Whiskey prices!

Whiskey prices and age of the single malt

I was in a large alcohol supermarket the other day and I was looking at Scotch whisky prices. I could see the same single malt at 18, 21, and 25 years. What struck me was how non-linear the price was. Like any good data scientist, I collected some data and took a closer look. I ended up taking a deeper dive into the whiskey market as you'll read.

(Gemini. Whiskey that's old enough to drink.)

The data and charts

From an online alcohol seller, I collected data on the retail prices of several single malt Scotch whiskies with different ages, being careful to make a like-for-like comparison and obviously comparing the same bottle size (750 ml). This is more difficult than it sounds as there are many varieties, even within the same single malt brand. 

Here are the results. You can interact with this chart through the menu on the right. Yes, 50 year old whiskies do sell for $40,000.

First impressions are that the relationship between price and age is highly non-linear. To see this in more detail, I've redrawn the chart using a log y-axis. 

This presentation suggests an exponential relationship between price and age. To confirm it, I did a simple curve fit and got an exponential fit that's very good.

What's going on with the price curve?

The exponential age-price curve is well-known and has been discussed in the literature [1, 2]. What might make the curve exponential? I find the literature a bit confusing here, so I'll offer some descriptions of the whiskey market and whiskey itself.

First off, by definition, whiskey takes a long time to come to market; by definition a 21 year old Scotch has been in a barrel for 21 years. This means distillers are making predictions about the demand for their product far into the future. A 50 year old whiskey on sale today was put into a barrel when Jaws was a new movie and when Microsoft was formed; do you think they could have made an accurate forecast for 2025 demand back then? Of course, the production process means the the supply is finite and relatively inelastic; you can't quickly make more 50 year old whiskey. 

How whiskey ages adds to the difficulty distillers have with production. Unlike wine, whiskey ages in the barrel  but not in the bottle; an 18 year old single malt bottled in 2019 is the same as an 18 year old single malt bottled in 2025. So once whiskey is bottled, it should be sold as soon as possible to avoid bottle storage costs. This punishes premature bottling; if you over-bottle, you either sell at a reduced price or bear storage costs.

There is a possible exception to whiskey not aging in the bottle known as the Old Bottle Effect (OBE). Expert tasters can taste novel flavors in whiskeys that have spent a long time in the bottle. These tastes are thought to come from oxidation, with oxygen permeating very slowly through the pores in the cork [3]. Generally speaking, oxidation is considered a bad thing for alcoholic drinks, but it seems in the case of whiskey, a little is OK. Viewing the online images of 50 year old whiskey bottles, it looks like they've been bottled recently, so I'm not convinced OBE has any bearing on whiskey prices,

Whiskey is distilled and gets its taste from the barrels, which means that unlike wine, there are no vintage years. Whiskey is unaffected by terroir or the weather; a 21 year old Scotch should taste the same regardless of the year it was bottled, which has a couple of consequences. 

• If you bottle too much whiskey and have to store it instead of selling it, you won't be able to charge a price premium for the bottles you store (over bottling = higher costs). 
• On the analysis side, it's possible to compare the prices of the same whiskey over several years; a 25 year old whiskey in 2019 is the same product as a 25 year old whiskey in 2025.

One notable production price driver is evaporation. Each year, 2-5% of whiskey in barrels is lost due to it, which is the so-called "angel's share".  Let's assume a 4% annual loss from a 200 liter barrel and see what it does to the amount of whiskey we can sell (I've rounded the numbers to the nearest liter).

Year	Whiskey volume
0	200
3	177
10	133
15	108
18	96
21	85
25	72
30	59
40	39
50	26

By law, whiskey has to be matured for 3 years and in reality, the youngest single malts are 10 years old. To get the same revenue as selling the barrel at 10 years, a 50 year old barrel has to be sold for (133/26) or about 5 times the price. That helps explain the increase with age, but not the extent of the increase.

Storage costs obviously vary linearly with age and we can add in the time value of money (which follows the same type of equation as the angel's share). These costs obviously drive up the cost of older whiskey more, but all the production and supply-side factors still don't get us to an exponential price curve.

Before moving to the demand side, I should talk a bit about the phenomena of independent bottlers, also known as cask brokers or cask investment companies. These are companies that buy whiskey in barrels from the distillers and store the barrels. They either bottle the whiskey themselves or sell the barrels, sometime selling barrels back to the original distiller. As far as I can see, they're operating like a kind of futures market. There are several of these companies, the biggest being Gordon & MacPhail who were founded in 1895.  It's not clear to me what effect these companies might have on the supply of single malts.

On the demand side, whiskey has been a boom-and-bust industry.

Up until the late 1970s, there had been a whiskey boom and distilleries had upped production in response. Unfortunately, that led to over-production and the creation of a whiskey 'loch' (by comparison with the wine lake and the butter mountain created by over-production).  By the early 1980s, distilleries were closing and the industry was in a significant downturn. This led to a sharp reduction in production. For us in 2025, it means the supply of older whiskey is very much less than demand. 

More recently, there was a whiskey boom from the early 2000s to the early 2020s. Demand increased substantially but with a fixed supply.  Increased demand + fixed supply = increased price, and as older whiskies are rarer, this suggests that older whiskies appreciate in price more.

It's an anecdotal point, but I seem to remember it was uncommon to see "young" whiskeys less than 18 years old. It's only recently that I've seen lots of 10 year old whiskeys on sale. If this is true, it would be a distillers response to the boom; bottle and sell as much as you can now while demand is high. Bottling whiskies younger will have the side-effect of reducing the supply of older whiskeys.

Of course, the whiskey boom has seen older whiskies become luxury goods. The Veblan effect might be relevant here, this is an observation that when the price of some luxury goods increases, demand increases (the opposite dynamic from "normal" goods). Small additions to a product might drive up the price disproportionately (handbags being a good example), in this case, the small additions would be an increase in the age of the whiskey (say from 40 years to 45 years).

As rare and old whiskies have become more expensive, investors have moved in and bought whiskey not as something to drink, but as something to buy and sell. This has brought more money into the high-end of the market, adding to the price rise.

Let's pull all these strands together. Whiskey seems to be a boom-and-bust industry coupled with long-term production and a fixed supply. Over recent years, there's been a boom in whiskey consumption. Market dynamics suggest that distillers sell now while the market is good, which means bottling earlier, which in turn means fewer older whiskies for the future. Really old whiskies are quite rare because of the industry downturn that occurred decades ago and because of maturation costs. Rareness coupled with wealth and desirability pushes the price up to stratospheric levels for older whiskies. The price-age curve is then a function of supply, distillers bottling decisions, and market demand. That still doesn't get us to the exponential curve, but you can see how we could produce a model to get there.

What about blends, other countries, and science?

If single malt whiskey is becoming unaffordable, what about blends? Like wine, the theory goes that the blender can buy whiskey from different distillers and combine them to produce a superior product. However, like wine, the practice is somewhat different. Blends have been associated with the lower end of the market and I've had some really nasty cheap blended whiskey. At the upper end of the blend market, a 750ml bottle of Johnnie Walker Blue Label retails for about $178, and I've heard it's very good. For comparison, the $178 price tag puts it in the price range of some 18-21 year old whiskies. There are rumors that some lesser-known blends are single malts in all but name, so they might be worth investigating, but at over $150 a bottle, this feels a bit like gambling.

What about whiskey or whisky from other countries? I'm not sure I count bourbon as a Scotch-type whisky, it kind of feels like its own thing - perhaps it's a separate branch of the whisky family. Irish whisky is very good and the market isn't as developed as Scotch, but prices are still high. I've tried Japanese whisky and I didn't like it, maybe the more expensive stuff is better, but it's an expensive risk. I've seen Indian whiskey, but again the price was too high for me to want to try my luck.

What about engineered whisky? Whiskey gets its flavor from wooden barrels and if you know the chemistry, you can in principle make an equivalent product much faster. There are several companies trying to do this and they've been trying for several years. The big publicity about these so-called molecular spirits was around 2019, but they've not dented the Scotch market at all and their products aren't widely available. The whiskey "equivalents" I've seen retail for about $40, making them much cheaper than single malts, however, the reviews are mixed. The price point does mean I'm inclined to take a risk; if I can find a bottle, I'll buy one.

The future

During the whiskey boom, investors created new distilleries and re-opened old ones, which suggests production is likely to increase over the coming years. At the same time, the whiskey boom is slowing down and sales are flattening. Are we headed to another whiskey crash? I kind of doubt it, but I think prices will stabilize or even come down slightly for younger whiskies  (21 years or younger). Older whiskies will still be rare because of the industry slump in the 1980s and they're likely to remain eye-wateringly expensive. 

Of course, I'll be having a glass of single malt in the near future, but I'll try not to bore everyone with whiskey facts!

References

1. Moroz D, Pecchioli B. Should You Invest in an Old Bottle of Whisky or in a Bottle of Old Whisky? A Hedonic Analysis of Vintage Single Malt Scotch Whisky Prices. Journal of Wine Economics. 2019;14(2):145-163. doi:10.1017/jwe.2019.13
2. Page, Ian B. "Why do distilleries produce multiple ages of whisky?." Journal of Wine Economics 14.1 (2019): 26-47.
3. https://hedonism.co.uk/what-obe-old-bottle-effect