Published on August 9th, 2014 | by Tom Wake1
How to invest in whisky for profit
Article by Derek Kemp
Happiness is a rare steak, a bottle of whisky, and a dog to eat the rare steak.
Recently I was in the Clynelish distillery in Brora, Caithness (waaaaay up in the far north of Scotland, an hour’s drive beyond Inverness).
While I was there I got chatting to a whisky enthusiast and investor. He firmly believed, like I do, that whisky can be a safer investment than gold – and that’s what I want to talk about in today’s Insider’s Edge.
Now talk of gold is particularly relevant here, because the very river that provides water for the Clynelish single malt whisky is itself panned for gold.
(That’s what gives Johnny Walker Gold Label its name, because the largest part of that particular blend is composed of Clynelish whisky).
Why now is such a good time to invest in whisky
Simply put, there’s a growing market for whisky.
(Note I’m spelling it ‘whisky’ and not ‘whiskey’, because any whisky made in Scotland is spelt without the ‘e’; whiskey made anywhere else in the world, is spelt with the ‘e’)
Why? Because there’s a huge shortage of aged whisky and lots of people looking to collect it.
This is demand on a global scale.
Distillers didn’t foresee this kind of demand many decades ago, and so neglected to hold back a large amount of aged whisky – and that’s just one of the reasons they’re so valuable.
Another reason is that some smaller distilleries come and go, but the demand for the whisky they produced remains.
The Clynelish distillery was built on the site of an earlier mothballed distillery simply known as Brora. There’s still a small amount of Brora single malt whisky left, dating from the time when the Brora distillery was still running.
Every few years a limited amount of Brora single malt bottles are released and the value of them rocket exponentially.
How to invest in whisky for long term profit
The simplest way to start investing in whisky is to buy new, limited-edition releases as soon as they come out (more details on this in a moment).
If you’re partial to single malt, buy two bottles: one to drink and one to save. Remember, older whiskies are increasingly rare, because, ultimately, collectors drink them!
For older releases, scour the specialist auctions:
1) Scotch Whisky Auctions should be your first port of call
2) Also try the less specialist auction houses such as Bonhams, where you’ll find bottles in various price ranges.
Which are the best whiskies to invest in?
There’s a whole gamut of different constant releases from every distillery in Scotland.
You’ll find different ages, different blends of different ages, whisky aged in bourbon casks, whisky aged in sherry casks, whisky aged in bourbon and then sherry casks, different strengths… the list goes on.
So how do you know which are the best whiskies to invest in?
Let’s start with what to avoid.
Here’s what NOT to buy…
Any whisky with a standard age on it – 10, 12, 15, or 18-year-old expressions (‘expression’ is the term for a specific bottled release).
These bottles only increase in value in very rare circumstances (just drink them instead).
Here’s what you should be buying…
1. Newly released limited editions and collectors’ editions
Tun 1401 was a limited edition release from a distillery in Speyside called The Balvenie just a few years ago. It retailed for £150 per bottle, and can now be sold for anything up to £2,000 a bottle.
That’s a £1,850 profit per bottle!
Tip: only buy limited editions that are of a run of 10,000 bottles or less.
2. Single-cask bottles
Distilleries also release single-cask bottles, which means there is automatically a finite number of these bottles released – so keep an eye out for them, they can prove very valuable.
3. Any single malt from the 1960s and 1970s
If you’re buying older bottles, any single malt from the 1960s and 1970s will be valuable. This was a time when there were generally fewer releases of single malt whisky). Anything pre–1945 is exceedingly valuable.
Ultimately the earlier you buy, the less money you’ll pay upfront and the greater profit you stand to make as it ages and increases in value.
This is one investment where you’ll be rewarded for patience. The longer you’re able to hold onto your whisky the more it will be worth.
With that said, you can often make a relatively quick profit on a very good bottle of whisky. Take the Macallan Fine Oak 12 year old.
The first 100 bottles from the distillery cost £35 each, yet within months they were selling for in excess of £100 per bottle!
Why? Simply because being within the first 100 bottles of a release is attractive to collectors.
What to look for in a whisky (and how to store it correctly)
Any expressions that are commemorative, single cask, discontinued lines, limited release, in the first 100, or small-batch are the types of bottling that will attract interest from collectors in the future.
Something else to mention, is that it’s not only distilleries that bottle their own whisky. There are independent bottlers to source from, who are preservers of some of the most rare whiskies from mothballed and current distilleries. Cadenheads is one such independent bottler.
Here are some important things to look for:
– The bottle condition (the label, the top seal, the presentation box)
– Fill levels are also very important when selecting whiskies to invest in: the higher the fill level the better and more desirable the bottle is
When it comes to storage, store your whisky upright (do not lay them down as the cork will be damaged by the strong alcohol content), at a constant room temperature, away from bright light and dampness.
To research which distilleries are most desirable, check out the Whisky Highland Index.
They provide guidance on the top distilleries who have produced collectable bottles, and provide data taken from UK auctions.
The index takes into account four variables:
1) the total value of sold collectable bottles
2) the highest single bottle price for each distillery
3) the average price per collectable bottle and
4) the highest percentage gain in value for collectable bottles.
They then score each distillery out of 100.
Collectable bottles from The Macallan are the best performers (after all, the 50 year old is James Bond’s choice of tipple) with a score of 96.9. This is followed by Port Ellen (90.2), Brora (88.65), Dalmore (88.2), Bowmore (88.15), Ardbeg (88.0), Balvenie (86.6), Glenlivet (84.6), Talisker (84.55) and Mortlach (83.25).
A passion for whisky helps, as does patience: short-term returns aren’t unheard of as we’ve talked about, but this should be seen as a long-term investment of 10 to 20 years.
As with any form of investment, the price of whisky can go down as well as up, but if the worst happens and the bottom falls out of the market, at least you’ll have something wonderful to drink!