From Special Report: Investing in Whisky and Champagne - December 2011
Whisky: A palatable alternative investment market
When people talk about the alternative investment market, whisky isn’t the first thing that comes to mind.
Precious metals, art, antiques, wine and even toys are more familiar as viable investments.
In the last 20 years, full sealed bottles of rare whisky have been increasingly sought after by collectors and investors. Like any investment, to make worthwhile gains you have to understand the market inside out; get it right and the returns can be impressive.
If you’d bought the current best performing 250 bottles of whisky in 2008 (at auction in the UK) they would have cost £42,508. In todays’ market they would be worth £94,884, an increase of 123.21 per cent.
If you’d done the same with the top 100 bottles, the increase is 162.96 per cent and the top 10 would have gained by 297.62 per cent, according to the Whisky Hignland index.
As with all investments, the risk of getting it wrong can be catastrophic, and whisky is no exception. The bottom 10 performing bottles of whisky represent a 73.47 per cent loss in value since 2008.
So how do you get it right? Firstly you have to get the right ‘type’ of whisky. Single malt scotch whisky has experienced the best gains in value and is far more sought after than blends or foreign whisk(e)y.
There is a market for very old blended whisky, with bottles from the early 1900s selling for low to mid hundreds of pounds. If you compared that with a bottle of single malt from the same period you’d be into the thousands of pounds for virtually every bottle.
Bottles from certain distilleries are far more sought after than others. Stick to the iconic collectors distilleries including Macallan, Dalmore, Ardbeg, lagavulin, Glenfiddich and Highland Park. Apart from producing spirit of incredible quality, these distilleries actively cater for the collectors and investors market. That’s not to say that other distilleries don’t produce investment grade scotch, however, this is all about minimising risk. Standard releases don’t represent an investment, stick to limited editions, special releases, single casks and commemorative bottles.
Bottles need not cost the earth; good examples of successful Investment Grade Scotch (IGS) released in 2011 are – The Macallan Royal Marriage which cost £150 and now sells for around £500, Ardbeg Feis Ile 2011 which cost £90 and now sells for upwards of £300 and Glenfiddichs’ Benevolent Foundation Reserve which cost a mere £50 and now sells for between £250 and £300.
At the other end of the price scale, The Dalmore broke its own record of £120,000 for the most expensive bottle of whisky ever retailed with its 62-year old ‘Drew Sinclair’ bottle. This is one of twelve individually named bottles originally released in 2002. One of these bottles sold at auction in 2002 for £22,000 (hammer price), another bottle sold in 2005 for £32,000 (bought and drunk in a London hotel), with the most recent bottle selling for £125,000 earlier this year. That represents a 468 per cent increase on the 2002 price.
Certain closed distilleries - known as ‘silent’distilleries - are performing exceptionally well as an investment. Two of the most popular are Port Ellen and Brora. Both these distilleries closed in 1983 so from that date, no more whisky was produced but stocks still exist in casks.
As with anything in short supply and high demand prices are soaring. As an example, every year since 2001, Diageo have released what’s known as the Port Ellen Official Release. The first release consisted of 6,000 bottles which cost approximately £100 each. At auction these now sell for £800-£1000 and at retail, a bottle recently sold for £1,400. The current Port Ellen (11th) release sold out before it hit the shelves at £300 per bottle, it’s already achieving £550 - £600 at auction. It was released just last month.
Virtually all ‘antique’ bottles of Scotch are worth-while investments. Bottles from long-gone distilleries such as Glenfyne, Ardlussa, Benmoreand Grange are now worth many thousands, if not tens of thousands of pounds. Finding one is a problem as there are a handful of bottles in existence from these distilleries.
Antique bottles from distilleries which are still in existence today also command many thousands of pounds. Very early bottles of Macallan, Clynelish (which was re-named Brora before being closed in 1983 and not to be confused with the current Clynelish distillery) and Laphroaig, realise thousands of pounds on the open market.
As with some less well known alternative investments, there can be a concern around disposal of the asset; will you be left with a lot of liquid in a very illiquid market? As an asset, whisky is clearly not as easy to dispose of as say, gold. However, there are a growing number of auctioneers who hold regular whisky sales. While there are the usual fees/commissions involved with selling at auction, acquire the right bottles and the gains can far exceed anycharges involved in disposal.
Unlike wine, whisky needs to be stored upright as the strength of the alcohol can corrode cork stoppers and seals. Over time this can result in evaporation and a vast decrease in value.
The ‘fill level’ of a bottle is crucial when looking at its value. If the fill level of a bottle has reduced through evaporation, the value of the bottle will reduce significantly.
Bottles are best kept at room temperature, out of sunlight and in dry conditions. Collectors and investors will always seek out the finest examples in the best condition; boxes, certificates, leaflets, and other accompanying items should be kept with the bottle.If you keep to these principles then your bottle(s) should outlast you.
In these uncertain economic times, as people seek out different investment vehicles, whisky has prospered and grown as an alternative investment. As with anything speculative there is a real risk, however, with whisky, if the bottom falls out of the market you’ll be able to commiserate in style.
Andy Simpson is founder of Whisky Highland
If you’d bought the current best performing 250 bottles of whisky in 2008 (at auction in the UK) they would have cost £42,508. In todays’ market they would be worth £94,884
The bottom 10 performing bottles of whisky represent a 73.47 per cent loss in value since 2008
Bottles need not cost the earth; good examples of successful Investment Grade Scotch (IGS) released in 2011 are – The Macallan Royal Marriage which cost £150 and now sells for around £500
The Dalmore broke its own record of £120,000 for the most expensive bottle of whisky ever retailed with its 62 year old ‘Drew Sinclair’ bottle. This is one of 12 individually named bottles originally released in 2002