Why do some whiskies cost hundreds of dollars a bottle, while you can get others for $20-30?

While the offhand, simplistic answer may be “quality”, the question deserves a more detailed explanation. The answer can be attributed to a variety of causes, which can be grouped as production costs, product quality, and of course, marketing.

Another thing to consider is that the definitions of “expensive” vs. “cheap” vary based on whether we are talking about Single Malt Scotch, Blended Scotches, Bourbons, Irish Whiskies or other types of grain alcohol.

Let’s review a few different ranges to make things clearer.

Jack Daniels on Side

Expensive vs. Cheap Whisky – Price Ranges

The concept of what is “expensive”, and what is considered cheap, varies tremendously by the types of whiskies being considered. The section below summarizes some broad price ranges to level set expectations for the readers.

Single Malts

Even cheap single malts (“starter” brands such as Glenlivet 12 YO, Speyburn 10 YO and Ardmore Traditional Cask) tend to be in the $30-$50 range. Better quality (see definition below) single malt whisky (Oban 14 YO, Highland Park 18 YO, Glenlivet 18 YO etc.) can hover between $60 to $100. The luxury levels (such as Glenfiddich 50 YO, Macallan 25 YO, Highland Park 40 YO etc.) frequently cost $200, $300 or even more, depending on various factors.

Bourbons

There are two broad categories of bourbons: (a) Mass-Market, such as Jim Beam, and (b) Premium (Small Batch or Single-Barrel), such as Woodford Reserve. Cheap, Mass-Market Bourbons can be bought below $25, while Premium Bourbons retail for $30-65. Very expensive ones, such as George C. Stagg, can exceed $100. Ben Nevis has a 31-year-old brand that costs around $275.

Blended Scotches

Cheap blended Scotches, ones frequently found in the well at bars (such as Johnny Walker Red Label, Dewars White Label and Cutty Sark) can be bought below $25. Mid-price ranges between $30-40 (Chivas Regal 12, Johnnie Walker Black), while the more expensive ones (Chivas Regal 18 YO, Johnnie Walker Gold and Platinum) cost between $50 and $100. A few luxury blends (such as Johnnie Walker Blue Label or Chivas Regal 25 YO) can cost over $100.

Irish Whiskeys

Cheap Irish Whiskeys can be bought below $30, the more middle of the road brands (e.g. Black Bush) are in the $30-40 range, premium brands such as Bushmills Single Malt 10 YO exceed $50. Finally, luxury brands such as Bushmills 1608, 21 YO can exceed $100.

Ryes, Tennessee, Canadian and Other Whiskies

Most of these whiskies are known for being cheap and on the harsh side – and are frequently mixed with sodas or other flavored mixers to tone down the flavor. Cheap ones can frequently be bought under $25. Even expensive brands do not cost much – the term “expensive” usually means they cost over $30. A few luxury brands, esp. of Canadian whisky, can cost above $50.

Focus of Discussion on Cost of Whisky

For our discussion, we will focus on mostly Single Malt Scotch and Bourbon, since the essential discussion of what makes a whisky “expensive” or “cheap” can be captured through the microcosm of these two types of whiskies.

The discussion will focus on three broad segments: Cost of Production and Marketing; Quality of Ingredients and Brand Marketing. There will be multiple sub-headers under each segment.

A. Cost of Production

While the cost of production may be correlated to quality, that may or may not always be the case. Below are some examples of things that may cause costs to be higher.

1. Costlier Malt, Other Grains, Water and Yeast

Distillers for premium whiskies, especially premium Single Malt Scotch, may use costlier types of malt barley, pricier water and types of yeasts – which raise the basic cost of ingredients.

2. Type of Stills and Distillation Process

In general, copper pot stills used in producing Single Malt need to be taken down and scrubbed out after batches of production and the distillation process lasts longer. This by definition adds cost. In addition, while continuous production stills operate more efficiently for Bourbons, there is the matter of how to get the cleanest “cuts” (fewer impurities in the foreshot and tails, discussed below). Continuous stills have multiple layers of plates that need to be maintained and cleaned within the fractioning column, and there are still significant costs that can be added due to the care taken during the distillation process and how clean the cut is.

3. Filtration and Other Finishing Process

A premium Scotch may add other steps, including high-quality filters and/or worm tubs to further refine the taste and take out impurities and sulfurous residues (and odors). These add cost to the process.

4. Longer Aging Process

The longer the whisky sits in a barrel, the costlier it is to bring to the market, since the distillate is not available for sale for a number of years. This cost is especially large for really premium Single Malt, where the barrel aging process may last well over the standard 10-12 years – 21-, 25- or 30+ years are not uncommon. With Bourbon, while the aging is much shorter, better quality “straight” Bourbons can be aged for longer than the two-year minimum limit.

5. Alcohol Content – Angel’s Share

Malt whisky is made from unhoped beer. Every 100 gallons of beer that is distilled produces 5 gallons of Ethanol. After everything else is completed and the aging starts, a certain portion of the alcohol evaporates every year – this is called the “Angel’s Share”. The longer the aging, the more evaporation and the less total volume of Single Malt Scotch remaining in the barrel. This raises the cost and therefore the price of a well-aged whisky.

6. Taxes

In any country, taxes play a major part in how costly the product is. In the UK, for example, there is a Value Added Tax charged at the end of every year whisky aged in a barrel. The longer the aging, the more the accumulated cost of the final product.

 

Mix of Scotch Whisky

Product Quality

Besides the pure cost considerations, there are genuine variations in quality and taste that can be produced by different processes. This means that premium whiskies do not just cost more, they taste better to the drinker. So good quality is an indicator and driver of price.

1. Better Quality Malt, Water, Yeasts, Peats

While the ingredients may or may not directly contribute to taste or mouthfeel, a premium product from a well-known distillery will buy the right ingredients to ensure that their product quality is maintained through thousands of batches being produced. Consumers pay for that taste and consistency.

2. More Experienced Distiller

Directly correlated to the above is the reputation that master distillers have crafted for themselves in the market. People pay higher for some premium Scotches and Bourbons because they have created a unique taste and their distillers have been known to produce good batches over the decades.

3. Proper Cut – not too much “Head” or “Tail”

This is a big-ticket item from a number of perspectives. The art of taking the right, prime cut – leaving out the impurities in the foreshots or “heads” and the “tail”, means that you may be collecting a lower volume of distillate, but it will be better distilled, free of impurities and noxious odors, and have the right flavor and mixture of tastes. That’s what premium whiskies achieve and one of the main reasons they cost more.

4. Better Quality Barrels, Longer Ageing

There are many qualities of barrels, including the type of wood (e.g. American vs. European Oak), age of barrels (new or once used barrels vs. older barrels) and the use on the first fill barrels (e.g. for Scotch, it could be bourbon-, sherry-, port- or other types of barrels). The “life” left in the wood after charring and toasting is critical to the final taste. Better quality barrels and longer aging produces unique, recognizable tastes and flavors that people pay more for.

5. Flavor – Angel’s Share

Part of the flavor and the length of aging is that while the angel’s share is being lost, the wood and the distillate interact with one another in progressive stages. An early finish (in terms of aging) will produce a fruitier, grassier product – as often happens with bourbon or cheaper qualities of Single Malt. The longer it ages, the peatier, smokier and subtler flavors and mouthfeel is created in a premium whisky.

6. No coloration or preservatives

Adding cheaper coloration or preservatives, including sugary preservatives, will raise the volume of the final product, making it cheaper to buy. While Single Malt Scotch will also use some caramel water to preserve coloring, the focus is on the alcohol content and the other flavors and tastes that have been produced through the proper distillation and ageing.

7. Better Taste, Flavor and Mouthfeel

Ultimately, premium whiskies have a “smoother” taste to the aficionados, with the right mixture of taste, flavor and mouthfeel. It could be peaty and smoky for a single malt with faint vanilla undertones, or the distinctive taste of a premium Bourbon. But the difference in taste between a bright, slightly tangy Glenlivet 12 YO and a Lagavulin 16 YO is distinctive – which is why people pay $30 for the former and three times as much for the latter.

8. Small Batch

A lot of distilleries produce certain brands in small batches – meaning that the amount of stock for that particular product is lower. Due to this, and various options that can be exercised to instill distinctive flavors to the small-batch output, they are more coveted and therefore command a higher price. It is not unusual to find a product that is marketed at a lower price normally, but at a significantly higher price when a small batch is produced.

Collection of Macallan

Licensed under creative commons – Image courtesy of Javier Lastras 

 

Brand Marketing

Despite all of the points mentioned above, most people in the business would agree that the difference in the price of a whiskey often comes down to brand and product marketing. Single Malt Scotch is now reputed to be – on an average basis – the “best” whisky in the world compared to Bourbon, Rye, and other types, as a result, it tends to command a higher price. Similarly, certain brands have established a superior reputation within the product class of Single Malts, which is why they are more expensive.

An added factor that happens is when a brand or product gets hot, it has been known that the distiller may limit the availability or cut it off for a period of time before they reintroduce it into the market at a higher price. At other times, speculators may buy up stock – this happened with Macallan 15 YO Single Malt Scotch in the 2005-06 period. When such events happen, the price is driven up if the product is valued by the market

The Verdict

The question of how expensive a whisky may be is often settled due to the availability and brand marketing of a particular drink. The consumers will often discern a better taste on a more consistent basis over time – there may well be underlying higher cost drivers to produce the libation, but ultimately it is the flavor, taste, mouthfeel and how the brand is marketed that determines the price level in the long run.