A few months ago, Suntory announced that they were discontinuing their extremely popular Hibiki 17 yr whiskey line. Considering that their aged Hibiki whiskeys are in high demand and have won a string of accolades including Gold Awards at the International Spirits Challenge or the title of World’s Best Blended Whiskey at the World Whiskies Award, this move seems incredibly odd. In today’s episode, we look into the reasons behind this decision, as well as how a certain financial product, known as futures contracts, could have helped to mitigate it.

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This episode will cover the following topics:

  • The constraints that whiskey producers face
  • What circumstances led to the discontinuation decision
  • Why Suntory faces a whiskey shortage today
  • The brief mechanics of a futures contract
  • How futures contracts can benefit whiskey producers
  • The main hurdle preventing a Hibiki futures market
  • How Suntory eventually faced their time-related problems

Post-show thoughts:

For those of you who are more familiar with the world of finance, this episode’s description of futures contracts can feel somewhat bare. Truthfully speaking, this was done for the sake of brevity and also to prevent too much confusion on a complicated matter. Of course, when you look into the technical details of futures contracts, there are many more things to consider. These include futures vs. forwards, OTC vs. electronic exchanges, minimum tick movements, deposit margins, counterparty risk, and so on. However, given the nature of the episode and what futures contracts are trying to address, the content was hopefully sufficient. If you are keen on a full breakdown on the instrument, here is an excellent course from MIT OpenCourseWare:

Also, although the topic might appear self-contained, there are some far reaching implications that span across many decades and continents. In an increasingly globalized world, this ripple-effect should not be too surprising. Yet, because of the peculiar circumstances surrounding the case, what you’ll find is a company that is caught in the transition from local to global. A superimposition somewhat, of past and present economic conditions.The eventual direction that Suntory takes however, is in light of this episode, pretty ironic. Talk about a twist ending.

P.S. How was that Bill Murray impression?

 

Sources:

Case Study: Japan – The Bubble Economy and the Lost Decade

Hibiki 17 year-old discontinued

Suntory to discontinue Hibiki 17 and Hakushu 12

Japan whiskey drought offers bitter aftertaste of retreat by corporate Japan

New Hibiki Whisky To Launch, Following Suntory Discontinuations

Warren Buffet on derivatives

Bill Murray “Suntory time” scene

History of the futures market

Definition of Futures Contracts

Music:

[Podington Bears – Pulsars]

[Blue dot sessions – willow belle]

[Podington Bears – Lope and Shimmer]

[Blue dot sessions – Valantis]

[Blue dot sessions – Even dreams of beaches]

[Blue dot sessions – Lanky]

 

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