Whiskey Supply’s Future Is Not On The Rocks

By Richard Thomas

Demand for whiskey of all types has been on the rise for years now, driven by increasing interest in old markets and rising demand in the new markets of Eastern Europe, South Asia and East Asia. This long-term surge in demand has seen a revival of interest in long neglected types of whiskey, such as rye, as well as a boom in micro-distilling and small, artisanal whiskey-making. Yet this rising tide has also led to speculation that the increase in worldwide demand for whiskey might put a squeeze on supply, leading to scarcity and increased prices.

The Whiskey Crunch
The logic behind rising demand putting a crimp on the whiskey supply follows a formula adapted straight out of Economics 101: more drinkers chasing the same supply equals scarcity and higher prices. Yet in this instance, the equation is supposedly compounded by the whiskey-making process itself.

Even bottom-shelf whiskey receives at least a few years of aging, while the premium stuff sits in the warehouse for several years or even decades before bottling. The necessity of aging whiskey introduces an unavoidable lag time between a sudden spike in demand and increasing the supply to meet that demand, and in the case of top-shelf whiskey the lag achieves generational proportions.

The notion that the whiskey supply is drying up is more than just a theory, at least in some cases. The revival of rye whiskey, and in particular its popularity inside the cocktail and mixology boom, turned many premium rye labels into a scarce commodity. In Scotland, some scotch-makers report the widening market for their products has or will put the pinch on their more aged whiskeys, and some of the more rarefied bourbon labels have become very hard to find.

On a more personal level, Kurt Maitland, a contributing writer for The Whiskey Reviewer, complains that in recent years he has not been able to find a bottle of Pappy Van Winkle in all of New York for any price. Buffalo Trace, the maker of Pappy Van Winkle, confirmed the scarcity behind Maitland’s complaint, indicating that their 23 Year Old was distilled in 1989, and at that time no one anticipated the substantially increased, modern day demand.

Is Whiskey Headed For The Rocks?
Whether trendy fads, such as rye-based cocktails, or the rising world demand for whiskey matters ultimately boils down to what it does to the choices of the average whiskey-lover. Devotees of rye were no doubt seriously inconvenienced by the disappearance of their favorite premium whiskey from store shelves, but the industry is already catching up. Better still, that demand has led to the introduction of many new labels, including the August release of Knob Creek Rye. All things considered, will premium whiskey really run aground on increased demand?

According to Ludo Ducrocq, the Global Ambassador for Grant’s, the answer is “no” for the most part. “It’s important to understand most Chinese consumers are not interested in a handcrafted small-batch brand made by a farmer,” Ducrocq told The Whiskey Reviewer. “They get plenty of that in China. They want a hugely successful international brand which can guarantee a consistent quality product.” Ducrocq was also quick to point out that factors such as tariffs in India and relatively low income levels (middle class incomes in China start at $10,000 a year) discourage interest in top-shelf whiskey.

Many whiskey-makers emphasize that another limiting factor on the demand for premium whiskey in the emerging markets is the lack of familiarity with whiskey, and also that small producers by and large are not targeting those emerging markets at this time. As Chris Maybin of the artisanal whiskey-maker Compass Box explained, “our sales are more influenced by the level of maturity and level of education of the whisky industry in each market. […] While there is enormous immediate potential for the big brands in places like Singapore, Brazil, China and India, the opportunities for Compass Box will not come for a while.” Grant’s Ducrocq concurred with that sentiment, stating “even if [the top brands] started to struggle with stock, there are still around 100 distilleries left for mature markets.”

Another thing to remember is that just because a whiskey is scarce, it isn’t necessarily more expensive. In the case of Pappy Van Winkle, Buffalo Trace indicated that “rather than driving price up to balance supply and demand, we have opted to strictly allocate product to markets.” In other words, rather than raise their prices, Buffalo Trace introduced rationing. That policy might not help you find a bottle of Pappy Van Winkle or George T. Stagg today, but if you put yourself on a waiting list, you should pay a reasonable price for it tomorrow. Also, blame any inflated prices for these bourbons on the merchant, not the distillery.

The Crunch Is A Long Way Off
While whiskey scarcity is real in some instances, it is not a general phenomenon, and it is not due to demand from emerging markets. Recall that the rye whiskey crunch was due entirely to new interest from some whiskey-lovers and the choices of a legion of bartenders in North America, and not to the thirsts of the Chinese, Russians and Indians.

Describing the scotch industry, Chris Maybin stated “Markets tend to start with the big blended brands, then develop an interest in single malts, and only then, once a thorough knowledge of these two categories is present, do they tend to start looking at micro-distilleries and craft blenders.” As for the future that predicts, many whiskey-makers expect those tastes to change gradually, with plenty of time to expand production to meet it, and that expansion is already under way.

What the rye whiskey crunch or the story of certain premium labels, such as Pappy Van Winkle, reveal is that your top-shelf whiskey choices are safe from the Chinese or Indians, but perhaps not from your neighbor. Also, while your favorite whiskey might become harder to find, it might not necessarily see a price hike, and scarcity is nothing that a little research and advance planning can’t fix.