Whisky is for investors not drinkers

rare whiskyThe value and quantity of rare whisky is on the rise making it popular investment asset according to experts Whisky Highland.

Last year saw a record number of full sealed bottles of single malt Scotch whisky sold. Early 2013 figures suggest this is continuing. Q1 saw 3,789 bottles sold - a 34.5% increase on the same quarter in 2012's 2,818 bottles.

Investment grade Scotch

In 2011 there were 8,696 bottles sold, this increased by 62.7% in 2012 to 14,150. The top 1,000 performing bottles of Investment Grade Scotch (the Whisky Highland IGS1000 Index) increased by 23.27% over the course of 2012, yielding an overall increase of 123.01% between 2008 and the 31st of December 2012.

At the top end of the market, the IGS10 (the top ten performing bottles of Single Malt Scotch) saw a second quarter of declines to the end of 2012, when overall 2008 – 2012 yields moved from 557% to 508%. But this was reversed in Q1 2013 when the index increased to 542%. In Q1 2012, the IGS1000 increased by 2.68% compared to a 6.05% increase in Q1 2013.

This positive momentum is being led by rare bottles from iconic distilleries. The 2011 Macallan 'Royal Marriage' bottle originally retailed at £150. This bottle now sells for around £900.

The Whisky Highland Index top 10 brands are:

  • The Macallan
  • Port Ellen
  • The Dalmore
  • Balvenie
  • Ardbeg
  • Brora
  • Bowmore
  • Glenury Royal
  • Highland Park
  • Glenlivet

Investors need to pick the right bottles. Whisky Highland's founder Andy Simpson (pictured) said "We are still witnessing continued increases in value for the right bottles from the right distilleries. The story is not quite so attractive at the other end of the scale with the worst performing bottles of single malt Scotch continuing to tumble further into red territory."

Andrew SimpsonThe negative index, the IGS(neg)1000, saw a further decrease in value through 2012. The worst performing 1,000 bottles would have yielded an overall loss of 28.65% between 2008 and the 31st of December 2012 (2008 – 2011 loss was 22.75%).

The continuing decline in values for the worst performing bottles seems to have stabilised into early 2013 with quarter 1 figures showing an overall loss (2008 – 2012) of 28.12%.

Gone but not forgotten

Many silent (closed) distilleries are now suffering from exceptionally short supply as existing maturing stock continues to deplete rapidly. The likes of Port Ellen, Brora, Rosebank and Glenury Royal are experiencing unprecedented demand for an ever decreasing pool of both bottles and whisky still in the cask.

The current dynamics of increasing global demand and decreasing stock of suitable investment grade bottles has maintained a very bullish market in the face of an ever more challenging economic climate.

Simpson said: "These results are very impressive and further cement rare Scotch's credentials as a viable alternative investment. While it must be borne in mind that whisky values can fall, as has been seen in some areas of the market previously, the current situation remains exceptionally buoyant. I still maintain whisky should be viewed as a long term investment of 10 to 20 years although clearly short/medium term increases are being experienced at the moment."

Simpson told AOL Money there are tens of thousands of people across the globe who are collecting/investing in whisky. This can be from as few as 10 bottles up to tens of thousands of bottles. The average tends to be in the region of 250 – 500 bottles.

Liquid history

Simpson said: "Putting together a collection has been a lifetime's work in some cases. I get involved in looking at deceased estates where a whisky collection is to be valued. In some cases, you get a wonderful depth of old antique bottles right up to modern day releases. In some cases it's like appraising 60 years of liquid history."

"By virtue of its ancient production methods, the 'right' bottles of Scotch are exceptionally rare. Batch distillation dictates there can only ever be an incredibly limited number of bottles suitable for investment. Once a certain whisky has been released, it can't be replicated again. There will never be another batch of 1972 18-year-old Macallan released.

"Supply is also constantly being consumed rendering the remaining bottles that little bit rarer and that little bit more valuable. The global demand and thirst for rare single malt Scotch is also increasing. So you almost have that perfect scenario where supply is constantly dwindling but demand is increasing. These simple economic dynamics are pushing prices north for the right bottles."

Grape and grain

Simpson says whisky is a better bet than investing in fine wine. "Whisky is an awful lot easier to store than vintage wine. It also has a longer shelf life than many vintage wines. Kept in the right conditions, a well-sealed bottle of Scotch could outlast you and me.

"Investment grade Scotch is also produced in far smaller batches than wine. Single casks releases from iconic distilleries can number into the low hundreds of bottles, if that. This finite rarity of the product can push values certain new releases exceptionally high exceptionally quickly.

"Take the Dalmore Custodian's Millennium vintage 12 year old. 421 bottles were released last November at a cost of £50. One sold last month for £240, representing a 380% increase within just a few months.

Easy entry for investors

Simpson says everyone can invest in whisky. "The entry price point to start a viable collection of whisky can also suit every budget. Suitable bottles can range anywhere from £50 per bottle to £100,000 per bottle. Let's not forget it's also great fun and brings to life a fantastic industry, steeped in tradition myth and legend."

"Storage for whisky is very simple. First of all stand it up, unlike wine. If you lie a bottle of whisky down, due to the high alcohol content (minimum 40% by law) cork stoppers and seals can be corroded resulting in all kinds of undesirable side effects, none of which will increase the value of a bottle.

"Store it at a constant temperature in dry surroundings. Whisky doesn't need to be 'cellared' at a specific temperature, merely kept constant (so lofts are not a good place). Don't throw away the box or packaging which accompanied the bottle, collectors always want the best examples.

"Keep bottles out of direct sunlight and if you like a dram or two, keep your investment under lock and key to avoid temptation (that also helps keep thirsty visitors at bay too)."

"Many people do keep their bottles at home. This is the most frequent storage solution for smaller collections. More serious collections will be in a separate room, shelved and often climate controlled. For large collections, many are kept in bespoke offsite storage facilities who specialise in preserving rare wines and spirits."
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