People

The price is right?

In this issue we ask some of the industry's luminaries to discuss the sensitive issue of pricing and effect on the public's perceptionof whisky.
Panel
Iain Baxter – Inver House senior brand manager IB
Ronnie Cox – The Glenrothes brand ambassador RC
Ken Grier – Malt Director for the Edrington Group KG
Dominic Roskrow – Whisky Magazine consultant Editor DR
Ian Weir – Head of Marketing for Ian Macleod Distillers IW Q: Can premium malts justify premium price tags,and does the public understand why?KG: I believe that a brand such as The Macallan, for instance, sits well in the luxury goods market. It has a well defined provenance and heritage, is supremely crafted, is iconic in its branding and appeal, is in scarce supply and constantly innovates to add more value for its customers.It all comes down to real substance. Both The Macallan and Highland Park are exquisitely crafted and deliver a taste performance and cachet that far exceeds the norm.The craft commitment and doing things the best way we can, make every bottle of The Macallan and Highland Park not only a miracle but a bargain. A true economic costing of the ingredients, including the heart and soul we put into every bottle would see a price many times what is asked.There are no “bad” whiskies but there is genuinely a disproportionate amount of crafting, extra ingredients costs and a scarcity issue that makes our premium products actually great value.DR: The simple answer to the first part is yes but I think you have to be clear what you mean by 'premium prices'.A proportion of whisky in this bracket falls under the category of 'collectible whisky' and in this area the question is superfluous because here demand and supply economics is at its rawest and the market dictates price. In other words a proportion of whisky customers are defining the price themselves and although this area of the market may be distorted, in the eyes of those consumers the price must be justified or it would fall.For the more mainstream premium whiskies the price can and should be justified. Some of this whisky is matured in top quality oak that has been taken from trees more than 100 years old. There are bodegas in Spain making grapes for sherry specifically to 'season' casks that will make Scotch whisky, and whisky is being made by skilled craftsmen in a labour-intensive industry and then stored and nurtured for years before the limited and finite stock is bottled. Compare that process to what happens to premium vodka, gin, even some wine, and tell me a premium price isn't justifiable. I'll go further: it would be a crime if such effort didn't get its just rewards.RC: Justification implies that there may be some sort of consumer question over the quality/price ratio but today’s market for rare and special items is mainly determined by consumer demand. As the period of Single Malt enlightenment grows (and, for this we must thank the keyboard tappers more than their quill-penned predecessors) so does the knowledge of what is great. What is great by its nature enjoys a higher value than that which is good.IB: I think there’s a number of different ways of looking at what makes a malt ‘premium’, which are related to the different ways that malts can justify their prices to different types of whisky buyer – or not as the case may be.For example, for the collector market, it is by definition rarity that justifies price rather than (necessarily) spirit quality, hence the high price of super-aged whiskies and closed distilleries. And of course, rarity is a very easy concept for the consumer to grasp.For the gifting market, price can be justified as much by the packaging as the whisky. As with rarity, it is easy for any consumer (whether a whisky connoisseur or not) to understand that luxury packaging commands a price premium.However when it comes down to the spirit itself, I’m pretty certain the characteristics that are often used to justify premium pricing (e.g. single cask, natural strength, no chillfiltration or using expensive, unusual casks) belong to the world of the true spirits enthusiast and are not understood by the ‘general’ whisky drinker. These malts are invariably more expensive to make, which of course has an impact on the price retail.However as to whether such things really, on pure taste terms, justify higher pricing I believe that it’s all down to an individual’s palate. In my personal opinion this comes down to the age-old question: is it ‘better’ or just ‘different’, and for many dedicated malt drinkers ‘different’ alone is worth a higher ticket-price.KG: I don’t believe that the public at large fully understands the extraordinary costs and crafting inherent in a bottle of single malts. Their knowledge may come from limited knowledge of our category or indeed lumping all marques together. Whisky as a category demands more cost inherent in its process due to having to be put into high quality oak casks, stored for an inordinate amount of time before it can be sold, coming from terroir that is often far-flung and difficult to get to. Many other spirits are fresh from the still and merely packaged in a fancy bottle at a style premium…there is a huge amount of substance to single malt Scotch whisky that make it the pre-eminent category in international spirits. Above all, we must leverage the power of brands to drive: awareness, cachet and establish a robust view of differential quality for the premium brands.It is in the interests of all of us who truly love Scotch whisky to charge the right price for exceptional quality so that businesses like ourselves can continue to invest in producing whisky at its very best.We have the stories… lets just tell them.IW:Well, I do think the public can understand the pricing. A premium malt is a crafted product that matures for many years before being consumed.If this investment in quality and time is properly conveyed to the customer then I believe they will understand the need for a premium price.Additionally, when I see the premium price that certain vodkas achieve and the length of time in comparison they take to make before consumption I think premium malts are very good value for money.DR:I am not so sure if the genral public really do understand the pricing.If you're reading this then you are not the sort of person I am talking about. You have made the next step to investigate whisky because you want to learn more, or it's your hobby, or you already know a lot and don't want to miss anything. You're a million miles away from the vast majority of people who know virtually nothing about whisky period, let alone the way it's priced.Most people aren't even at base camp with whisky, and most people can be convinced to pay more for something if they perceive it as good value.And here lies whisky's problem. How can you say to a consumer that something is a luxury item and then devalue it by discounting it?Look at Stella Artois: reassuringly expensive at the pub pump, as cheap as chips in the winter sales when sold in drinks warehouses and supermarkets.That's nonsense.What other luxury item would cuts its prices just when demand is at highest before Christmas, when most one-off gifting purchases are made?The customer sees this, spots a great big contradiction, and is put off by higher prices for ever, retreating back to their whiskyless comfort zone.Someone has to get brave and stand up to the supermarkets. In an ideal world there would be a low entry point for a reasonable blended whisky, an affordable one for vatted (blended malts) and an attainable one for aged single malt.And for whisky over 12 years old there should be a ladder of consistent but justifiable prices and all of us should be explaining just why to anyone who wants to listen. In other words, courses for different types of horses.RC: Like in fine wine, not all are blessed with the knowledge of the difference between what is good and what is great, that is, until the next morning.But, as knowledge is gained and confidence rises, experimentation becomes more widespread.Events become more popular where there is inevitably a wide assortment of malt whiskies to be savoured. And, this is important. People who savour malt whisky are the polar opposite to what Aeneas MacDonald called “drinkers for drunkee”.The formulation of thousands of malt whisky clubs around the world are testament to the determination to understand more about the “cratur”. And, while there are always those that continue to have difficult in determining the great from the good, more and more understand the price/value relationship.Product understanding and to a lesser degree rarity value, intellectual snobbery and label-consciousness will all influence, but to continue to underpin this end of the market we need to continue to maintain excellence in quality, above all else. The industry learned a painful lesson a century ago.