Whisky whets investor thirst for 'neat' returns
June 5th, 2012
11:30 AM ET
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Single malt Scotch whisky, the centuries old Scottish liquor, has emerged as an attractive investment over the last four years, analysts and industry experts say, with high demand for rare luxury bottles driving record-high auction prices.

The recent opening of a lavish, Manhattan-based whisky club, and the $460,000 world auction record sale of the Macallan ‘Cire Perdue’ in 2010 are just a few signs of the trending single malt market.

Bonhams hosted its first U.S. whisky auction in 2008, and has since sold tens of thousands of bottles domestically. Whisky Highland is a Scottish company that independently tracks the UK auction values of thousands of whiskies. They provide detailed valuations of individual bottles and their sales, as well as statistical analysis of auction results.

Whisky Highland’s figures suggest that a 2008 investment in one of the top ten performing whiskies it tracks would have achieved a gain of more than 400 percent if sold at auction in late 2011. A four-year investment in one of the top 100 bottles would have returned an average 245 percent profit, and an investment in one of the top 500 bottles would have returned an average 126 percent profit. In comparison, according to gold futures settlement prices at COMEX, gold rose 82.7 percent between Q1 2008 and Q4 2011.

Andy Simpson, a Scotsman and founder of Whisky Highland, adds that the average auction price of the bottles the Whisky Highland Index monitors is £205.

Marcin Kacperczyk, an Assistant Professor of Finance at NYU’s Stern School of Business, is not particularly surprised by the increased interest and investments in single malt Scotch whisky considering the timing.

“The economic climate of the past four years has caused people to seek alternative investments,” says Kacperczyk. “2007 to 2010 were not good years for the markets in general, so it isn’t really surprising that these smaller markets are growing.”

Patrick FitzGerald, Professor of Entrepreneurship at the Wharton School of the University of Pennsylvania, agrees. He says the whisky market gives investors a stronger sense of control.

“Owning your investment, owning a bottle that is yours, that’s a pretty tight connection. And most folks aren’t having to put up their life savings for this kind of investment,” says FitzGerald.

On the other hand, expensive whisky has turned into a status symbol amongst affluent liquor drinkers in and from Asia, according to Simpson.

In its 2010 whisky auctions in New York, Bonhams sold 75 percent by lot with 10 percent of buyers coming from Japan and China. The numbers changed drastically one year later; Bonhams’ 2011 auctions sold 88 percent by lot with Chinese buyers accounting for 38 percent of all buyers.

In September 2011, a Chinese businessman set a retail record when he purchased a bottle of Dalmore 62 at Singapore Airport for $194,000. In March, Indian businessman Mahesh Patel, bought 2012’s most expensive auction bottle so far: a Glennfidich Jane Sheed Reserve for $94,000.

Simpson notes that whisky prices are driven by two simple factors: supply and demand. When a new whisky hits the market, the age of the spirit and the quantity of bottles help auction houses determine prices. The Dalmore 62 sold for $194,000 at Singapore’s airport in 2011, for example, was one of only 12 bottles of its kind.

Keeping a bottle in proper conditions and secure is essential to retaining its value, according to Patel, CEO of Universal Whiskey Experience, a company that organizes whisky tasting and education events around the country.

David Clelland is a Scottish whisky aficionado and the founder of 1494, a New York club designed to offer expert consultations, obtain, store and insure rare bottles for its members, as well as create an environment to learn about and enjoy whisky. With a lavish city clubhouse set to open this fall, and luxury car and jet privileges for its members, 1494 is New York’s premiere, but exclusive whisky club.

“During my years working in the whisky industry, I became aware of the growing need for a service to foster connections and initiate communication between the distilleries producing the rare, limited release bottles and the potential collector or investor looking to acquire them,” says Clelland.

Experts say single malt Scotch whisky is accessible and affordable to most people.

“What you need to look for are investment and collectible grade bottles. These are bottles that have a limited quantity, or whiskies from distilleries that no longer exist but have a stockpile of bottles,” says Patel.

Any investment carries risk, and whisky is no different, according to Simpson. He thinks that hasty spending and the expectation of fast returns are dangerous. Patience is key.

“It is possible to turn a profit in a short amount of time, but it doesn’t happen often,” Simpson says. “Most of the bottles we follow have shown price increases in the last four years, and I even recommend that people look for investments over ten to twenty years.”

As the whisky market grows and demand increases, Simpson expects to see many counterfeit bottles produced around the world. He also says that auctioneer’s fees can sometimes minimize investors’ overall profits. Simpson and Clelland conclude, however, that a whisky investment should never be made by someone who doesn’t love the liquid inside the bottle.

“Long term, if an investment doesn’t work out the way a collector thought it would, at least you’ve got a great bottle of whisky to crack open and enjoy.”

Previously:

The Hollywood glitz of Japanese whisky

- Bourbon for beginners

- Five ways to make yourself a whisky connoisseur

- Bourbon beyond the glass

- Bottle of whisky sells for $200,000

- Scotch distillery turns whisky into watts

- Scotch on the rocks

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Filed under: Sip • Spirits


soundoff (18 Responses)
  1. William

    I have a unopened 1960s green triangle bottle of Glenfiddich still in its case with history,anyone know how much that would be worth today?.

    January 18, 2013 at 11:02 pm |
  2. Til

    I have an unopened bottle of Haig & Haig that is over 60 years old. Anyone interested in buying it.

    January 9, 2013 at 4:05 pm |
  3. Buy Whisky Online

    Buy Whisky Online
    says We pride ourselves on stocking quality drams at reasonable prices, including some rare and hard to find whiskies.

    June 11, 2012 at 8:11 am |
  4. Deborah does Bourbon

    Bourbon girl....

    June 7, 2012 at 8:15 am |
  5. ryanoverton

    laphroaig!!

    June 6, 2012 at 8:27 pm |
  6. MarkGlicker

    I always preffered canadian Whiskey, but what do I know.

    June 6, 2012 at 2:48 pm |
  7. Candice Anderson

    People invest to generate profit from it. they created this wine to increase sales as this is different from they usually offering.

    Candice Anderson
    Open Source POS

    June 6, 2012 at 11:47 am |
  8. Silly Suckers

    People are suckers, JayZ proved this. He took a bottle of wine that costs 13 bucks to make and usually sells for about 40 bucks. He called it Ace of Spades and it sells for 360 bucks wholesale and up to 1400 bucks in clubs. Idiots are paying $1,400. for a $40. bottle because they think if it is the most expensive that it must be the best.

    June 5, 2012 at 6:27 pm |
  9. AmericanWhiskey

    Bourbon...way better than Scotch and 100% american made

    June 5, 2012 at 5:22 pm |
    • Greg

      Agreed

      June 6, 2012 at 1:02 am |
  10. Jack

    Filthy Rich Drunks attempting to justify one of their many addictions and vices.

    June 5, 2012 at 5:04 pm |
  11. JB

    I bought a bottle of Johnny Walker Blue to have at my wedding. I had several that day, and I have one shot every year on my anniversary. Only occasion I could ever justify such an expense. Worth every penny, though. That stuff is awesome.

    June 5, 2012 at 3:46 pm |
    • snoopy

      JWBlue is not worth the price in any sense. For one, it isn't even single malt, it is blended.

      Secondly, Glenfiddich, Glenmorangie, and Glenlivet are all superior tasting, are single malt, and are greatly cheaper than JWBlue. JWBlue is an ad campaign.

      June 6, 2012 at 9:02 am |
      • Cody

        But the Whisker Bandit drank Johnny Walker... the history! I've never tried JW blue, but I'm skeptical of such mainstream alcohols at high prices. If I've seen a commercial on TV, it's probably not unique enough for the price...

        June 6, 2012 at 9:55 am |
  12. Rootin' Tootin' Sheriff

    BarKeep-Give me a shot of Redeye before I give 'ya The Deadeye !!

    June 5, 2012 at 3:45 pm |
  13. lindaluttrell

    It's like the wine industry. The more you pay, the better it should taste. No always so. People buy what they like and can also afford...

    June 5, 2012 at 3:30 pm |
    • Pumbaa

      Magazines like the "Wine Spectator" use a point system to rate wines. Unless you have had the wine before or you can get a taste sample, using the ratings beat buying the first thing you find on the shelves.

      June 5, 2012 at 9:06 pm |
  14. Solo

    This isn't really an investment. It's more of an ego-driven purchase.

    June 5, 2012 at 2:57 pm |
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