WHISKEY IS FOR DRINKING – Eventually!
Posted March 22, 2012, 3:28 p.m.
WHISKEY IS FOR DRINKING – Eventually!
By Dominic Roskrow
Have you got some cash to invest and are not sure where to put it? Then consider putting it into whisky. Dominic Roskrow, author of ‘The World’s Best Whiskies’ explains why whisky is the best bet if you want to make money
It was the summer of 2006 and we were wandering through a whisky warehouse at the Dalmore Distillery which sits next to the Cromarty Firth in the North East of Scotland. My companion is David Robertson who is responsible for the rarest malts within Whyte & Mackay, the company which owns Dalmore. He’s been a font of knowledge all morning, but now, he says, he has something special to show me.
Deep in the heart of the dank spirit-soaked warehouse he points to a small fenced off area containing a couple of not very impressive storage vessels. ‘See those?’ he says. ‘The whisky in them has had to come out of the cask because it’s getting close to falling under 40% ABV and when that happens it can no longer be called whisky. But there’s enough there for three bottles, and when we bottle it we’re going to sell them for £100,000.’ He pauses. ‘Each.’
David isn’t one for exaggeration or theatricals. I’ve known him for as long as I’ve written about whisky and he’s a pillar of common sense. He has malt whisky running through his veins. His father was a distiller, and he was born at a distillery. He followed his father into the trade and was master distiller at Macallan, one of Scotland’s truly iconic distilleries while still in his early 30s. By the age of 35 he was running Dave Mark & Robbo’s Easy Drinking Whisky Company, and now, still only 42, he’s in the special chair at Dalmore and so if he says the whisky will sell for £100,000 then in all probability it will.
And indeed it does - but it takes another four years to do so.
Fast forward to the autumn of 2010 and the world of whisky is involved in a surreptitious battle between two malt super powers - a sort of whisky version of the USA-USSR space race programme. The prize is the first six figure sale and competing for it are David Robertson’s new charges, Dalmore, and his former employers, Macallan. Macallan has been showing off a malt that aged for more than 60 years in the barrel – ancient by whisky standards – packaged in a very stylish and expensive Lalique vase. The company has held events in cities such as Paris, London, Milan and Moscow and at each has sold a 5cl miniature of the whisky in a Dutch auction to raise money for the charity Water. Thousands of pounds have been raised, and the expectation is that when the Dalmore bottle is auctioned off at Sotheby’s in New York the six figure sum will be a slam dunk.
But The Dalmore isn’t going to be denied. Two weeks before the Sotheby’s auction it announces the sale of two of the three bottles of its super premium malt Trinitas – for £100,000 each. Just as David Robertson predicted. If you’re wondering what happened to the third one – well, it’s about to go to auction, too. If you’re quick you’ll be able to pick it up from Harrods for a cool £120.000.
So game, set and match to Dalmore? Not quite. For just as the Americans responded to being pipped into space by the Soviets by putting the first man on the moon, so Macallan had the last laugh with its super premium whisky. The bottle Sotheby’s sold fetched $600,000 - £375,000, give or take the odd thousand.
So what on earth’s going on? On the one hand we’re told we’re bumping along at the bottom of a very deep economic quarry, but at the same time individual bottles of whisky are selling for the price of a nice four bedroom house. The answer is that Scotch whisky has become the ultimate expression of wealth and ‘bling’ in emerging markets such as Brazil, Russia, India and China and the ultimate investment in many other places. The demand for super premium whiskies, those very fine whiskies which have been aged in the barrel for more than 40 years, far exceeds the supply and has dragged up the price. Admittedly £375,000 and even £100,000 is the exception, but there is now a constant stream of £10,000 bottles entering the market and selling out before they have barely touched the shelves. The most recent example is a 70 year old bottle of The Glenlivet, bottled by Gordon & MacPhail. There are 100 bottles, each costing a weighty £13,000.
Whisky investment has become big business. When the financial crisis hit investors hard they naturally sought alternatives, and with commodities such as art and wine already well mined, old and rare whisky understandably came under scrutiny. It wasn’t found wanting. Not only is rare, irreplaceable and constantly in demand whisky regularly in supply, but little work has been done into the sector, and because it hasn’t had a light shone upon it, there are gems to be discovered. Better still, whisky doesn’t go off (always store it upright!) and so there are no time limits to factor in.
Best of all, some whiskies are rising in price considerably faster than most other commodities. Know what you’re doing with whisky and it can pay you back handsomely; one whisky consultant reckons that a collection of the top 10 bottles would now be worth more than four times what they cost just three years ago.
But as with all these things, you need to know what you’re doing. There are about 100 malt whisky distilleries in Scotland, and about twice that number worldwide. But of these, it’s only worth pursuing a handful if you are looking to make money. There are a number of 'premier cru' distilleries which attract collectors and have proved over the years that they will always command high prices. We have already spoken about The Macallan and Dalmore, but the list also includes Springbank, Laphroaig, Bowmore, Ardbeg, Glenfiddich, Glenlivet, Talisker and Highland Park. Closed and demolished distilleries such as Port Ellen and Rosebank add further choice. But even then, not every bottle will be worth putting your money into.
The world of malt whisky is a complex one. The vast majority of malt whisky is used for making blended whisky, and more than 90 per cent of whisky sold is blended. But the interest in Scotch is driven by single malt whisky. Most distilleries release a range of single malts of different ages and sometimes these are matured in different casks. But a limited amount of whisky targeted for blends finds its way to brokers, and that in turn is bottled and sold by independent companies, often in limited quantities.
To complicate matters further the distilleries may also put out limited edition malts. Dalmore, for instance, has recently released two bottlings -Dalmore Mackenzie and Dalmore Castle Leod - to raise money to preserve property owned by the Clan Mackenzie. Both cost under £100 and both are highly collectable.
But it is a mistake to think that just because a whisky is of limited quantity it will become valuable.
One of the individuals who bought a £100,000 bottle of Trinitas is Sukhinder Singh, who owns The Whisky Exchange in London, one of the world's best retail outlets. He says that care needs to be taken when looking for investable malts. ‘It is a mistake to think that because there are only 250 or 300 bottles of a whisky it will automatically increase in value. The problem is that it may be a rare release today, but there will be another released tomorrow and today's will quickly be forgotten about. There are just so many of these sort of releases coming out at the moment that it is making it tough to make the right call. You need a whisky that is rare and of limited release but also which tastes great. If people taste it and go on the internet saying how nice it is, other people will want to get hold of it, and some of them will drink it, bringing another round of favourable reviews. Every time somebody opens a bottle there is one less bottle available and the value rises further.’
This is borne out by the fact that Singh has a private list of collectors across the world that have expressed an interest in particular rare whiskies. Some of the names on his list are former world leaders and celebrities, and for the right bottle they will pretty much pay anything. If you have certain Bowmores from the '60s, for instance, you can pretty much write your own cheque.
The advice to anybody looking to invest in whisky is to seek advice from an expert or spend a considerable period of time tracking prices at auction. One such expert is Andy Simpson, who runs a company called Whisky Highland. He has been tracking malt prices at auction and through private sales for years, and can instantly advise on what the best and worst performers are. For a fee he will also give you a spot price for your bottle of malt. ‘There is a growing interest in this whole area,’ he says, ‘but a lot of people only have a limited amount of information and there are still great and under-exploited opportunities for the right investment. But you do need to be careful. I have seen some information which is misleading and could encourage people to make the wrong choices.’
The Dalmore's David Robertson says that the one other major thing to consider is your exit strategy. Where are you going to take your bottles to sell them when you want to realise your cash? ‘If you buy a bottle this year for £100 and at the end of next year you're ready to sell it because it's worth £130, then you'll have problems,’ he says. ‘If you take it to The Whisky Exchange they'll want to make a profit when they put it on sale for £130. So they will take VAT off it, and then their margin, and offer you less than the £100 you paid for it. You have to think of your investment as for the medium to long term.' What is certain is that with demand across the world certainly set to outstrip supply investment opportunities will continue into the future.
Where will it end? Well there are rumours in the whisky world that one distillery has two casks of whisky that will reach 100 years old this decade. Fifty year old whisky is rare enough and can attract a £10,000 price tag. The sky may well be the limit when it comes to 100 year old malt. But whatever happens whisky will continue to be a dynamic and exciting place to put your money.
‘You don't need to spend a fortune on whisky,’ says Robertson. ‘If you go for the sort of bottles that are potentially collectable, but you might like, then you can always open and enjoy them if they don't look like making money. After all, at the end of the day whisky is for drinking .’
More information on whisky investment can be found at: www.whiskyhighland.co.uk
The World's Best Whiskies -750 Unmissable Drams from Tain to Tokyo by Dominic Roskrow is published by Jacqui Small Publishing, priced £30