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What Scots call “the water of life” has become an increasingly popular investment. Forget the £30 bottles found on supermarket shelves, the finest whisky can sell for dizzying amounts. Here we explain how to invest in the bottled spirit and what to watch out for.
Over the last decade, the value of rare whiskies has shot up 582%, according to the Knight Frank Luxury Investment Index. In November 2023, a single bottle of 1926 Rare Macallan single malt sold at auction for $2.7 (£2.1) million – more than double its estimated price.
As all investors will tell you, diversification is key and many people like the idea of owning material tangible assets in their portfolios. But investing in whiskey and other bottled spirits can be risky. Most are unlikely to appreciate meaningfully in value, so doing a lot of research first is a must.
In this guide we cover:
- Why are some whiskies valuable?
- What are the main types of whisky you can buy?
- What is the difference between whisky and whiskey?
- How do you invest in whisky?
- How safe are whisky investments?
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Why are some whiskies valuable?
As with many other alternative investments such as gold, fine wine and art, the value of whiskies and other bottled spirit comes in large part simply from scarcity of supply coupled with rising demand.
Less is more when it comes to a particularly highly rated whiskey. If there is less of it available in the market, the greater its price will be in general.
The finest whiskies require complex, time-consuming production methods.It is the variation in the quality of the ingredients used and the skills of the producer that lead to big differences in the quality and taste of a whiskey – and ultimately the price.
Another key factor is how long the spirit has been “aged” for. In most cases, the older a whiskey, the higher the price, although this is far from an absolute rule.
Global factors
The increase popularity and price of whisky over the past couple of decades has been driven in large part by the rise of the middle class in Asia, particularly China. Hundreds of millions of potential new customers emerged as people in the region became more affluent and developed a taste for luxury products from the West.
In Europe and America demand for the most expensive, luxury items has also increased as disposable incomes have broadly risen over recent decades. The numbers of millionaires and billionaires willing to spend thousands of dollars on a drink have climbed fast.
Quantitative easing has also lifted values of investible assets in general in recent years,not just the stock market.
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What are the main types of whisky that you can buy?
There are hundreds of well-established whiskies across numerous categories but there is no definitive or universally accepted list on investable whiskies. There are however several categorisations that broadly encompass the market:
- Scotch
- Irish whiskeys
- Japanese whiskies
- Bourbons (American whiskeys)
- Tennessee whiskeys (American)
- Canadian whisky
- Rye whisky
A lesson in whisky – or whiskey
Whisky and whiskey are from the same family of spirits and alcohol, but whisky tends to refer to the spirit from Scotland, Japan and Canada, while whiskey is associated with the drink from Ireland and the US. There are also differences in the production and ingredients.
Whiskies can be single malt or blended. A single malt is comes entirely from a single batch aged in an oak barrel for at least three years at a distillery. Investable whiskies are usually aged much longer than this though, with timeframes often running into the decades. Blended, as the name suggests, will be mixtures of a number of batches.
The term malt comes from malted barley which is the key ingredient in most whiskies. Single malt Scotch whisky must be made from 100% malted barley.
It is the generally agreed that the finest whiskies – and most of those that are potential investments – are single malts. There can be rare exceptions of highly prized blended whiskies, but single malts are where the main focus for investors lies.
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Distilleries
The distillery that produces a whiskey can have a big impact on its valuation. The most historic and respected ones are usually responsible for most of the expensive stuff.
The market is dominated by Scotch, and therefore many of the top distilleries in the world are in Scotland. A prime example is the Macallan distillery in the Speyside region, which gave life to the record setting £2.1 million bottle.
Each of the main producing nations has its top distilleries. For example, in Ireland the crown goes to Midleton distillery in County Cork,while in Japan it is the Suntory Yamazaki distillery.
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How do you invest in whisky?
The starting point, as with any investment, is to do some thorough research. It is advisable that you spend a significant number of hours reading up on distilleries and valuations of various whiskies before you make your first buy.
You will also need to decide whether you are going to buy bottles, whole barrels or a mixture of both. Practically, bottles are likely to be easier as barrels come with far greater storage challenges and transportation costs.
Storage
Some whisky dealers offer a storage and custody service which takes care of it for you, for a fee of course. If you would rather take physical possession and see what your money has got you up close, or even drink any of it, you will need a suitable premises.
If you intend to acquire more than a few bottles, the ideal scenario is dedicated room or cellar. Whisky must be kept in a cool, dry place that is reasonably dark. It does not need to be pitch back, but direct sunlight must be avoided as this can change the colouring of whisky itself and any labelling.
You should also consider the insurance implications. As with all high value items, insurers will require specific information on what you have and will offer you a rate accordingly. It is unlikely that high value whisky would be covered by any general possessions policy, so you must speak to your insurer.
Where to buy
There are a few different avenues for buying whisky, if you want to take the plunge. First there are whisky dealers, many of which can be found online.There are dozens of dealers, and identifying one with a strong track record and positive reviews is a must.
You can also buy directly from distilleries, although that will likely require you establishing a relationship which involves doing a significant amount of business.
Finally there are auction houses. At the top end of the market sales are often conducted through prestigious auctioneers such as Sotheby’s.
Pricing
The current peak price for a bottle of whisky is £2.2 million as mentioned, but investable whisky can be acquired for significantly less. There is a wide range of pricing on what is generally accepted as investable.
The very minimum for what could be considered a worthwhile investment is in the region of £1000. Most whisky that is considered an investment would be in the tens of thousands of pounds though. The top end reaches six figures and beyond.
How safe are whisky investments?
Checking the credentials and history of any firm or individual you do business with is crucial because there is always the risk of being defrauded when you make an investment.
Larger, well-known dealers or auction houses tend to be a safer bet than buying from individuals whose track record is hard to establish with as much certainty. A proper auction house will likely have done its due diligence before putting anything up for sale.
The other major risk is that what you buy simply does not increase in value – or even falls. There could be many potential reasons for this but they broadly fall into two categories:
- specific to an individual whisky
- whole market level
The particular whisky may have just gone out of fashion as tastes and trends change over time. The availability of supply of a particular whiskey could also change significantly.
At a wider level, a global recession or regional economic crisis could suddenly cause a big drop in luxury goods spending. Prices would likely recover in time in this scenario, providing the individual whiskey in question remained highly regarded.
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