What’s next for whisky investment?

Andy Simpson runs Whisky Highland and has the most advanced research in whisky trends. Dominic Roskrow spoke to him…

What are the trends affecting whisky prices in 2012, and is this good for collectors?
What I’m seeing at the moment is a broad increase in values across all ‘collectable’ single malt Scotch. There is, however, an interesting polarisation emerging. The most sought-after bottles from the most desirable distilleries are increasing rapidly, while the less desirable bottles are further decreasing in value; a sort of rich get richer and poor get poorer effect. This is largely brought about by an increase in the number of investors entering the market. New investors are – and rightly so – sticking to well-known rarities from the best performing distilleries. We’re seeing rapid increases in value for the likes of Macallan, Dalmore, Brora, Port Ellen, Glenfiddich and Balvenie. On the flip-side of the coin, some examples of decreasing values are being seen, and many lower-value bottles from the likes of Imperial and Lochside. Given time, I’d expect to see the value of these bottles reach a natural floor then start to gradually increase. I’m also seeing increases in value for what I term defensive bottles; iconic relatively high-value bottles where prices have remained broadly constant and the risk of losses are minimal. This includes bottles such as the Black Bowmores and the 1965/66 Springbank Local Barley. The main risk this year is if distillers start to charge what is perceived as too much in the market for their bottles. Successful bottlings such as the annual Port Ellen releases will always leave some ‘value add’ for the collector/investor. If this year’s Port Ellen release were to be released (in similar quantities as last year’s) at £500-£600 it would have a serious effect on increases in the secondary (auction) market.

How important is taste to a collectable whisky? Could a whisky package really become collectable if the bottle was full of cold tea?
The quality of the spirit is critical to the success of the bottle as an investment. There’s a reason why the best-performing distilleries remain highly sought after – they produce some of the best-quality spirit. There are exceptions to every rule and this is no different. Loch Dhu Black Whisky originally retailed for around £18 a bottle and now sells for £90 – £140 at auction. It is the only bottle of whisky I have ever poured down the sink! Rarity also plays a part; even the worst-tasting bottles from Port Ellen will ultimately increase in value. From a personal perspective, I never buy anything unless I’d love to drink it. Today’s investment for someone could well be opened and consumed in five to 10 or 20 years.

What are the trends to look for in the future? I’m thinking styles, regions, countries, ages…
Heavily peated whisky from the icons of Islay will always be sought after. There are an ever growing number of ‘peat heads’ (I’m one too!) who ensure demand is always high for good releases from the likes of Lagavulin, Laphroaig, Bowmore and Ardbeg (although some Ardbeg values have re-traced over the last three to six months). As ex-sherry casks have become increasingly expensive stocks are in high demand. A good example is Macallan. Their ‘Fine Oak’ series is broadly not desirable from an investors perspective, however the wholly sherry matured spirit is in even greater demand than ever. From a perspective of the regions, it’s more about choosing the right distillery than saying bottles from, say, Speyside are worth more than bottles from, say, Campbeltown. There are iconic distilleries in each of the whisky regions. I pay no heed whatsoever to them – it’s all about the right bottle from the right distillery. I’m also keeping a watchful eye on certain Japanese whiskies. There seems to be some early indication of good gains, particularly with single cask releases from Karuizawa.

Do you think Diamond Jubilee bottles will dominate?
Simply, no. The Diageo special bottling released for £100,000 doesn’t represent an investment, nor is it meant to. It’s a great idea to raise money for charity. In my opinion we won’t see any increases in value for that particular bottle. While I’m not seeing a huge inflow of limited bottles released for the Diamond Jubilee, I’m sure if Macallan released something similar to their Royal Marriage bottle of last year it would perform well.

What do you tell people who ask you whether whisky’s a good investment?
It’s like any investment. Unless you understand the market, the risk for disaster is as real as with stocks and shares. My rules for investing in Scotch are: 1: Love whisky! If the market crashes at least you’ll enjoy what you have. 2: Patience is key. I always advise a period of investment from 10 – 20 years. When I buy bottles I always look to its potential in 20 years’ time. Short-term gains should be viewed as a bonus. Short-term traders are almost akin to ‘day traders’ in the equities markets. Big risks, potentially big gains… and losses! 3: Never invest what you can’t afford to lose. This is the key for any investment.

Any pitfalls or potential dogs on the horizon?
The new issues are exclusivity and forgery. Some whiskies may seem to be good investments,
but might be better off opened and enjoyed. I’m expecting to see an increase in the volume of fake and forged bottles as whisky becomes more popular and values increase. If you’re at all suspicious of a bottle, check its provenance, speak to an expert or a collector who has a genuine bottle and if still in doubt, simply stay away.

As whisky investment grows, how quickly will the small investor be squeezed out or the market mature to the point that it becomes difficult to find bargains – weeks, months, years?
Very interesting question. I genuinely believe there’ll be constant opportunities. What I do think will happen is that very old whisky (for both new releases and previous bottlings) will see rapid price increases over the next five years. This may well place certain bottles out of the financial reach of many. In terms of the opportunities available, take the new Balvenie Warehouse 24 release ‘The Cooper’. This was a tiny initial release of 300 bottles at a cost
of £65. It will be one of this year’s investment gems. The impending Macallan Easter Elchies release will be an essential bottle for many. If I were a betting man I’d also put odds on seeing another Dalmore distillery exclusive, following the sellout success of their 2011 release. If we look to the medium/long term, when you consider how many distilleries have their bicentenaries in the 2020s (thanks to the 1823 excise act), there’s plenty of scope for releases to keep investors happy well into the future. I already have my name down on a list for a bi-centennial bottling from a distillery established in 1819!

Finally, what would you say to claims that whisky is not an investment opportunity, or that it has peaked, or the bubble is about to burst?
Firstly, I don’t see whisky as a ‘bubble’. Whisky only really started to become a ‘collectable’ in the early 1990s. The timeframe for it being an ‘investment’ is even shorter. It’s by no means a mature market, so it still has plenty of legs. Price volatility is far less of a risk than some other investments, although it can and does happen. Do I see the bubble bursting? No.
Whisky is driven by supply and demand. A catastrophic crash can be likened to the share price of HMV: a 2009 high of £1.50p has now come down to under 0.05p per share. If I put that into perspective with whisky, it would mean you could pick up a Glenfiddich Snow Phoenix from its £125 high for just £4.20, an Ardbeg Kildalton for £12.60 and a Dalmore Aurora for £93.00.

Will that happen?
Not a chance! Not unless there’s a far more fundamental breakdown of the economy
and society in general. Demand for investment-grade whisky is increasing every year. This will continue to drive whisky as an investment. There will be price fluctuations (certainly for some distilleries) and some bottles will outperform others… Just like any other investment, alternative or otherwise.

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One Response to “What’s next for whisky investment?”

  1. David Bennett says:

    Would you recommend purchasing Macallan Sherry Oak 10y/o in bulk as a mid to long term investment?

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