MARKET ANALYSIS

Whisky Market Breadth

24. September 2020 | 1.1K Views | 3 Comments

The prices for collectable whisky keep on rising. But for how many whiskies is this actually true? Is the market driven by just a few rare releases or does every bottle of whisky gain value? The whisky market breadth will give us some answers! 

The great thing about the Whiskystats project is that once we have all the price observations matched to the whiskies in our database, we can apply many well known analysis techniques from traditional financial markets. The methodology we want to take a look at today is the so-called market breadth. The market breadth is often used to evaluate the movements of a market index by checking how many of the underlying assets followed the direction the index indicated.

Market Breadth

The breadth of the whisky market is simply the relative number of whiskies that gained any value. So for example, if we want to calculate the market breadth of the August 2020 round of auctions, we simply count the number of whiskies for which the price in August was higher than the last known market price prior to August. If we divide this figure by the number of whiskies which experienced any price change in August we get the market breadth. In August 2020 the whisky market breadth was 54% meaning that 54% of the whiskies for which we had a price observation prior to August experienced a price increase.

Breadth over Time

We repeat the above calculation for all the rounds of auctions from early 2011 to August 2020. In the below visualization you see the respective monthly market breadth indicated by the grey line in the background. So the last value of the grey line is the 54% from above. To ease visual interpretation we also added the six-month moving average market breadth as the blue line.
Whisky Market Breadth over time Overall it looks like the six month average market breadth tends to stay in the corridor of 50% to 60%. Above 50% means that there were more value gainers than value losers. Even on the monthly basis the breadth tends to stay positive, i.e. above 50%. Only in the second half of 2019 we observed many months of negative breadth. From July to December 2019 the WWI (our major market index) lost 8,5% too.
 
The market breadth reached its peak in February 2015 when 67% of the then traded whiskies gained in value. At the same time, the WWI, which describes the change in value of the 500 historically most traded whiskies each month, gained 3,7%. Beside the very early days in 2011, the market breadth saw its minimum in September 2019 when only 45% of the then traded whiskies gained value. In that round of auctions, the WWI lost 2% likewise.

Total Breadth

Instead of calculating the market breadth on a monthly basis, we can also take a look at (what we call) the total market breadth. This means that for each and every whisky in our database we compare the latest with the first price observation. Note that the first price observation is the first recorded trade on auctions, not the original retail price. In addition, for obvious reasons, we are excluding those bottles which were traded only once. By September 2020 this analysis comprises more than 45 thousand bottles of whisky.
 
In the below visualization you see the distribution of the overall change in value for all included bottles. The lower bound is naturally -100% since a bottle of whisky cannot lose more than that. We cut off the graph at an upper bound of 400%. Of course there are whiskies that gained more value, but the majority (97% of all analyzed bottles) lies within these boundaries.
Distribution of Whisky Price Change Apparently a lot of whiskies have a price change close to zero. This should be of no big surprise since a lot of new releases are entering the market and it takes some time to move the price. Also unsurpisingly we see that the higher the price change, the fewer whiskies that realized that increase. Not every bottle of whisky will double in price just like that.
 
So the whole area below this curve represents the total 100% of analyzed whiskies. The area of positive value gains (above 0%) covers 69% of the total. Hence, the total market breadth is 69% meaning that more than two thirds of all whiskies in our database gained value on the auction market!
 
Beside the total market breadth we can draw more information from this dataset. The average price increase was 70% while the median lies at 25%. This means that half of the whiskies in our database gained more than 25% in value. The difference between the median and the mean indicates that there are some few releases with a extraordinarily high price increase.
 
We already count down the highest value gainers among the scotch whiskies in one of our previous articles. Unsurprisingly the overall highest gaining whiskies come from Japan, with the Hanyu Queen of Clubs toping this list. An initial auction price of 150 Euros and the latest observation coming in at 13.500 Euros equal an incredible 8.900% increase in value!

Found in Shops:
Suntory Yamazaki Distiller's Reserve Japanese Single Malt Whisky
70cl / 43% - A fresh and fruity whisky from Yamazaki, full of red fruit and a touch of sherry cask. It's also got some mizunara (Japanese oak) matured whisky in the mix, which comes through as a complex spicy and almost incense-like note. A well put together and deep dram.
Fair Priced
65 GBP Shop Price at The Whisky Exchange
70 GBP Estimated Market Value

Comments

Board Forums Whisky Market Breadth

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  • #32559
    alan scottalan scott
    Participant

    Interesting article. Most market indices are driven by a small number of high performing stocks.
    You make the point that -“Apparently a lot of whiskies have a price change close to zero. This should be of no big surprise since a lot of new releases are entering the market and it takes some time to move the price”
    It’s actually worse than this as many new entrants to the market fall from their first auction price for 4 or 5 months before regaining an upward trend. Macallan Folio 5 for example was fetching 785 Euros in January 2020. It’s now fetching 568 Euros.
    This is a very common pattern for new releases and I wonder why collectors buy in the first auction. It can’t be to make money so I suppose the reason must be to be the first amongst their friends to own a new release.

    #32610
    WhiskystatsWhiskystats
    Keymaster

    Yes, that initial bottle flipping for ridiculous prices is something we observere very regularly. It is often the case for “hyped” releases like you mentioned the Folio 5, some Highland Parks and so on. Actually when looking at the highest value losers most of them experience exactly that. Prime example is the whole Game of Thrones series. The Lochnagar House Baratheon dropped from over 400 Euros to 30 Euros!

    #32663
    alan scottalan scott
    Participant

    There’s one new release going in auction for £130 at present. It cost £100 retail and can still be bought retail for £100! I won’t mention the name as I own it and I’m very happy to see the price going up.

    • This reply was modified 2 months ago by alan scottalan scott.
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