kickert

01-02-2009, 13:57

I have been thinking a lot lately about values in bourbons. I know what I consider to be a good value (Benchmark, Rittenhouse BIB, Weller SR, etc.) but I wanted a more scientific way of calculating things. I keep a pretty detailed set of tasting notes complete with price and ratings so I figured this should be a pretty easy exercise. I found simply dividing rating by cost did not work because it put too much emphasis on having a low cost. There are plenty of great values in the $20-30 range.

Here was my basic assumption: The cheapest bourbon should have the lowest cost and vice versa, the most expensive bourbon should have the highest rating. Any diviation from that would affect the value of a bourbon.

Before we get into the math, let me give you a key to my formulas:

P = Price of bourbon

Ph = Price of highest cost bourbon

Pl = Price of lowest cost bourbon

Pv = Price

R = "Magic" Ratio

Se = Expected Score

Sh = Highest score

Sl = Lowest score

Sa = Actual Score

V = Value rating

Vt = Value Threshold

First we must be able to calculate the expected score for each price. In order to do this, we must come up with a formula that gives the lowest possible score to the lowest cost and the highest possible score to the highest price. Here is the formula I used:

Se = (P-Pl)R+Sl

Basically what the formula above does is assigns the lowest score (Sl) to the lowest cost bourbon. However, in order to make it work correctly, we need to figure out the "Magic" ratio that results in a perfect score (Sh) to the most expensive bourbon. I used the following formula to figure that out:

Sh = (Ph-Pl)R+Sl

That simplifies to this:

R = (Sh-Sl) / (Ph-Pl)

I calculated two ratios. The first was based on my notes where the highest price (Ph) was $100 and the lowest price (Pl) was $8. My highest score (Sh) was 9.75 and my lowest score (Sl) was 5.5. The "personalized ratio" was ~0.0462. I then did an overall rating where I looked at the highest price bourbon commonly available in my area (PVW23 @ $250) and the lowest price (Ten High @ $6). I also figured the highest score would be a perfect 10 and the lowest score on my scale would be a 5. The resulting "overall ratio" was ~0.0205.

Armed with this information, I am able to calculate the value of each bourbon. This is basically the actual score (Sa) dividing by the expected score (Se). This requires the following formula:

V = Sa / ((P-Pl)R+Sl)

When I ran the numbers for all 55 whiskies in my tasting notes, I found the results it returned were very close to my own estimates. In other words, excellent bourbons at all price ranges rose to the top. A decent bourbon at a cheap price was deemed to be a better value than a good bourbon at an average price.

When using my "personal ratio" here is my top 10 list:

WL Weller 12

Rittenhouse Rye BIB

Elmer T Lee

Four Roses Small Batch

Very Old Barton 86

Elijah Craig 12

Old Charter 10

Evan Williams 1783 No.10

Eagle Rare 10

Buffalo Trace

When using the "overall ratio" here is my top 10 list:

WL Weller 12

Elmer T Lee

Rittenhouse Rye BIB

Four Roses Small Batch

Eagle Rare 10

Very Old Barton 86

Elijah Craig 12

Van Winkle Family Reserve Lot B

Evan Williams Single Barrel Vintage (98)

Old Charter 10

What I found is that if you can afford more expensive bourbon (i.e. look at the overall ratio) then it is easier to recognize values in the higher price range. If you max out at $30 the values are going to be lower priced. This is easiest to observe by looking at the movement of particular bourbons on my list (outside the top 10 list). In light of the bourbons I can afford, GTS is a decent value, but in light of everything out there it is a pretty good value. Likewise, in light of the bourbons I can afford, Benchmark is a pretty good value, but in light of every bourbon out there, it is only a decent value. So then, a good value is really dependant on how much you are able to spend.

As I was writing this tome on bourbon values, I realized I could calculate the threshold at which a bourbon is a good deal. Basically I wanted to find the price point where a particular bourbon would enter the 75th percentile of bourbon values (top 25%). To do this, I took the same formula as above and set the value threshold (Vt) where a bourbon entered the top 25% and then calculated that value price (Pv). Here is the formula

Vt = Sa / ((Pv-Pl)R+Sl)

When solved for Pv the result is:

Pv = (Sa + Vt*Pl*R – Vt*Sl) / Vt*R

Of course, you could set your threshold at any level you want. Perhaps you think anything in the top 50th percentile is a value, or maybe you are extrememly value conscious and are only interested in what would make something a top 10 value. Looking at my results I found these stats interesting:

Based on my personal ratio value threshold, WL Weller 12 would still be a value at $49 while Woodford Reserve would have to be priced at under $8 to be a value. Pappy VW 20 would have to be under $30 to be a value, but based on my preferences, I would pay $45 for VWFR 12 Lot B and still consider it a value. At the far end of the spectrum, someone would have to include $13 with a bottle of Early Times for it to be a value on my scale!!

This value threshold information would be very useful when trying to figure out how much a person should spend on dusties. For instance, the $20 I spent on OC12 was appropriate, but if I can only find it for $25 it is probably not worth it.

So what do you all think? My wife is convinced I have spent way too much time working all this out, but I think it is well worth it as I can better recognize "value" bourbons. If you are interested, you can see my excel file here: http://spreadsheets.google.com/ccc?key=pEniGQvvhfZb-U_cFBLaoMQ

Here was my basic assumption: The cheapest bourbon should have the lowest cost and vice versa, the most expensive bourbon should have the highest rating. Any diviation from that would affect the value of a bourbon.

Before we get into the math, let me give you a key to my formulas:

P = Price of bourbon

Ph = Price of highest cost bourbon

Pl = Price of lowest cost bourbon

Pv = Price

R = "Magic" Ratio

Se = Expected Score

Sh = Highest score

Sl = Lowest score

Sa = Actual Score

V = Value rating

Vt = Value Threshold

First we must be able to calculate the expected score for each price. In order to do this, we must come up with a formula that gives the lowest possible score to the lowest cost and the highest possible score to the highest price. Here is the formula I used:

Se = (P-Pl)R+Sl

Basically what the formula above does is assigns the lowest score (Sl) to the lowest cost bourbon. However, in order to make it work correctly, we need to figure out the "Magic" ratio that results in a perfect score (Sh) to the most expensive bourbon. I used the following formula to figure that out:

Sh = (Ph-Pl)R+Sl

That simplifies to this:

R = (Sh-Sl) / (Ph-Pl)

I calculated two ratios. The first was based on my notes where the highest price (Ph) was $100 and the lowest price (Pl) was $8. My highest score (Sh) was 9.75 and my lowest score (Sl) was 5.5. The "personalized ratio" was ~0.0462. I then did an overall rating where I looked at the highest price bourbon commonly available in my area (PVW23 @ $250) and the lowest price (Ten High @ $6). I also figured the highest score would be a perfect 10 and the lowest score on my scale would be a 5. The resulting "overall ratio" was ~0.0205.

Armed with this information, I am able to calculate the value of each bourbon. This is basically the actual score (Sa) dividing by the expected score (Se). This requires the following formula:

V = Sa / ((P-Pl)R+Sl)

When I ran the numbers for all 55 whiskies in my tasting notes, I found the results it returned were very close to my own estimates. In other words, excellent bourbons at all price ranges rose to the top. A decent bourbon at a cheap price was deemed to be a better value than a good bourbon at an average price.

When using my "personal ratio" here is my top 10 list:

WL Weller 12

Rittenhouse Rye BIB

Elmer T Lee

Four Roses Small Batch

Very Old Barton 86

Elijah Craig 12

Old Charter 10

Evan Williams 1783 No.10

Eagle Rare 10

Buffalo Trace

When using the "overall ratio" here is my top 10 list:

WL Weller 12

Elmer T Lee

Rittenhouse Rye BIB

Four Roses Small Batch

Eagle Rare 10

Very Old Barton 86

Elijah Craig 12

Van Winkle Family Reserve Lot B

Evan Williams Single Barrel Vintage (98)

Old Charter 10

What I found is that if you can afford more expensive bourbon (i.e. look at the overall ratio) then it is easier to recognize values in the higher price range. If you max out at $30 the values are going to be lower priced. This is easiest to observe by looking at the movement of particular bourbons on my list (outside the top 10 list). In light of the bourbons I can afford, GTS is a decent value, but in light of everything out there it is a pretty good value. Likewise, in light of the bourbons I can afford, Benchmark is a pretty good value, but in light of every bourbon out there, it is only a decent value. So then, a good value is really dependant on how much you are able to spend.

As I was writing this tome on bourbon values, I realized I could calculate the threshold at which a bourbon is a good deal. Basically I wanted to find the price point where a particular bourbon would enter the 75th percentile of bourbon values (top 25%). To do this, I took the same formula as above and set the value threshold (Vt) where a bourbon entered the top 25% and then calculated that value price (Pv). Here is the formula

Vt = Sa / ((Pv-Pl)R+Sl)

When solved for Pv the result is:

Pv = (Sa + Vt*Pl*R – Vt*Sl) / Vt*R

Of course, you could set your threshold at any level you want. Perhaps you think anything in the top 50th percentile is a value, or maybe you are extrememly value conscious and are only interested in what would make something a top 10 value. Looking at my results I found these stats interesting:

Based on my personal ratio value threshold, WL Weller 12 would still be a value at $49 while Woodford Reserve would have to be priced at under $8 to be a value. Pappy VW 20 would have to be under $30 to be a value, but based on my preferences, I would pay $45 for VWFR 12 Lot B and still consider it a value. At the far end of the spectrum, someone would have to include $13 with a bottle of Early Times for it to be a value on my scale!!

This value threshold information would be very useful when trying to figure out how much a person should spend on dusties. For instance, the $20 I spent on OC12 was appropriate, but if I can only find it for $25 it is probably not worth it.

So what do you all think? My wife is convinced I have spent way too much time working all this out, but I think it is well worth it as I can better recognize "value" bourbons. If you are interested, you can see my excel file here: http://spreadsheets.google.com/ccc?key=pEniGQvvhfZb-U_cFBLaoMQ