Whisky Investment Guide: Top Tips for Whisky Investors May 19, 2019 12:00
Investing in whisky has become big business in the last few years. Rare bottlings of scotch from the likes of Macallan, Ardbeg, Bowmore and Lagavulin, Bourbons such as venerable bottles of Old Crow and Japan’s Suntory and Karuizawa, can now fetch prices as high as any First Growth Bordeaux.
Once a market for the avid collector and the connoisseur, demand for high-end whisky – as for high-end wine – has morphed from being simply about pleasure, to being about serious financial returns too. According to data from the Scotch Whisky Industry Review, whisky returned around 8.2% per annum after inflation between 2009-2018, a rate of return on investment that caught the eye of many an investor in this ultra-low interest rate world in which we live. The market itself has also grown sharply in size, with nearly £10m of investment grade whisky traded in the UK in 2015, up from £7.6m in 2014.
Like any investment, whisky can be risky. Prices can go down as well as up, you need to know which bottles to invest in and you need to be wary of the scammers. Yes, just as they are in wine investment the fraudsters are about in the world of whisky investment too and being wary is always the way to proceed.
To help you navigate this exciting opportunity, here is MWH Wines’ whisky investment guide. In it we’ll give you our top five tips for investing in whisky, give you some suggestions as to producers you may wish to look at and offer some help on buying and storing.
Whisky Investment: A Little History
The rise of whisky as an investment commodity has been sharp recently, but as a category it’s been going for some time. Initially it was casks that people were asked to buy into, taking a share in a young cask and waiting for it to mature and be bottled in a similar way to en-primeur Bordeaux. This method, which remains an option, has its disadvantages, namely:
- You are forced into a long-term investment as whisky takes years – and can sometimes take decades – before bottling
- You are tied to one distiller
- If you decide you want to drink your investment, you may have a wait on your hands
Conversely, buying bottled whisky brings the following advantages:
- You are buying something with a critical provenance – leading critics will have tasted commercial releases and these can boost values as they do with wine
- There’s often a proven track record to specialist bottlings - purchasers of the latest release of Macallan Gran Reserva can look to the performance of previous bottlings
- As the market grows and distilleries have got wise to the opportunities that small, exclusive bottlings bring, so you can now buy releases that are created as collector’s items which, by extension are, investment opportunities
- You can spread your risk by buying various bottlings from various distilleries. The world of whisky investment used to be about scotch, but as buyers in the Far East have become more dominant, so Japanese whiskies have also become collector’s items. Even U.S. distilleries, long regarded as being mass producers for the mainstream market, have taken off
Whisky Investment: Top Tips for Top Returns
The market is relatively young – it’s certainly a youngster compared to the mature fine wine market – and as such it’s worth taking advice before taking the plunge. To help here’s our top tips for whisky investment:
Tip 1: Buy the best you can afford – just like investing in wine, if you want to make a decent return you’ll need to buy whiskies that have a cachet about them – in short, the finest and the rarest. Let’s take an example from both worlds.
If you bought Talbot 2005 en-primeur you’d have paid around £540 per case including VAT and today you could sell for it around £900. A £360 return on investment, very good. If, however, you had bought Lafite 2005 at £6000 a case you’d now be looking at a return of £3000 a case.
Similarly, if you had bought a Bells Wade Christmas Decanter in 2010 you would now be looking at having made about £20. If, however, you were one of the savvy (lucky!) ones who bought Balvenie’s Tun 1401 Batch 1 when it was released at £150 a bottle you’d now be looking at a return of £2850 a bottle.
Tip 2: Buy wisely – all whiskies are not made the same and their investment potential is by no means universal. The feeling in the trade at the moment seems to be that there are the superstars and the rest. The superstars include names such as Macallan (especially their late release, special wood finish and decanter editions), Lagavulin, Bowmore, Glenfiddich, Glenfarclas and Dalmore. These distilleries are all premier league performers and if you can grab one of these releases early then you can do well.
Tip 3: Look for sleeping giants – for all its growth as a sector, there are some famous named distilleries that have been taken out of production over the last few decades. Once proud names like Rosebank, Dallas Dhu, the electrifyingly peaty Port Ellen and Banff have closed or are ‘sleeping’ as they say. Small runs and commemorative bottles of these are highly sought after by collectors and investors alike.
Tip 4: Small is beautiful – nothing appeals to the Far Eastern market – and especially Japan – like small productions. Look out for limited releases – the smaller the better – and also those batch releases that exhibit unusual characteristics – different wood finishes, prolonged aging, cask strengths and vintage statements.
Tip 5: Be careful who you buy from – as with wine, the arrival of high prices and a surge in demand, the growth in the whisky market has brought in the fakers. While no one of the likes of Rudy Kurniawan has been found in the whisky market (yet!) fakes are becoming more common and more daring. The East Kilbride-based Scottish Universities Environmental Research Centre’s tests found last year that over 30% of the rare whiskies they tested were fake. A glass of the world’s most expensive whisky – a Macallan 1878 – served up to a Chinese customer for a cool £7,600 a glass was also found to be a forgery. Our advice is buy from reputable merchants with solid reputations, and if something looks too good to be true; it probably is.
How to Store your Liquid Gold Assets
Whisky is easier to cellar than wine: the high level of alcohol sees off most things and oxidation is less of an issue. It does need to be carefully stored though and it should ideally:
- Be stored standing up – the cork shouldn’t be in contact with the contents
- Be kept in the dark – light can damage the colour and the aromatics
- Be kept at below room temperature – to avoid evaporation
One of the really important things is to keep it pristine. Collectors and investors alike will want to see perfect, age-appropriate labels, unbroken seals and original packaging. I remember a friend of mine telling me once how a Courvoisier Erte Number 1 – a £2,500 collectable cognac – was refused by a Japanese customer because the plastic outer for the cardboard box was missing. Such is the world of the collector.
Whisky Investment: Take the Long View
Given the size of the market and the rate at which its growing, it’s probably fair to say that it is unlikely that amazing returns like those of the Balvenie’s Tun 1401 Batch 1 will come around again. The distilleries are too canny, collectors and investors are too tuned into the market and any releases that are made will be pricey and snapped-up quickly. That’s not to say that money can’t be made. To use the wine parallel again; when Petrus 2005 was released at around £18,000 a case the world gave a collective gasp. Those who took the plunge must now be rather pleased, given the same case is now around £36,000.
No, there is money to be made but you need to take a pragmatic and long-term approach. Buy now, wait 5-10 years and then go to market. Like wine these things are made to be drunk and drunk they are, shrinking the supply and forcing prices up.
Like Some More Help?
If you would like some help finding fine and rare whisky, then please get in touch. You can call us on 0118 984 4654 or email us and we’ll be more than happy to help guide you.