Whisky, you mutter? That drink Scottish people love to go on about and bring out at weddings, christenings and funerals? Yes, indeed, and we cherish it for many reasons. Not only does the industry provide employment to over 10,000 people in some of Scotland’s most remote and deprived areas, but according to the Scotch Whisky Association it contributed around £4.2bn to UK GDP in 2011.
In fact, drinks giant Diageo announced last year that it planned to invest more than £1bn into production over the next five years.
The opportunities for whisky investors have become golden, just like the drink itself
Whether it is a malt or blend, whisky is proving popular and demand is growing, both at home and abroad. Traditional markets in Western Europe and North America continue to enjoy Scotland’s liquid gold, but in the new and emerging markets of China, Brazil and Russia, whisky is fast becoming the drink of choice, particularly Scotch whisky.
Why? Taste, of course, is a significant part of this. Scotland is home to just over 100 distilleries and the regions provide a variety of tastes for all connoisseurs, but for drinkers in these countries, whisky represents something different. Its purity and unique qualities make it a drink of aspiration. And like fine wines from Bordeaux, international investors are thirsty for some of Scotland’s more refined and expensive bottles. The opportunities for whisky investors have become golden, just like the drink itself.
For example, in 2010, I helped secure the sale of the world’s first £100,000 bottle of whisky, a 62-year old Trinitas from The Dalmore. The most expensive bottle of whisky was sold in 2011 in Singapore at Changi Airport - again a Dalmore - for around £135,000.
The important thing to note is that investors aren’t buying bottles from the local supermarket or off licence. They are looking for older bottles from prestigious brands or bottles from so-called ‘silent stills’ i.e. whisky that is no longer produced or is from closed distilleries.
The most conclusive proof of the surging price is from Whisky Highland, a valuation service for collectors and investors run by Andy Simpson.
Statistics show there was a 60% increase in bottles of single malt whisky sold in UK auction houses in 2012, just over 14,000 in total. In the first half of this year, 8,800 were sold. Andy's analysis shows that the top 1,000 performing whiskies on the market were up to just under 13% in value in the first six months of 2013. That’s astonishing; find me an ISA or savings bond that gives such excellent returns - especially in these tough economic times!
Naturally, picking winners is not something that just happens with most investments. Whisky, like any investment, requires knowledge, insight, intuition and naturally - like a good whisky - time and patience. The nature of the beast is that whilst the top performing whiskies have been doing tremendously well, it has not translated into an instant return for others; some investors have found their bottles depreciating in value, some by as much as 70%. That is not to say they may not be valuable in 10 or 20 years’ time, but there are too many examples of people investing more than they can afford to lose and expecting a fast buck!
Once you have done some research and spoken to an expert, my golden rule in investing is thus: always buy two bottles. Whiskies from certain years are finite, so there are fewer in circulation. Therefore, drink one, keep one. The one you drink should be most enjoyable and now that it is taken out of circulation it will mean your second bottle is even rarer!
David Robertson is a director at The Whisky Trading Company. He was formerly Master Distiller at The Macallan.