malts either. Still its outrageously expensive... And this high price leads a lot of customers (and members of this forum) to believe it is a great blend

I know some that revere it like a God! Johnny Walker Gold whiskies are at least 18 years of age and I believe JWB whiskies are in the 25+ year old range (?). All blends have a certain amount of grain whisky, some like alot of the cheapies much more than others.

I was at the Aberfeldy distillery in June where it was mentioned that they had found some really old casks of Aberfeldy and sent them to JW to be used in their Blue Label Scotch. My reply? What a waste of good whisky!

All in all I too can't see the justification of the prices they charge for JWB, I'll never buy one but I wouldn't turn down a sample either!
Maybe a JWB fan(atic) can give us more insight?


Cheers!

[Lawrence]

To go back to your orginal question, regarding the difference in price between Talisker and Speyburn, I sincerely believe that it is due to the higher market demand for Talisker over Speyburn regardless of small differences in production & transportation costs.

I really like Speyburn but Talisker is more in demand worldwide. The Classic Six as introduced by Diageo (or what was then Diageo) in 1989 really put those six whiskies on the world whisky map. There is really only one Talisker but several drams that are close in profile to Speyburn taking into account that there are approx 50 distilleries in Speyside.

If you take into account that Talisker has a finite capacity and worldwide demand and that the product is rationed (the industry calls it 'on an allocation basis') to various markets around the world you are left with a price difference. Speyburn just cannot compete, so far, with Talisker.

I believe this is the cause of difference in price.

[Simplicio]

I think Mr. T. is technically correct in that economics can be done entirely in terms of supply and demand. There are no other factors.

...Price -- especially in the 'luxury' or high end segment -- is also about perception, not just supply and demand. Think Johnny Walker Blue for example. Why is it so expensive? NOT because of demand, to be sure! Is it because it costs a lot to produce, blend and distribute? Again no. The stuff contains a lot of grain whisky and no great malts either. Still its outrageously expensive... And this high price leads a lot of customers (and members of this forum) to believe it is a great blend... It is perception. And image...

Yes, price is also about perception, but perception is also part of demand. No-one says that demand has to be rational!

But the problem is, is that 'supply and demand' doesn't often really explain anything; it's circular reasoning. (e.g. people want more Talisker because it is better; yet it is really only 'better' because people want it more.) It implies that there is no inherent value to goods at all and I think that is (often) false. The thought behind 'it's all explainable in terms of supply and demand' is that price is arbitrary because supply and demand are ultimately arbitrary as well, the one being subjective and the other due to scarcity which is unrelated to quality.

I think there are more meaningful answers.

Speyburn might cost less because there are a lot of other whiskies like Speyburn around (I think - I've never had it); and that might be due to the demands of the blending industry, which after all is a far larger market than the single malts industry. So Speyburn is cheaper because it is 'easier', for the above reason, to make Speyburn-like malts, because they are wanted in blends. And it's easier to make blends because of, among other things, column stills.

[Deactivated Member]

Johnny and Oliver, you're right. Supply and demand is a misleading and simplistic answer. The truth is that all prices are set by the Whisky Fairy, who spins a big wheel with all the possible prices on it. The Whisky Fairy is open to bribery as well, and everyone knows that Dougie Talisker isn't above slipping him a few bob now and then. It's just good business practice, since the genetically modified jalapeno barley Dougie uses is so expensive. It eats up the copper in the stills, too, so they have to be replaced more often. And that's why Talisker is so expensive, not that silly supply and demand stuff.

[Lawrence]

Johnny and Oliver, you're right. Supply and demand is a misleading and simplistic answer. The truth is that all prices are set by the Whisky Fairy, who spins a big wheel with all the possible prices on it. The Whisky Fairy is open to bribery as well, and everyone knows that Dougie Talisker isn't above slipping him a few bob now and then. It's just good business practice, since the genetically modified jalapeno barley Dougie uses is so expensive. It eats up the copper in the stills, too, so they have to be replaced more often. And that's why Talisker is so expensive, not that silly supply and demand stuff.

LOL

[kallaskander]

Hi there,

here is another one for you. Talisker is asking higher prices because they can. There are not many among us who would answer Speyburn when asked about their favourite whisky.
Talisker and some other distilleries are in the position to ask higher prices and we pay. What we pay for any Talisker we would not pay for a comparable Speyburn.
The whisky fairy or the laws of supply and demand is all the same as long as there is a hype about something prices are high.
We want to pay more for Speyburn? Let`s create a hype first and they will do us the favour to ask higher prices.

Greetings
kallaskander

[Frodo]

Johnny and Oliver, you're right. Supply and demand is a misleading and simplistic answer. The truth is that all prices are set by the Whisky Fairy, who spins a big wheel with all the possible prices on it. The Whisky Fairy is open to bribery as well, and everyone knows that Dougie Talisker isn't above slipping him a few bob now and then. It's just good business practice, since the genetically modified jalapeno barley Dougie uses is so expensive. It eats up the copper in the stills, too, so they have to be replaced more often. And that's why Talisker is so expensive, not that silly supply and demand stuff.

[lambda]

Well, I didn't even do econ 101, but diageo does control the supply. What diageo could do is ask higher prices for "Talisker 10" than the actual supply-demand dictates. Therefore (unless I'm missing something), they sell less than they could, if this were true. However, they could get rid of the unsold talisker on the blenders market or mature it longer. It might not maximize their profits in the short run, but I believe there are reasons for doing so, for example protecting the brand name, etc. Speyburn may not have this luxury. Thoughts?

[Deactivated Member]

I think you are spot on, lambda. Companies like Diageo certainly have very complex market strategies, and part of being seen as a quality malt is maintaining a relatively high price. There is no great demand for Glenkinchie that I know of, for example, but in order for it to be seen as a worthy part of the Classic Malts range, it can't have a bargain basement price. Diageo are therefore perfectly happy to sell less of it than they might as single malt in order to maintain the image of the Classics, because maintaining that image makes them more profitable overall. Doubtless the vast bulk of Glenkinchie goes to blending, anyway. In other words, for a big company like Diageo, having blending contracts, along with the fact that single malts make up such a small portion of the market, allows them to manipulate the laws of supply and demand to one extent or another. But when a malt like Lagavulin becomes so popular that all of its output goes into malts, it becomes much more sensitive to the marketplace, beyond their ability to control. And kallaskander took the words out of my mouth: "Because they can." Pricing in the marketplace is always about what the traffic will bear.

[laphroaig10_65]

...and what about Edradour 10 yo and Springbank 10 yo which are at a price twice as much Laphroiag 10 yo and other fine brands?
Bye
Luca

[Deactivated Member]

Those (and Bruichladdich, also) are small independent (or semi-independent) distilleries with a complete different set of economic realities. Bruichladdich, for example, used to send the bulk of its product to blenders; under the new ownership, it all goes to single malts. To some extent, they have to charge more, but they are still subject to the laws of the marketplace. And here I'm getting out of my depth (one never notices until the nostrils fill with water). But it seems to me that Bruichladdich has done an excellent job of supporting their slightly higher prices by creating demand with aggressive marketing and creative bottling policy, much to Nick's (and many other people's) dismay. Springbank has a certain cachet in some quarters; I really can't comment on Edradour's situation, except to note that they are reputedly the smallest distillery in Scotland. My head hurts now, and I'm going to go lie down. Dismal science indeed. Someone please wake up John Kenneth Galbraith.

[bamber]

Edradour is small. Springbank has kudos. Talisker is popular and few people care about Speyburn.

[Lawrence]

I care about Speyburn

[bamber]

To be honest I've never had a single dram of it

[Deactivated Member]

You are few, Lawrence. One, to be exact!

[Deactivated Member]

I spoke at some length to the nice Inver House people at Whisky Live in Glasgow. I asked them specifically about Speyburn.

They told me that Speyburn is deliberately priced low in order to sell product to people who are willing to spend low amounts on single malts - people who want to drink something "better" than cheap blends but who are unable or unwilling to pay more for whisky. By the same token, their 25yo (I think that is the right age) was created for people who want to drink older whisky but can't afford the other brands. The 25 in particular is a nice dram, albeit unspectacular. Inver House do not think Speyburn is an inferior product - just one to tap into a different market that they would otherwise not get profit from. Perhaps they mature their whiskies in cheaper barrels (bourban is cheaper than sherry) and perhaps they use cheaper barley. I don't know. Perhaps, though, the top brands just make very hefty profit on their single malts.

I would have thought the principal costs in whisky production are warehousing and interest on the up-front production costs given the long delay in seeking a return. The actual costs of production are small, as those who have invested in their own barrels will attest. The bulk of the price of a bottle is duty, maturing, packaging and delivery - and these will be the same whether it is a 10yo Speyburn or a 10yo Talisker.

[JohnyyGuitar]

OK then,
It seems that we all pretty much agree that the actual making of scotch, the indgredients and process have probably the least influence on price. Which I wouldn't have guessed coming into this converstion. In reality it has more to due with marketing, advertising(ie sophisticated lying), perception and yes supply and demand.
Well that kinda' pops my bubble and suddenly Talisker doesn't taste so good anymore at the price. Guess I'll be thinking twice and twice again before dropping big bucks on a bottle knowing that. (wonder if I can get my money back on the last stuff?)
I feel violated and house broken, or is that heart broken, deceived and cheated. Here I thought that stupid and bad money was only thrown at the rare bottles, but it seems we are all suckers, not just those with daddy's money.
I'm the type of guy who thought the beanie baby craze (remember that) was for idiots just throwing their yuppy money away on whimes due to a lack of self control and an abundance of stupidity.
Well my mama didn't raise no fool, and dad taught me the pitfalls of being a sucker. SO THEY CAN KEEP THEIR LOUSY TALISKER AND ALL THAT OTHER OVER PRICE YUPPIE FOO-FOO wiskey, let the suckers have. I've got better things to do with my money.
I guess you could say that Mr Taddie-whatever (and the likes of) really aren't that smart afterall if they are perfectly willing to throw away their money on items with such inflated worth. It appears to me obvious now you'd have to be a compete sucker to do that. When one only needs to change his taste preference in his mind and can be perfectly happy drinking wiskey of the same quaility without the sucker price-tag.
So who's the smart one now, Mr. ?

[Wave]

Here's a nice little experiment to see the difference of the popularity between Talisker and Speyburn.
Go to "search" at the top of this page and type in Talisker and click on "search", then type in Speyburn and do the same.


Cheers!

[Deactivated Member]

It's very simple - if you want a peppery Talisker - you have to pay the asking price. If you want a grassy/malty Speyburn, you have to pay the asking price. Nobody forces you to go for one or the other - it's your choice. By the same token if Inver House want your money, they have to pitch a product at your price range that catches your eye.

There's nothing deceptive in this. You can see as well as anyone else what the products are and how much they cost.