Profits Galore - How to invest in Whisky

As whisky auctions boom, an article in the Daily Telegraph identifies five possible vintages for novice investors

For most, whisky has just one benefit, admittedly a big one: it’s enjoyable to drink. But increasing numbers are discovering that investing in the “water of life” can also be profitable – and fun, too.

Whisky investment is booming. The number of bottles sold at auction in Britain has risen from 20,211 in 2013 to 49,719 in 2017 and is on track to reach 100,000 this year, according to Rare Whisky 101, a specialist in the area. The value of bottles sold at auction was £3.5m in 2013 but is expected to be £36m this year. Prices averaged £328 in the first half of 2018.

Much of the rise in whisky trading has been fuelled by overseas buyers. Charles Ashton of Cheffins, an auctioneer, said: “Among the biggest buying groups for aged single-malt whiskies are the Chinese, Japanese and Indian markets, which are, of course, pushing up values.”

Anyone considering whisky investment should already have a well-balanced portfolio and be happy with the risk involved. The usual route is simply to buy bottles and hope to sell them for a profit.  It is also possible to invest in entire casks of the spirit or buy into whisky funds, but this is more specialist.

The trick, of course, is to buy the right bottles.

Andy Simpson of Rare Whisky 101 said “brilliant liquid from iconic distilleries in limited releases” was the key to whisky investing.

Within this, single-malt Scotch makes up the vast majority of the whisky investment market.  While countries such as Ireland, Japan and the US make a good deal of whiskey (strictly, only Scotch whisky drops the “e”), Mr Simpson said investment in these drinks had not yet taken off. Blended whiskies also tend to be unpopular with investors.  “Single-malt Scotch whisky has that cachet and many nations just view it as the best,” he said.

Even within the realm of single-malt Scotch whisky, certain distilleries’ outputs increase in price more than others.  At the front of the pack is The Macallan, which alone produces 12pc of the whisky bought and sold at auction. Mr Ashton said: “The Macallan is currently the name most sought after, with the Private Eye brand, which was launched in 1996 and had a retail price of £36, now selling for around £2,000 to £2,500.”

Such is the demand that the distillery last month set the world record for the most expensive bottle ever sold at auction – £848,750, for a 60-year-old bottle of The Macallan Valerio Adami.  Aside from The Macallan, established Scottish distilleries such as Ardbeg, Highland Park and Glendronach are also promising bets for would-be investors.

But it’s not all about buying into big-name brands. Whisky investors also favour certain flavours over others, and this translates into the prices paid for bottles.  Currently, whiskies aged in sherry barrels, and which have picked up some of that flavour and colour, sell very well.

Mr Simpson said: “It tends to be the very heavily sherried, rich, fruity Christmas-cake taste that people go for. That is a distinctive flavour profile, but very in demand.”  Investors also tend to buy with their eyes and pay more for darker drinks than lighter ones.

To source bottles that are likely to increase in value, buyers can either keep a close eye on auctions and private sales or get more creative. For example, many distilleries have fan clubs that benefit from access to releases of exclusive, rare bottles.  Some distilleries even keep certain bottles back and sell them cheaply to people prepared to make a pilgrimage to the site in person.  One distillery, Balvenie, did just that in 2010, selling 336 bottles of its Tun 1401 Batch 1 for £150 each. These now sell for up to £4,000 at auction. 

Whisky investment is risky – and illiquid. If demand slumps, investors might find it hard to regain their cash. Buyers should also watch for inferior whisky passed off as higher quality.  As a physical asset, of course, whisky bottles are at risk of being broken – or consumed.

But if your prized bottle survives and profit doesn’t come your way, you can always console yourself with a stiff drink.