The Cable News Giant Started A New Whisky Shortage Scare With Just One Story, But How Accurate Was It?
By Richard Thomas
On Wednesday I was catching up with my whiskey news feed, whereupon I discovered a torrent of articles about a new Scotch shortage. As I sifted through the pile, I found that the overwhelming majority of the articles (like this one, this one, and this one) referred back to last Friday’s report from CNNMoney’s Sophia Yan, which stated “whisky lovers are draining the world’s supply of old single malt Scotch.”
Stories like this are old hat to observers of the world whiskey scene, so much so that The Whiskey Reviewer has been testing the veracity of these tales for four years now, harking back to our early blogging days. The problem with so many of these shortage stories is that they use a very narrow base of sources, and often amount to little more than yellow journalist clickbait. Sadly, Yan’s story was no exception.
Is There A Shortage?
The textbook definition of a shortage is an imbalance created when demand exceeds supply. That word imbalance is important, and often forgotten by plenty of people who ought to know better, because it comes into play when the mechanisms for coping with a shortage, such as price increases, fail. Minor shortages happen all the time in all manner of goods and services, but often go unremarked upon because moderate adjustments cope and restore equilibrium.
A shortage becomes a crisis, and a crisis is exactly what these scare stories strongly imply, when you can’t get what you want except at extreme prices, assuming you can get it at all. The 1970s energy crisis with its ubiquitous gas lines was a shortage crisis. Look around at a premium liquor store and ask yourself if you think the same thing is happening to whiskey.
The question then becomes not whether demand for Scotch whisky has exceeded supply, although it certainly has to a degree. Instead, it becomes whether normal market mechanisms are adjusting and coping, which they most certainly are. Over the last decade, I’ve seen the prices on my favorite, regularly purchased single malts rise only slightly higher than the rate of inflation, and I can always buy these whiskies on demand. That is the market coping, and a sign that it is coping well.
The only Scotch whiskies that are routinely hard to get are hot limited releases or rare, discontinued or old expressions, and this is so precisely because both are only available in very finite numbers. The truth is that unless your idea of a go-to single malt is James Bond’s 50 year old Macallan, you’ve got nothing to worry about.
This Is What Happens When You Consult A Speculator
A common flaw with whiskey shortage articles is their reliance on a narrow base of sources, sometimes just one source. Many scaremongering bourbon shortage stories, for example, rely solely on Buffalo Trace’s annual press release on their continuing supply difficulties for particular brands as a source, and then tack on a headline implying there isn’t a drop of bourbon available anywhere in America.
Where Sophia Yan went wrong is in relying on whisky speculators as sources, thereby producing a necessarily and severely slanted article. If you ask to Rickesh Kishani and Stephen Nothman, both CEOs of Hong Kong-based whisky investment firms, and David Wainwright, who advises on investing in wine and spirits, if there is a severe whisky shortage, as Yan did, of course they will say yes. These people make their profits in speculation on pricey bottles of Scotch and other whiskeys, and talk of a shortage helps drive prices up.
If she had consulted more widely, Yan might instead have learned one or more of the following:
- Aside from speculators, Yan’s only other source is former Macallan Brand Ambassador Charlie Whitfield (Whitfield now works on another brand owned by the parent company, Edrington). The Macallan’s shift to NAS whiskies was predominately for their European market, while keeping their classic age statement single malts still available in the U.S., the world’s largest and most lucrative whiskey market. This is a sales strategy, shifting aged stock to where it can drive the most growth in a move I’ve taken to calling “robbing Peter to get more from Paul later.”
- Using data available to the public via the Scotch Whisky Association, a number of bloggers and whiskey writers, such as Diving For Pearls, have done good statistical work showing the long term picture for aged Scotch whisky is not as generally dire as is sometimes supposed (especially by those in the whisky auction sector). Expansion choices made a decade ago are now having an impact and will continue to do so, so once again, it’s only those billionaires who think of Scotch laid down when Harold Macmillan was hanging his hat at No. 10 Downing Street as a “go-to” whisky who should worry.
- After years of (eerily similar) predictions that the Chinese would drink all of the world’s whisky, sales there slumped as Beijing tightened its belt and cracked down on luxury imports. Johnnie Walker owner Diageo bet heavily on sales to China, and canceled or postponed several whisky expansion projects as a result. Dire prognostications of this type have proved very, very wrong, and only in the recent past to boot.
- The general trend in the Scotch whisky trade right now is that of flattening sales growth except in the ultra-rare bottles that speculators like Kishani and Nothman are snapping up and hoping to profit from.
While reading Yan’s CNNMoney article, I couldn’t help but reflect on what many business reporters like her were doing in the years before the housing bubble burst, causing the global financial crisis. Remember those stories circa 2006 about how the sky was the limit on housing prices, and we were in a “new economy” of endless growth? Those were fluff pieces penned by business reporters, credulously repeating what interested parties in the real estate and finance sectors told them.
It’s an all-too-familiar scenario, as is scaring the bejesus out of people to sell newspapers. That is why, in all likelihood, you’ll never see the headline “Whiskey Shortage Overblown” on CNN, and if you did, you absolutely wouldn’t see it repeated ad nauseam all over the mainstream media.