Thirty years ago, a distillery died. Now its scotch sells for £1,500 a bottle
The Scottish industry is booming as whisky becomes the drink of aspiration for the world's middle classes
Port Ellen on the island of Islay, just off Scotland's west coast, would seem an unlikely twin for a village in Burgundy or the Loire. The latter are likely to have considerable wealth based on their ancient vineyards, while the former is a rugged – albeit beautiful – fishing village with a couple of pubs, a few shops and an Indian restaurant.
However, a common trait now links these places: both lend their names to extraordinarily expensive drinks. Wines from Gevrey-Chambertin or Pouilly-sur-Loire can sell for eye-watering prices; now Port Ellen is to join this elite club of beverage makers. The drinks conglomerate Diageo will this week release 2,950 bottles of Port Ellen whisky – at £1,500 a bottle. Within days, many will be offered on eBay at twice that price – not bad for a whisky that sold for £30 two decades ago. "Port Ellen's price has soared for a straightforward reason," says Diageo's Nick Morgan. "We don't make it any more. Its scarcity is the driver."
And that is the extraordinary aspect of the Port Ellen story. Its distillery was closed in 1983 because demand for whisky was plummeting. Today the industry is struggling to meet demand. New distilleries are being built, warehouses expanded and imports of barley – whisky's prime ingredient – have soared. Scottish whisky's fortunes have been transformed, with considerable political ramifications. The story of Port Ellen, therefore, has key implications.
In the late 1950s, regulations controlling whisky manufacture were changed and distilleries made big improvements in output, creating a glut in a market then dominated by the US and Britain. Sales peaked and companies cut production. Distilleries – including Port Ellen – were closed and their great gleaming copper stills sold for scrap. The Port Ellen decision has since been scrutinised, because its whisky was one of Islay's most distinctive single malts with a deep smoky taste derived from the peat used to dry its barley. "Port Ellen was then used entirely to make blended whisky and it was thought that our other distilleries – at Lagavulin and Caol Ila – would simply take up the slack," adds Morgan.
Since then there has been an extraordinary transformation in the fortunes of whisky makers. "It has become the drink of aspiration for the spreading middle classes of China, Latin America, Taiwan and other nations," said Campbell Evans of the Scottish Whisky Association. A bottle of Johnnie Walker, the world's biggest selling whisky, or another similar blend on a sideboard has become a symbol of success in many homes around the world. "The point is that Scottish whisky is made to very rigorous manufacturing standards. When you buy a bottle, you know it will be good and it will be just as good as the last bottle you bought," adds Evans.
The fact that whisky is becoming the number one choice of the planet's swelling middle classes is good news for Scotland, of course. Over the past decade, whisky exports have almost doubled, creating a market that was worth £4.3bn to the Treasury last year. On top of that, the Treasury made £800m from duty on whisky sales inside Britain. "Today whisky accounts for 25% of the UK's entire food and drink overseas market," says Evans.
And that has crucial implications for control of the industry and its staggering dividends, which could switch dramatically depending on the outcome of Scotland's independence vote next year. Manufacturers and distillers refuse to comment on any issues they might have about an independent Scotland's treatment of their industry, though Evans was at pains to stress the importance that the EU – whose future relations with an independent Scotland remain unresolved – plays in negotiating protective tariffs for Scottish whisky around the world. "To put it simply, we need EU protection," he said.
By contrast, concerns over next week's Port Ellen sale are of a slightly lower order. Collectors merely have to work out if a bottle is really worth £1,500, while Diageo has to contemplate how to price next year's release. "We are down to our last few casks," says Morgan. "In a decade or so, it might all be gone. Future pricing is going to be very tricky."
KNOW YOUR MALT
Whisky can only be called Scottish or scotch if produced at a distillery in Scotland and matured in oak casks in a Scottish warehouse. Most scotch is made from malted barley and each distillery's whisky is known as a single malt. Key whisky-making regions are Speyside, with typically sweet, smooth whiskies like Glenlivet; and Islay, whose whiskies are more smoky, such as Lagavulin. However, most whiskies sold are mixtures of many different single malts to which cheaper grain whisky, made from wheat or rye, is added. These are known as blended whiskies. Until recently, virtually all whisky sold was blended, such as Johnnie Walker, but there has been a significant growth in single malts in recent years.