Whisky has long been seen as a premium quality item with a rich and diverse heritage. While the perception of the ‘water of life’ hasn’t changed much, more and more high net worth individuals are seeing the varied opportunities to invest in the burgeoning whisky market with considerable results.
Across the world, investors and collectors alike are spending increasing amounts to get their hands on the world’s rarest and best bottles, offering opportunities for savvy spenders thinking about getting involved.
Whisky has a unique status as an investable item because it has much more stable longevity than many other alternative investment items. Unlike cars, wine, and watches, whisky maintains its quality if left unopened. This means that collectors can keep hold of their best bottles for as long as they need to see the best possible returns without concern for the product ageing. With over 150 distilleries active today, Scotch is an ideal collectable item. Whisky enthusiasts can build a collection focused on specific distilleries or particular bottle releases, known as expressions.
This is ideal for investors who can get their hands on more covetable bottles from the collection. Many distilleries also have powerful, well-established reputations, giving the label considerable influence over the value of their expressions. However, not all expressions are collectable and rarity is one of the key attractions for whisky lovers. Limited and special releases typically perform better in second-hand markets as buyers are aware of the scarcity of the product. Distilleries no longer in production still enjoy confident positions in whisky investor rankings because their diminishing stock appreciates in value the longer time goes on.
Whisky Market in 2020
The whisky market is poised for big growth in 2020.
When it comes to whiskey investment in 2021, the lots that are going under the virtual hammer are bottles spanning five decades; the oldest was bottled in 1945, while the most recent was bottled 30 years ago, in 1987. Perhaps the most eye-catching lot to invest in is lot 42, which contains one bottle of The Macallan whisky from every year in 1954-1986. The collection of 33 bottles has been valued at between £57,000 – £72,000.
One of the best whiskey to invest in (and the costliest) is the Macallan Selected Reserve 1946, originally bottled in 1998 as a 52-year-old whisky. Of course, in 2021, this whisky is more than 70 years old and has been valued at £7,800 – £9,800.
Another lot to keep an eye out for when considering investing in whisky is a collection of Macallan Gran Reserva whiskies, one for each year from 1979 to 1982. This collection is expected to fetch between £6,700 and £8,800.
Much like fine wines, old and rare whiskies will often be of particular investment value to collectors. The head of wine and whisky at Bonhams Hong Kong said that they picked The Macallan distillery for this sale because they believe it is the best whiskey investment whiskey. Certain whisky enthusiasts may disagree with the accuracy of that statement, but there’s no doubting that the brand is among the very elite in the world of Scotch whisky.
Whisky Market in 2019
These elements, plus an increase in interest from secondary markets in Asia, have meant that Scotch whisky is enjoying its best period on record. Rare Whisky 101’s 2018 report shows that their Apex 1000 index increased by 30% and that the overall value of collectable bottles went up by 62% in the last year.
Additionally, the average bottle price jumped from £299 to £377 between 2017 and 2018 and the number of bottles sold for over £10,000 rose from 91 in 2017 to 265 in 2018. This suggests that now is the best time to get involved before initial investments climb any higher. The Rare Whisky report 2017 shows that investment isn’t the main reason for second-hand whisky purchases for more than 80% of collectors. People buy whisky because they love drinking it and they’re willing to pay ever-increasing amounts of money for the pleasure. For those who are fans of whisky but more interested in the return on investment, the health of the market makes this the ideal time to start investigating rare and collectable bottles up for grabs.
Whisky Market From 2013 – 2018
The market performed exceptionally last year but this is only one year in a persistent trend over the past five. The Apex 1000 index has appreciated by 162.91% since 2014, outstripping gold by over 150% and the FTSE by over 160%. As the interest in alternative investments continues to build, whisky is unparalleled in its performance.
However, this comes with some challenges, as more investors are throwing their hat in the ring, the average bottle price has gone up by over £100 and the volume of whisky on the second-hand market is up by more than 200% since 2014. Identifying the best bottles and ensuring that the right price is found is vital in this flooded market.
Comparison with Other Investments
Whisky Invest Direct, a company specialising in cask whisky investments, reports that barrelled whisky kept for at least six years has never returned less than 60% and outperforms FTSE shares and London property whether it’s held for three years or 12.
Though wine is typically considered the pinnacle of consumable investments, the performance of the Scotch market says differently. Last year, the average bottle price for wine was £165, a far cry from the £377 paid for whisky. Both wine and whisky saw the world record broken for the highest price paid at auction for a single bottle last year, but whereas the 73-year-old bottle of Burgundy sold for around £430,000, a 60-year-old Macallan fetched £1,000,000. This record has also since been broken in 2019 by a bottle from the same cask which sold for £1.5m.
Though alternative investment assets are generally close to the investor’s interests, the returns that can be found in whisky investment are likely to make this market much more attractive to a more varied audience.
Scotch is by far the most successful type of whisky available in the world. The established reputation of their distillers and its geographical identity as a heritage product of Scotland mean that Scotch is usually the first thing that comes to mind at the mention of ‘whisky’. However, the Japanese market is currently also noting impressive growth. The Japanese Icon 100 Index has seen a 38% increase over the past 12 months and WhiskyStats declared it the best-performing whisky-producing region. Japan out-performed second-place region Campbeltown by 15%.
While there are fewer distilleries with much more humble reputations in Japan, investors are turning their eyes towards the East more frequently as expressions continue to draw international acclaim. The Japanese index is filled with bottles from silent distillery Karuizawa (the best-performing distillery in 2018), Yamazaki (producer of the most expensive Japanese whisky ever sold) and a series of bottles from the Hanyu distillery.
The Hanyu ‘card’ series is particularly interesting as there is said to be only four full sets still in existence. A full 54-bottle set was sold in August this year for a record-breaking £755,000. Though the prices are much lower than Scotch, the influence of Japanese traditions on their whisky expressions makes bottles from these distilleries attractive and unique to whisky enthusiasts.
For new investors, the best bet for safe investments is in well-known distilleries which already have a reputation for investable whisky. The top 10 in the investor rankings for 2018 are: Bowmore • Brora • Springbank • Macallan • Glenugie • Laphroaig • Ben Wyvis • Killyloch • Clynelish • Dalmore
Generally, more limited expressions from the distilleries will do well as collectors know that the whisky is top-quality and that their value is more stable. However, investors looking for more high-risk opportunities might want to consider the trend forecast for the next few years and choose distilleries on the rise or desirable flavour profiles to build their collection.
Glenugie, Laphroaig and Clynelish all saw considerable rises in the table in 2018, rising 12, 22 and 22 places respectively. This shows an interest in more second-tier distilleries which can also be seen in the first half of 2019.
The half-year 2019 report picks the top 10 as: Springbank • Brora • Glenugie • Bowmore • Ben Wyvis • Dalmore • Macallan • Port Ellen • Rosebank • Ardbeg
Though many of the same names feature, this shows quite a dramatic shift halfway through the year. Distilleries on this list aren’t likely to fall too far from favour but, as with all investments, there are clearly some risks in putting faith in the value of the brand alone. Glenugie has shown even more improvement since the end of 2018, rising all the way to third place. Distilleries like Dalmore, Ben Wyvis and Ardbeg could continue this tendency over the next few months, making them optimal targets for investors.
Beyond the Scottish landscape, a number of Japanese distilleries are likely to grow in popularity in the eyes of investors over the next few years. A major discrepancy between demand and supply has meant that popular Japanese expressions have been discontinued to protect stock levels. Whiskies from Yoichi, Yamazaki and Chita have been restricted which could lead to an increase in value for these bottles on the secondary market.
From the Rare Whisky yearly reports, it seems that the behemoth of Macallan could be due a challenger in the near future. As average prices for bottles from the top-tier distilleries continue to skyrocket, many investors or collectors may look to smaller brands available to cater for multiple price points. Because of this, brands like Springbank, Bowmore and Dalmore have taken higher spots on the list in the eyes of investors.
The 2018 report also highlighted the level of uncertainty around Brexit and the UK government in predicting the future of the whisky industry. Though Brexit will certainly remain a spanner in the works, the demand for both casks and bottles is still considerable and isn’t likely to fall too sharply too soon.
Six Top Tips for First-Time Investors
1. Understand flipping
Flipping is the name given to those who buy limited whisky releases with the intention of turning them for a considerable profit shortly after they sell out. As most buyers seek out rare whiskies for the enjoyment of the spirit itself, flippers have a bad reputation in the community in much the same way as ticket scalpers in live music.
It can be frustrating to know that some buyers have managed to secure a bottle of whisky with no regard for the craftsmanship and tradition, but patience is the key to whisky investment so understanding when to buy and when to leave the flippers alone is essential.
2. Be Aware of Fakes
Fake bottles are becoming increasingly prevalent as scammers see the demand for rare bottles rise. The most common fakes are typically Macallan but there have also been increased sightings of fake bottles of Talisker. Keeping track of the industry and seeking a second opinion on particularly rare expressions will be a useful way of keeping investments safe.
3. Store your collection properly
While the quality of unopened whisky generally stays the same for a long time, it’s still important to properly store whisky bottles for peak quality maintenance. For bottles solely bought for investment purposes, the bottle shouldn’t be opened under any circumstances. This will drastically reduce the value. Additionally, bottles should be stored upright to avoid contact between the cork and spirit inside.
4. Knowledge of the Industry
Knowing the industry well is the best way to ensure your investments are well-founded. Doing your research around the performance of notable distilleries, the market in general and which bottles are most desirable is highly advised. For those who love whisky, this probably won’t be too difficult but for those getting involved for investment purposes only, a knowledge of the broader market will not only help you spot opportunities more confidently but keep your investments practical.
5. Make an Investment Plan
There are a number of ways to invest in whisky, including bottles, casks and distillery shares. With each type of investment come different advantages and drawbacks. For those less interested in the spirit, purchasing bottles is a more tangible investment but may take more effort than purchasing shares. Cask investment allows investors more freedom with the spirit to either sell it back to distilleries or bottle their own produce. However, there are added costs for storage and market uncertainty to contend with when investing in a product to be stored for several years.
6. Be Patient
As with all investments, second-hand whisky is all about timing. For those keeping a close eye on the market, keeping track of distillery performance or the latest releases will help identify new opportunities. Being able to predict which distilleries will be popular in the future or the ideal time to shift a rare collectable can make or break an investor.
Investing in Whisky in 2021
No matter your current involvement in whisky, the prospect of such a healthy market popular with investors is highly enticing. Once you’ve figured out how best to spend your money, getting started in the world of whisky is exciting whatever form it takes.