Growing your money in whiskey bottles, and the pitfalls of doing so

Key Points
  • Asia is not only driving sales of whiskey, but leading a global movement in whiskey investment as well
  • Interests in whiskey investment have led to the set up of funds whose underlying assets are bottles of the distilled liquor
As Asia grows wealthier, its people are taking an interest in drinking and investing in whiskey.
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Asia's massive population and their expanding wallets have made the region a fertile ground for whiskey sales. Along with that came a group of aficionados who saw the potential to grow their wealth by investing in bottles of the distilled liquor.

The principle behind it is simple: buy bottles of rare, limited edition whiskey and sell them at a higher price later on.

Returns can be lucrative. An index tracking the value of the top 1,000 Scotch whisky bottles grew 61 percent between Jan 1, 2013 and Sept 30, 2015, said Matthew Fergusson-Stewart, regional brand ambassador for Glenfiddich, Asia Pacific at William Grant & Sons, citing data from a consultancy called Rare Whisky 101.

During the same period, the FTSE 100 was up 1.5 percent and shares of alcohol group Diageo was up 3 percent, he told CNBC in an interview.

"Whiskey is very, very stable in the bottle if you follow some basic rules to care for it. It can last easily a hundred years," he said.

"If you take a really good bottle, it's produced at a certain time and it's not going to be produced again, you got scarcity of a great product. Value is going to go up and people are going to want to hold that and sell at a later date to make some money from that."

And that movement is taking off in Asia, the region tipped to be the world's wealthiest by 2019.

Asian whiskey enthusiasts have displayed bigger investment appetites than their Western counterparts who are mostly collectors looking to grow an inventory, instead of flipping the liquor for a profit, noted Mike Soldner, founder of B28 Whisky Fund.

B28 is a Singapore-based entity that pools money from individuals to invest in whiskey. The fund turned in a 20 percent gain in its first year and aims to lock in around 15 percent this year, Soldner told CNBC.

"Our pool of investor is still small so if any of our investors want to exit, they have to sell their stakes to remaining investors or they can exit with stock, and in whiskey bottles. Of course with a larger pool we'll probably get to a stage where people can cash out," he said.

China's appetite for whiskey
China's appetite for whiskey

The catch

No gains are guaranteed in any investment and that applies to whiskey as well, said Fergusson-Stewart and Soldner. They said the downsides of whiskey investing are not being discussed enough given the attention on its huge potential gains.

For those keen on getting started, Fergusson-Stewart and Soldner have these tips to offer:

  1. Know your whiskey. There are counterfeit products out there, ranging from genuine bottles refilled with a different type of beverage to fake labels and brands that simply do not exist. Having some knowledge of the industry can help minimize the risk of purchasing something inauthentic.
  2. Storing your bottles the right way. Whiskey can evaporate and the bottles could leak from improper storage, affecting the quality of the liquor and your potential returns. Bottles should be kept upright.
  3. Have an exit plan. There are no monetary returns unless you sell your holdings, but fellow investors and whiskey collectors well-versed with the industry would probably not pay exorbitant prices for your bottles. One could join a whiskey fund or invest in bottles that bars or restaurants would buy.
  4. Love whiskey so that when things go wrong, you'll still have a bottle or two to enjoy at the end of the day. Provided they're the real thing, of course.