Economic toll nips at scotch buyers too


Atlanta Journal-Constitution
Published on: 06/03/08

Eggs and hamburger cost more. Big deal. Seen the price of scotch lately?

Pity the not-so-poor, single-malt, $140-a-bottle, whiskey-swilling connoisseur whose favorite beverage has jumped 25 percent since Christmas. That person has problems.

Frank Niemeir/AJC
Pearson's Wine owner Walter Eisenberg stocks a bottle in the Buckhead store's Scotch whiskey section. As for increasing costs, 'High-end scotch prices are reflective of the economy overall,' Eisenberg says.
 

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"There's no such thing as a cheap vice, now is there?" asks David McDaniel, who tends bar whenever the St. Andrew's Society of Atlanta gathers and offers the occasional high-end scotch.

Actually, all whiskey prices, including bourbon and rye, are going up. More pedestrian, blended scotch brands like Crawford's, which cost less than $15 a bottle six months ago at Pearson's Wine of Atlanta in Buckhead, now top $20.

Scotch can serve as a barometer of the struggling economy's impact on the well-to-do and the strivers keen to join them. Better able to withstand a slowing economy, the scotch-sipping crowd nonetheless shows signs of curtailing consumption.

Whiskey sales at St. Andrew's events, where Scottish descendants gather for fun and fund-raising, have "taken a hit," McDaniel says. The Brick Store Pub in Decatur, which offers 35 varieties of Scotland's finest, reports less scotch-related revenue of late.

The Scotch Whisky Association (the Scots drop the "e" for their whiskey) reports that 121 million bottles of scotch were exported to the United States in 2007, down 5 percent from the previous year.

"We've seen somewhat of a decline in on-premise [scotch] consumption at restaurants, in particular, and bars," says Frank Coleman, spokesman for the Distilled Spirits Council, a national trade association. "When gas prices get so high, people aren't going out for dinner."

Blame the usual suspects for the price rise: a cheap dollar that makes imports more expensive, higher transportation and raw material costs and an upsurge in consumption by China, India and Russia.

Distillers say grain prices — barley and corn — have doubled the past year. Glass for bottles costs more. Even the prices for wood and copper to build the casks to age the whiskies have risen dramatically.

Many countries make whiskey, but whiskey and Scotland are synonymous. Golf, the Loch Ness Monster, Robert Louis Stevenson and those tartan kilts rival scotch in global renown.

Scotch exports worldwide rose to a record $5.5 billion for the United Kingdom in 2007, according to the Whisky Association. The United States, the Scots' best customer, downed $824 million worth of the brown elixir last year — a record. But the overall number of bottles sold in the United States was down, due partly to higher prices.

High-end goes even higher

Many now drink more high-quality, high-priced scotch. So-called super-premium brands, including the single malts with tongue-twisting names like Laphroaig, Lagavulin and Bruichladdich, command an increasing share of the U.S. market. All single-malt sales rose 7 percent last year, according to the Distilled Spirits Council.

"Prices for single-cask, single-malts — the most expensive end of the single-malt business — have gone up about 50 percent over the past year," says Alan Shayne, president of the Scotch Malt Whisky Society of America, a membership club with 8,000 single-malt fans in the United States and Canada.

At the Brick Store in Decatur, single-malts (except those aged 16 years or longer) used to cost $7 per glass. Today, a dram of 15-year-old Macallan will run you $9.

"Distillers are raising prices because everything else is going up and they can get away with it — but there's nothing wrong with that," says Walter Eisenberg, the owner of Pearson's. "High-end scotch prices are reflective of the economy overall."

Eisenberg, Shayne and Coleman say Americans' embrace of expensive scotch is no different than their penchant for pricey SUVs, $5 Starbucks coffee or $300 Coach purses. A wealthier clientele, less-restrictive state laws regulating alcohol sales, slicker marketing and a certain cachet attributed to smoky, peaty whiskies all contributed to the run-up in sales. Chivas Regal, Johnnie Walker and Dewar's, for example, have introduced super-premium whiskies the past few years to tap the upscale market.

U.S. tipplers increasingly compete with foreign scotch enthusiasts for the limited flow of liquid coming from Scotland's 42 distilleries. Non-U.S. exports from the U.K. rose to $4.7 billion in sales last year, the Whisky Association reports. Not surprisingly, sales to burgeoning India (up 36 percent last year) and China (up eight-fold the past decade) zoomed.

"The general public is not that informed about whiskey, but Chinese nationals look out for high-end products," says Qiang Li, a Shanghai lawyer and Lagavulin drinker who spoke one recent morning via cellphone. "And many people have traveled or studied abroad or work for multinational companies so they've developed [whiskey] drinking habits."

Fancy whiskey for fancy places

The Chinese trade press reports that cheaper, blended and better-known brands like Ballantine's,

Cutty Sark and the Famous Grouse sell well in China. It's not uncommon for the Chinese to mix Johnnie Walker with green tea. Cognac, though, remains the import of choice. And baijiu, the fiery and widely quaffed local spirit, remains the most popular drink. It is 15 times cheaper than whiskey.

But China and India are set to further reduce import tariffs, which will lead to cheaper whiskey prices, increased sales, less supply for U.S. drinkers and, ultimately, higher prices worldwide.

And only then will America's taste for the sublime single-malts dull, right?

"I don't know," Brick Store co-owner Michael Gallagher says. "People in fancy places still want a fancy whiskey."

Adds Pearson's Eisenberg, "Thank God we're Buckhead."

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