Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the Macallan on Speyside before moving to The Dalmore in 2006 to head their innovation team. Today, he's putting his knowledge and expertise of the 'liquid gold' to good use as co-founder of U.K.-based The Whisky Trading Company, the first entity of its kind in the world. He spoke recently with FINalternatives' senior reporter Mary Campbell about whisky as an investment.

What makes single-malt whisky a good investment?

This comes down to simple economics where supply is tight and demand high. 

What we have seen over recent years is an explosion in demand for high quality, premium single malt around the world and at the very apex of that category is 'rare and collectable' single malt. In particular, small releases from iconic distilleries who have terrific reputations for quality that has been built up, curated and cherished over many decades.

Additionally, rare whisky, unlike fine wine, is a more stable product—it is distilled and fully matured before bottling and does not evolve in the bottle to the same degree as wine. The whisky creators in Scotland only bottle their whiskies when they feel the time is right and that the right quality has been achieved.

Furthermore, we are now seeing a 'triple' dynamic where the market has matured to now include drinkers, collectors and investors. The collector and investor market is embryonic in comparison to fine wine but savvy buyers have got in early and are seeing very positive movements in value. For example, the UK auction market has grown from around 5,400 bottles in 2008 to a forecast of 30,000 in 2014 with values rising from £1.17M to £6.73 (est.) for 2014. The top 1,000 whiskies at auction have risen from an index start point at 100 in 2008 to just over 300 year to date end June 2014 as measured by Rare Whisky 101, the global experts.


 
What makes a particular bottle of single malt valuable?

A number of key factors come in to play here—quality of the liquid—as most of it will have been or will be consumed. Is it from an iconic distillery? For example: Macallan, Bowmore, Dalmore, Springbank, Mortlach, Talisker, Glenlivet. Is it from a "silent still"? i.e. a distillery that is no longer operating like Port Ellen, Brora or Rosebank. 

Is it from a very limited release—typically below 3,000 bottles. Is it old and rare? For example whiskies distilled before the Second World War are highly sought after. Aged bottlings of 25, 30, 35, 40, 45, 50 and even 64 years of age are highly sought after too. Finally, sentiment—is it a bottle or distillery that has positive momentum that we can acquire at below open market value (OMV) and is rising so the metrics look like this will continue.
 
What is the best way for a retail investor to invest in single malt?

Quite simply, it’s all about research, research and more research. Do your analysis, speak to some experts, track the market at auction and set yourself some clear objectives. Pick the right distilleries, the right bottles and the optimal acquisition price. The explosion in auctions has helped drinkers, collectors and investors access bottles that are hardly ever available at retail. Spread your portfolio across a number of iconic distilleries, ages, vintages.

Be prepared to take a long term view, in our market this is around three to five years.

As of year-to-date 2014, what is the highest price ever paid for a bottle of single malt?

In January 2014, The Macallan M decanter, a 6-litre trophy bottle, was sold for $628,000 in Hong Kong at a charity event. Before then, three bottles of the 64 year-old Dalmore Trinitas were sold, two directly from distillery at £100,000 each and the third through Harrods in London for £120,000. One bottle of The Dalmore 62 year old sold in Singapore in 2012 for $200,000 in the DFS shop at Changi airport. A Bowmore 1957 sold in late 2012 for £100,000 at a charity auction.
 
What whisky would you most like to own and/or drink?

I was lucky enough to work at The Macallan for many years and my favourite ever whisky is The Macallan Gran Reserva 1979, which is absolutely delicious. It originally sold for around £65 per bottle in the late 1990s and now fetches around £1,000 at auction. 

Which is a bigger factor in determining the value of a bottle of whisky: rarity or quality?

Both factors are critical, high quality without rarity is a great drinking acquisition. High rarity without quality just becomes a piece of liquid art. If you can hit the sweet spot of peerless quality and absolute rarity then you have a great opportunity for value appreciation!

However, caveat emptor, buyers beware, like all investments you need to know that not all whiskies are destined to appreciate in value. The worst performing 1,000 bottles since 2008 have lost around 70% of their initial value. As Andy Simpson from RW101 describes, there is very clear "polarization" in the market and you need to know what you are doing.


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