Impact of Declining Demand for Luxury Goods
The auction prices of rare whiskies, which had been soaring to unprecedented heights, have fallen at the steepest rate in a decade. As consumers tighten their wallets amid an economic downturn and demand for luxury goods slows, prices for ultra-premium rare whiskies appearing at auctions are also declining.
According to a report released on the 27th (local time) by Scottish investment bank Noble & Co, which analyzed 8,500 transactions in the auction market including high-end single malt whiskies, the price of Fine & Rare grade single malt whiskies stood at ?27 million (approximately 44.2 billion KRW) as of the end of September this year, down 7% compared to the same month last year. This represents the largest decline since 2012, excluding the COVID-19 pandemic period.
The Fine & Rare grade refers to ultra-premium whiskies sold at over ?1,000 per 700ml bottle. Prices for Fine & Rare grade single malt whiskies rose 19% just last year. Noble & Co analyzed, "Except for the 51% drop during the economic uncertainty at the start of the COVID-19 pandemic in 2020, this is the steepest decline since 2012."
Duncan Macfadyen, head of the food and beverage division at Noble & Co, noted, "Although the ultra-premium single malt whisky 'Macallan 1926' caused a stir by selling for ?2,187,500 at a recent London auction, far exceeding its expected price, overall market trends show that demand itself is decreasing."
The whisky bottle investment trend, which had been popular among the general public due to the high entry barrier of expensive whiskies, has also recently shown signs of sluggishness.
Typically, rare whisky investments have offered high returns and strong price protection, so even in uncertain economic conditions, price declines were limited. Especially during the COVID-19 pandemic, there was a surge in revenge spending on luxury goods, leading to rapid growth.
According to the 'Luxury Investment Index 2022' published by UK market research firm Knight Frank, rare whisky recorded the highest returns among luxury goods over the past decade, with a 428% increase, surpassing cars (164%), wine (137%), and watches (108%).
However, as revenge spending on luxury goods during the COVID-19 pandemic has dispersed and demand for luxury goods has weakened due to the economic downturn, the decline in rare whisky prices has continued.
Diageo, owner of Johnnie Walker, stated that sales are clearly slowing and expects weak profit flows in the second half of this year. According to the Scotch Whisky Association, whisky export value in the first half of this year decreased by 3.6% compared to the same period last year.
A British foreign media outlet pointed out, "The ongoing real estate-driven economic downturn in China, one of the largest luxury consumption markets, has significantly pulled down demand for luxury goods," adding, "The decline in luxury demand is evidence that the asset value of rare whisky is no longer attractive."
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