Liquid Gold: Whisky Investments Can Hit the Spot
Fine whisky has been part of Scotland’s heritage for over 500 years, but it is only recently that the investment opportunities for its most famous export have become clear. With global demand for luxury whisky on the rise, putting your money in Scottish single malt could make you some pretty neat returns.
“Over the last 10 to 15 years, the demand for whisky has just increased,” said director of TheWhisky Exchange, Sukhinder Singh.
“My feeling is that the risk in whisky is quite low," he said. "I can just feel the demand globally; even very recently I’m watching prices go wild over the past six months.”
While the US remains the top Scotch whisky importer, with more than $400 million sold there this year, Asia has seen the largest increase. Demand from Singapore rose 64 percent, making it the third largest importer, and in Taiwan demand was up 45 percent.
Whisky writer Jonny McCormick explained global interest to CNBC: “Just in the last couple of years we’ve seen new auctions open up by Bonhams in New York and in Hong Kong, and these sales are extremely popular. We’ve seen nearly 100 percent sales by lot and by value and the American collecting market is extremely lively. The Chinese and Japanese market is very popular."
The Macallan distillery is one of Scotland’s most famous brands, and has become a strong name in whisky investment.
David Cox, director of fine & rare whiskies at the Macallan, told CNBC, “We were one of the early pioneers if you like, in the release and availability of very rare and old whiskies. As we released these onto the market, that, together with the reputation of the Macallan, attracted collectors and connoisseurs around the world.”
Cox also highlighted the increasing importance of less traditional markets.
"Russia has become a very, very important market for us," he said. "There's still many collectors in Europe and certainly North America as well, who are on the lookout for special Macallan bottlings. But as a proportion of the ones that we are releasing these days, certainly we are seeing a higher and higher percentage going to Asia-Pacific and to Russia."
For the potential investor, names like the Macallan are a great bet; a 64-year-old Macallan auctioned last year for charity achieved a world-record price of $460,000. While of course not all bottles are fetching these kinds of prices, Singh says investors have a budget in mind—and enough space to house a collection—then getting into this market is easier than it used to be, and specialist shops and auctions are the places to be.
"It’s much easier now that it was a number of years ago," he said. "As the demand for whisky has increased, more and more specialist whisky shops have cropped up.
"There are a number of auction houses. I remember when I started there was only one, and there was only one auction a year. I think today there are three or four auction houses doing whisky and each of them are having maybe anywhere between three to four sales a year, which is quite a lot."
"A collection of about 120-150 bottles ... is a nice size collection. You’ll have a balance of some really standard stuff, you’ll have some very rare stuff which is quite expensive, but it’s a controllable size."
Cox agreed that modesty was the best policy. “Its like any investment, it can go up and of course it can go down. Start carefully, modestly, research the market and buy on limited number of bottlings. I think they’re the most important things to look for.”
And it seems rarity is a watch-word in this market. “Certainly availability is one thing, so closed distilleries and past bottlings become very popular,” said McCormick.
Singh was also keen on these "lost distilleries"—old producers whose names evoke the rarity and exclusivity for the best investments. “Now a lost distillery is a distillery that closed a number of years ago and will probably never re-open. So let’s say…Brora for example. Brora closed in 1984...And what we find is every year the price just goes up.”
Unlike with wine, there are few established investment vehicles available. Michel Kappen, who founded The Whisky Exchange and who answered viewers' investment questions on CNBC, started an index this year. Kappen is looking to start a fund in 2012.
While watching for rarity and exclusivity improve investors' chances of seeing a profit, experts agree that genuine love of whisky is all important; this isn't just about cold hard cash.
"The way I classify whisky is I think it’s the pinnacle of spirits," said Singh. "It’s the ultimate spirit. People start with gin, vodka, and will evolve onto something slightly more approachable, maybe rum and eventually, they will end up with whisky. People fall in love with whisky, I don’t think there’s any turning back. Because there is so much diversity, there’s so many flavors, basically there is something for everyone."
McCormick was also keen to stress the emotional attachment to the drink. "Most people are collecting rather than cold-hearted investing. People aren’t purely looking at it for profit; it really matters to them where the bottle comes from, and what it means to them personally and to the rest of their collection.
"No two people’s collections are alike," McCormick said. "And people buy for very, very personal reasons. They enjoy the side benefit—the fact that they’re going up and up—and that’s why people are getting more involved in the investment side of it."