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The cost of young Bottlings ?

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The cost of young Bottlings ?

Postby ardbug » Thu Nov 30, 2006 2:58 am

Hi all,

I not sure if its been discussed at all before, but i would like everyones thoughts about these young bottlings that seem all the rage ( but most are great whiskies). The cost of these are strange and seemed to be pointed at the collector not the consumer.

PC5 for example, is around double the price + of the standard laddie, what will it cost when it makes 10 years . I understand that the reduced numbers released increase the cost of bottling etc, but this should be outwayed by the reduced amount of warehouse time/ cost and loss to the angels.

Ardbeg Still Young is another example, it costs more than the standard 10, and was supposed to be a limited release, but is still pretty available even in Australia. Will the cost follow though till it turns 10?

this is just a few examples there are plenty more ie Lagavulin 12 ?

Or is it just the fact that they are all cask strength bottlings ?

Have i just answered my own question just then?

Any thoughts ?
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Postby Deactivated Member » Thu Nov 30, 2006 3:32 am

PC5 (for example) has a high price tag because the Laddie folks figured (quite rightly) that there would be high demand for it. It's market value, or at least their perception of it.

Time and again people get all wound up in "cost of production" and "time in the warehouse" and "the angels' share", etc etc, when discussing pricing policy. These things are virtually irrelevant. In a free-market system products--all products--are priced at what the seller thinks the market will bear. If that happens to be a lot more than the cost of production, they make a nice profit. If it happens to be less than the cost of production, they stop making the product, or go broke.
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Postby ardbug » Thu Nov 30, 2006 4:54 am

I'm all for the distilleries making a profit and and staying around, especially bruichladdich.

What i was trying to voice, was my concern that if the price should continue to rise with the age( extra cost ) if the same profit margin is expected, it will possibly be out of reach of some of the consumers.

They will then have to reduce their profit margin to keep it realistic as it ages. I suppose this is still a good way of getting the most out an investment at a early stage.

Mabey they should hang onto a 1000 bottles then slowly sell them on eBay in 5 years time, at three times the price.

Cheers Ardbug
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Postby Mr Fjeld » Thu Nov 30, 2006 5:05 am

I think only a few distilleries can charge premium money for a young whisky and the very same distilleries are also among the best at playing the "enthusiast tune" - effectively making customers go crazy becaues of the relative rarity of their whiskies due to reopening mothballed distilleries. Bruichladdich and Ardbeg are in that respect more or less unique among the distilleries to do so successfully. Lots of young whisky is sold cheap - especially so to certain markets like the italian.

I don't think young whisky in general will become cheaper - only costlier due to the fact that export to new markets are exploding. Single malt whisky will inevidently become quite expensive in the future. Yes, they may drink blends now but when the markets are cultivated they'll continue drinking single malts.
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Postby Deactivated Member » Thu Nov 30, 2006 5:28 am

ardbug wrote:What i was trying to voice, was my concern that if the price should continue to rise with the age( extra cost ) if the same profit margin is expected, it will possibly be out of reach of some of the consumers.

They will then have to reduce their profit margin to keep it realistic as it ages.


Exactly so! This is called reading the market. PC5 is expensive because you and I and Lawrence and everybody else are excited about it and want to buy it. As years pass, if we all remain excited about it, the price will stay high. If not, it will drop. If interest drops a lot, they'll simply stop bottling it as a single.

The price will rise with age (or not) not because older whisky is inherently more expensive, but because we are willing to pay for it (or not). Any commodity is worth exactly what people are willing to pay, no more, no less.
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Re: The cost of young Bottlings ?

Postby corbuso » Thu Nov 30, 2006 9:47 am

ardbug wrote:Hi all,

Ardbeg Still Young is another example, it costs more than the standard 10, and was supposed to be a limited release, but is still pretty available even in Australia. Will the cost follow though till it turns 10?

this is just a few examples there are plenty more ie Lagavulin 12 ?

Or is it just the fact that they are all cask strength bottlings ?

Have i just answered my own question just then?

Any thoughts ?


You answered partially your own question. Cask strength bottles are more expensive than regular bottlings, since whisky is taxed on the alcool content. But the price they charge is not completely in line with that. The difference should be in the same range as between the laphroaig 10 YO 40% and the 10 YO Cask Strength. Most of the new bottles are "limited" editions and the costs of production (and promotion/marketin) are slightly higher and the casks used are first-fill caks which are more expensive than 2nd or 3rd fill casks. Finally, as mentioned in a few post, why not trying to make some more profit?

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Postby Admiral » Fri Dec 01, 2006 4:14 am

Case in point: Consider the 5yo peated Jura bottled by The Whisky Exchange at 60.1% ABV.

The cost here in Australia was about $170! (To put that in context, Johnnie Walker Black retails for $42; Lagavulin 16yo currenty retails for about $95).

As a 5 year old, and Jura whisky at that, the real cost of the contents would dictate that the price should have been around $50. However, the usual suspects apply:

1. Limited release
2. Cask strength
3. Unique bottling (very heavily peated Jura)

And so the bottler can set a high price and cash in on the anticipated demand.

Cheers,
AD
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Postby Deactivated Member » Fri Dec 01, 2006 1:08 pm

MrTattieHeid wrote:Time and again people get all wound up in "cost of production" and "time in the warehouse" and "the angels' share", etc etc, when discussing pricing policy. These things are virtually irrelevant. In a free-market system products--all products--are priced at what the seller thinks the market will bear. If that happens to be a lot more than the cost of production, they make a nice profit. If it happens to be less than the cost of production, they stop making the product, or go broke.


I agree 100% - although in the whisky industry, you have the added complication of the time lag between the cost of production and the receipt of sales revenue. This means that decisions might be taken on production today in the light of today's sales figures, whereas the whisky being sold today may have been produced in a very different climate. This can lead to old product being sold very cheaply (e.g. old Glenglassaugh can be found at very affordable levels that cannot be yielding a net profit for the manufacturer). The whisky already exists and you have to get what you can for it. But it can also lead to some product being sold at apparently expensive prices, such as these young "premium" whiskies.
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Postby Deactivated Member » Sat Dec 02, 2006 6:32 am

Actually, that sort of thing happens all the time in any business, although the lag time for whisky may well exaggerate the effect. Gidget's Widgets Ltd makes 1,000,000 widgets costing $.05 each; expected markets don't materialize, and widgets are only worth $.03. Yoy lose money selling them at that price, but not as much as you lose if you don't sell them at all.
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