People often ask me why some spirits charge such a dear price. Peruse the spirits aisle at any fine grocery or liquor store, and you’ll inevitably find that whiskeys, along with certain other spirits such as Cognac, Brandy, and such, command three to five times or more of the price of other spirits such as vodka, rum, and gin. Remember that some brands in the latter categories also charge significantly higher prices, but on the whole, whiskeys and such categorically charge an arm and a leg for even the most mundane brands.

While it’s true that some brands charge a premium for exclusivity – the simple law of supply and demand – it doesn’t explain why some widely sold brands can ask such exorbitant prices. That answer, in a nutshell, is time. The old adage “time is money” is no truer than with whiskey and other aged spirits. Every moment spent maturing is money unavailable for operational expenses, salaries, profits, or dividends. In business, this is called “opportunity cost,” and the longer the maturation of the product, the greater the opportunity cost.

And it’s not just the loss of use of the funds. Over time, money tied up in aging loses value due to inflation. By committing to a long maturation period (the “average” age for Scotch is 12 years), distilleries lose access to those funds at the risk of not having funds for other needs. Storage space requires money, as do maturation casks. And, finally, add the risk of a bad product. Imagine if the product is not good after 12 or more years – and you begin to see why the price of aged spirits can be so high.

At the end of it all comes the exclusivity factor. There are a finite number of bottles available for every batch, which explains why a bottle of The Macallan 25 can sell for as much as $3000. Even a bottle of Johnnie Walker Black, a 12-year-old blended Scotch whisky, can sell for $20-$30 per bottle. The price variation may reflect market forces, but the overall concept is the same. Heck, even a bottle of store-branded Scotch requires a minimum of three years of maturation in Scotland.

So the next time you shop for an aged spirit, remember everything the producer did and, more importantly, what they gave up to bring that bottle to market!