Food & Beverage

‘The bulls remain in firm control’: Why some investors are pouring thousands into rare whisky

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Investment in old, rare and exclusive bottles of whisky is booming, according to analysts.

In the U.K. alone, the value of collectable bottles of Scotch sold at auction broke a record high of £11.18 million ($14.34 million) in the first half of 2017 – a rise of 94 percent from the first half of 2016 – according to a report published Friday.

Whisky brokerage and investment experts at valuation firm Rare Whiskey 101 said that the number of bottles of single malt Scotch whisky sold at auction shot up by almost 50 percent since the first half of the previous year.

"The market is in good health, the bulls remain in firm control. Supply is increasing significantly but increasing demand continues to push prices higher for the right bottles," Andy Simpson, broker and consultant at Rare Whisky 101, told CNBC via email on Friday.

A 50-year-old single malt brand, Macallan, was the most expensive Scotch sold in the first half of the year, selling for £65,210 ($83,656) – up from a previous high for the brand of £17,000 ($21,808) in 2015.

'An almost perfect bull market'

There's more than $700,000 worth of whisky in this room
There's more than $700,000 worth of whisky in this room

"Scotch, and indeed all whisky, investments have traditionally been an investment of passion," Simpson added.

"Collecting bottles from a favorite distillery, or one bottle from every distillery, or birth-year vintages (mine's 1972) are all popular ways of starting a meaningful collection."

Investors could be divided into three categories, he said: collectors focused on building a prized inventory; professional investors ("funds" and "corporates") with bigger buying power; and connoisseurs focused on consumption.

"Traditional collectors, the professional investors and the curious connoisseurs are creating an almost perfect bull market where demand consistently exceeds supply. Some of the most sought after bottles had tiny volumes released globally, so getting hold of them can be a huge challenge, irrespective of one's budget."

Time is money

Time is of essence for whisky investors.

Earlier this week, Rupert Patrick, CEO of the online investing site WhiskyInvestDirect, told CNBC that the value of the commodity is that "it gets better the longer you store it".

"Microchips, butter, you want to use them up quickly, but whisky – a five-year-old is always better than a one-year-old."

Scotch whisky is a steady, long term growth business: Pro
Scotch whisky is a steady, long term growth business: Pro

He compared investing in Scotch whisky to buying gold bullion.

"If you think about a gold bar sitting in a vault, and then switch that image for piles and piles of Scotch whisky sitting in barrels – for 10-15 years sometimes – you've got an asset which is investable to retail investors through very clever technology," he said.

Japanese bottles lead demand

Demand for Japanese brands seemed to be leading the demand trend in the U.K., according to fine wine and spirits merchant BI.

On Thursday, the firm revealed that sales of Japanese whisky climbed by 232 percent since January 2017.

"Japanese whisky is certainly the latest discovery for whisky connoisseurs and the growing popularity is leading to increasing prices for the rarest varieties," Gary Boom, BI's managing director, said in a press note.

Sought-after brands like Yamazaki and Karuizawa led the charge, seeing their bottle prices rise by as much as 30 times.

The sale of a bottle of Karuizawa 1960 for £100,100 ($128,291) in April set a new U.K. and European record, according to Rare Whisky 101.

A strong interest in Japanese whisky for investments: Fund
A strong interest in Japanese whisky for investments: Fund

On Sunday, Whisky Investment Fund CEO Rickesh Kishnani echoed Boom's sentiment.

He said: "Clearly we've seen a rise of Japanese whiskies here in Asia, especially over the past three years, and we see that continuing. Of course the Olympics coming up in 2020, the relatively low yen and continued interest in tourism in Japan has really made for a lot of interest in the single malt whisky business."

Whisky 'a global market'

Rare Whisky 101's Simpson told CNBC that whisky investment went beyond the U.K. market.

"It's really a global market," he said. "We're seeing new rare/old whisky buyers (for drinking, collecting and investing) emerging all over."

He added: "Continental Europe is also home to a huge community of passionate rare whisky enthusiasts – particularly for long discontinued bottles. The U.S. remains a massive market with some of the largest collections being in America."

According to BI's research note, sales of Scotch to Asia grew by 55 percent in the last 12 months; sales of Scotch brands Macallan and Glenfarclass rose by 97 percent and 84 percent respectively in the continent.

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