How to Invest in Whisky

The whisky market is currently seeing growth at an unparalleled level. Overall, the market has grown by 732% since 2013 and the number of bottles sold for over £10,000 has increased by 1,295% over the past five years. Whisky enjoying such major investment and interest has now made it the most profitable investment product, beating out wine, gold and London property. For savvy first-time investors, the whisky industry offers a chance for major gains, but does hoarding whisky for money-making purposes hurt its spirit?

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What Makes Whisky Collectable?

There are a number of reasons whisky is so respected and so readily collected the world over. These include:

- Its stability as a product, as it doesn’t change over time like wine

- Its place in Scottish history as an iconic heritage product

- The maturation stage means every product represents years of work and development

- The varying characteristics between each batch, cask, region, maturation method which make each whisky different

Whisky collections can be made up of each year from a specific distillery, each regional type, a bottle from every distillery. For this reason, personal value can drive up costs in some specific cases, but as a general rule, highly investable whiskies are rarer, older or broadly recognised for their quality.

Limited edition whiskies can also make for good collectable and can be effective investments since the number of bottles available is limited, helping to raise scarcity. However, the risk with limited edition bottles is that their value may only be based on their novelty rather than the quality of the whisky which could mean returns aren’t as fruitful as other bottles.

graph of the average whisky bottle value

Whiskies make for strong, long-lasting collectables because of their stability. For example, a 12-year-old bottle kept sealed for 100 years will still be 12 years old as they no longer age once they’ve been bottled. In comparison, wine alters over time, meaning a top-quality product one year can become completely undesirable the next. Collectors and investors purchase whiskies distilled for a certain flavour and keep them for their rarity, assured that the flavour won’t change as long it goes untouched.

There are four key reasons whisky is able to increase its value over time. Overall, the most significant is rarity. Andy Simpson, director of famed whisky brokerage Rare Whisky 101, claims that whisky is experiencing a perfect storm of heightened demand with reduced supply which influences most of the decisions investors make when expanding their portfolio.

Below is a look at these four qualities in closer depth to better understand why whisky is so treasured.

How Does Whisky Go Up in Value?

Rarity 

Each batch of whisky is likely to taste slightly different to the last, meaning that once a specific batch is gone, it’ll be near impossible to find a whisky that tastes just the same. Distilleries known for their quality are able to influence the market by trickling releases of batches to limit numbers available for consumers. Additionally, limited edition whiskies become more valuable as time goes on because of scarcity, which means bagging a bottle from a limited release could seriously help improve your earnings.


Distillery 

Especially important for first-time investors, whisky from iconic, well-known distilleries like Glenfiddich and Macallan are typically the best whiskies to invest in due to their reliability. Although, bottles from silent distilleries – distilleries which no longer operate – can only grow in value due to perceived endangered status. Many silent distilleries have been staggering releases of long-kept casks to capitalise on their rarity.


Collectability 

Whisky is still made to be drunk and for those enthusiasts who would rather swill it that store it, collectability is an important part of whisky investment. Not to mention, owning a full series of whiskies in a collection increases their worth exponentially.


Age 

Although whisky doesn’t age once it’s been bottled, maturing whisky for longer is almost certain to increase its value. Investing in cask whisky allows you to choose whiskies that will be matured for longer, meaning you could hold on for higher returns if you’re interested in playing the long game.

macallan 12 year old macallan 18 year old

[The difference in price between a 12-year-old Macallan and an 18-year-old Macallan]

Brand, blend, region and wood cask all have an impact on the value of whisky so the dedicated investor will need to understand how each of these factors is experimented with by distilleries around the world to find the best, most reliable deals.

Whisky Value Statistics

Whisky enjoys a special place in the world economy, making up 4% of global spirit sales by weight but three times as much by value. No whisky has such a powerful hold as Scotch whisky worldwide.

What follows are statistics which show that Scotch whisky dominates the market:

- The UK’s £35bn trade deficit would be around 11% wider without the contribution of whisky

- Whisky returns more than 40% in 3 years, doubles in value at 8 years and triples in value after 12 years

- Since the financial crash, barrelled whisky has never returned less than 60% when sold after 6 years

- 2018 saw the first bottle sold at auction for over 1 million – a Macallan 1926 60-year-old unique hand-painted bottle.

- 4 of 5 of the most expensive bottles ever sold at auction were Macallan.

You can purchase a Scottish castle for less than the Macallan 1926.

- The average bottle price in 2017 was £299, growing to an average of £377 in 2018 – a 26% increase.

Which Whiskies Are Most Valuable?

As previously mentioned, the more iconic distilleries offer the best returns for investors due to their reliability. According to the Rare Whisky 101 investment reports from 2017, the most heavily traded brand was Macallan, with 11.39% of the total market share. Rare Whisky 101 also placed Macallan at the top of the Investor’s Rankings 2017.

In the 2018 Investment Report, Bowmore took the top spot in the Investor’s Rankings but Macallan keeps the major market share with 13.85% at the end of 2018. Additionally, the most expensive bottle sold in 2017 was a Dalmore at £95,000 whereas, in 2018, the most expensive bottle was the Macallan 1926 at more than £1 million.

Silent distillery Brora also reached a high point in the Investor Rankings last year, showing how scarcity can dramatically influence the investment value of a bottle.

volume market share table of whiskies

How Does Whisky Compare to Wine?

In comparison with whisky, the most expensive bottle of wine sold at auction was a 1945 Burgundy sold last year for £424,000. This is considered to be the world’s finest Burgundy and yet it was unable to even come close to the bottle of Macallan. Additionally, Sotheby’s Wine Market Report states that the average bottle price last year was £165, still drastically lower than the average bottle price for whisky.

At auction, bottle prices for Burgundy and Bordeaux appreciated by 65% and 63% respectively, making the average bottle price in 2018 for Burgundy £1342 and for Bordeaux £635. However, the price of an 18-year-old Macallan increased by 142% from 2015 to 2016, making it a better investment than first-growth Bordeaux and Macallan’s £ value market share increased by 33.19% last year, meaning its growth is consistently reaching higher.

Which is Best for Investment?

In addition to holding the record for the most expensive single bottle sold, the Macallan distillery dominates the whisky market to such an extent that investing in their product is a highly safe bet. Even when removing the high-priced bottles from last year, their % £ value market share went up by over 20% and they have held a high point on the Rare Whisky 101 investor rankings since the report’s inception in 2014.

Macallan took the top spot from Brora on the investor rankings in 2017 but a late dip in value brought it down to position 4 for 2018. However, this is the lowest position the distillery has held since 2014. Brora remains in the top 3 despite having closed in 1983. Brora and Port Ellen, both highly regarded silent distilleries, are set for revival by next year which could see interest increase over the next few years but could also lead to depreciation due to reduced scarcity once the products are matured.

whisky investor ranking tables

The bottles from these distilleries may reach high prices at auction due to their scarcity but they are also renowned for their quality, so reviving them may not harm their reputation too much. The original copper stills at the Brora site are to be renovated and the owners assure they have detailed drawings of the originals at Port Ellen. These distilleries will also be producing much less whisky than they did previously, helping lend exclusivity and bespoke quality to whatever enters the market in over 12 years’ time.

For those more comfortable investing in shares, drinks giant Diageo is behind the revival of both Brora and Port Ellen. Their shares are up around 27% since 2017 and 65% over the past five years, which suggests a reliable return is likely in the future.

 

Should We Trade Whisky Like Gold?

While investors the world over turn their eyes towards whisky, there are those die-hard enthusiasts who believe that the growing interest is damaging the ‘soul’ of whisky. But is this the case? Rare Whisky 101’s report from 2017 notes that, of those who are involved in the whisky market, 43% claimed to be collectors, 33% connoisseurs and only 24% investors. 41% also stated that they were looking to make a financial gain but it wasn’t their main reason for collecting whisky. This suggests that, although money is an important presence in whisky, those who collect it and sell it are mostly whisky lovers themselves.

Additionally, with a larger audience, whisky fans have a wider community to involve themselves in and more involvement from brands in the marketing of rare and special whiskies could help combat the presence of fakes. On the other hand, more interest from investors and ever-increasing prices could increase the distribution of fakes which could disproportionately affect smaller investors.

Ultimately, whisky is made to be drunk and making it an investment item is likely to remove the number of bottles in circulation for consumption and continue to make declining bottle numbers more inaccessible by the majority of whisky lovers. Smaller, independent distilleries may also find it difficult to break through in amongst the whisky giants and create marketable limited editions.

Investing in whisky, like investing in anything, is a tricky game but unlike most other investment items, whisky enthusiasts can still end up with a product of exceptional quality for themselves if everything goes south. For this reason, whisky’s soul can be kept alive by investors who still love to drink whisky as well as trade it.

What is a Whisky Flipper?

The title of whisky flipper is reserved for those who buy whisky purely to sell it on, mainly focusing on limited edition releases they are confident will see an instant price hike on whisky auction sites. The intention of flippers is to increase the price immediately to make a quick profit rather than those collectors/investors who buy whisky to keep for a long time until rarity makes them more valuable.

Much in the same way as third-party gig ticket sellers, whisky flippers flood the initial purchasing market and then place the bottles on auction sites before they’ve even been despatched. This means that whisky enthusiasts looking to develop their collection or simply those who want to taste these extra special releases are left at the mercy of wildly inflated auction prices.

Of course, this is an issue for whisky lovers as the likelihood of them securing a rare bottle is much lower once flippers get involved but this could also negatively affect investors in the long run. Investors who are forced to pay inflated initial prices at auction may see reduced returns on resale for highly-regarded releases. To combat this, those who are serious about whisky might want to consider investing in cask whisky for a stake in the product before bottles can reach the hands of flippers.

How to Get Started in Whisky Investment

1. Research the business

To truly understand the market and keep your investments secure, it’ll help to know as much about the world of whisky as possible. Research Scotch, American, Irish and Japanese whiskies, how each region produces its whisky and what buyers are most interested in from each.

2. Plan how you want to invest

Once you understand the industry, you’ll have to weigh up the choice between casks vs. bottles. This might be a personal preference, as bottle investment means you can also build a personal collection of whisky to enjoy if you decide not to resell or the market behaves unexpectedly. On the other hand, cask investment can be a useful money-making strategy as you are able to estimate the return you can get on the cask through predictions when you first enter into the investment scheme.

3. Be aware of special editions

Special editions are more likely to reach higher resale prices due to their limited availability. However, it’s still important to take care and choose good-quality whiskies rather than opting for limited editions which are just standard whiskies with a new label.

4. Understand that you’re buying a product to hold not consume

The key to whisky investment is knowing that its purpose is to be drunk. For this reason, it’s best to like whisky just in case things don’t turn out and you’re left with the product to drink.

5. Stick to ‘iconic’ distilleries

Those new to investment might want to start with these distilleries:

- Macallan

- Ardbeg

- Dalmore

- Glenfiddich

- Balvenie

- Lagavulin

Silent distilleries to consider include:

- Port Ellen

- Brora

- Rosebank

- St Magdalene

- Glenugie

- Dallas Dhu

Further Reading

Tables are taken from the Rare Whisky 101 2018 report: https://www.rarewhisky101.com
More information on cask investment: https://www.whiskyinvestdirect.com/


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