Rare whisky returns better than gold

Prices of rare whiskies are on the rise, with the most wanted single malts offering better returns than gold. Lucy Shaw explores whether these old drops are a good long-term investment, or if the bubble might be about to burst.

When it comes to liquid assets, whisky is currently a more solid investment than wine, oil, and even gold. In January, a bottle of Yamazaki 50-year-old single malt set a new record for Japanese whisky sold at auction when it went under the hammer at Sotheby’s in Hong Kong for a tidy £209,740 – double its estimate. As Sotheby’s wine specialist Paul Wong pointed out after the auction, the old and rare whisky market is “in full swing”.

The rare whisky auction market in the UK has smashed the £25 million mark as value sales grew by a staggering 76% last year. Some 83,713 bottles of whisky were sold at auction in Britain last year, achieving an average bottle price of £299, though the top lots sold for much more. Topping the charts was a bottle of 62-year-old Dalmore The Kildermorie – one of only 12 released – which sold for £95,000 at Christie’s in London last December.

“Rare whisky is experiencing a perfect storm of diminishing stocks and skyrocketing demand,” says Andy Simpson, director and co-founder of whisky brokerage Rare Whisky 101. “The rare whisky acquisition landscape has changed forever because the consumer, rather than the retailer, now decides what price they will pay for a bottle of collectable whisky.”

Proving just how hot an investment whisky has become, Rare Whisky 101’s Apex 1000 Index, which tracks the best-performing 1,000 bottles of rare whisky, outperformed both the oil and gold indexes, and also the Liv-ex Fine Wine 100 last year, closing the year up by 27.5%.

Last December alone saw 8,848 bottles of Scotch sold at auction in the UK – nearly half the number of bottles sold throughout 2013. The most sought-after bottles of rare single malt Scotch and rare Japanese whisky are performing equally strongly around the world, though the Chinese market has developed a particular fondness for Japanese whisky.

Exceptional returns There are three types of rare whisky buyer – those who buy to drink, those who buy to collect, and those who buy to sell on the whiskies at a profit. Iain McClune of Whisky Auctioneer believes investing in whisky is a win-win situation. “If you’ve done your research then the return can be exceptional in a very short period, and if the market changes then at least you can drink it,” he says.

Noticing the growing interest in rare whisky at auction, and keen to profit from their own nectar, distilleries have upped the release prices of old bottlings – 50 decanters of Dalmore 50-year-old were released last year at £50,000 a pop to celebrate master distiller Richard Paterson’s 50th anniversary in the whisky industry.

Sukhinder Singh of The Whisky Exchange, says: “The same whisky was released 15 years ago for a few thousand pounds a bottle, and some of those bottles are now on the market for around £35,000. It’s the same with independent bottlings – there is great value to be had with old and rare when compared with new releases.” George Grant, head of one of Scotland’s few family-owned distilleries – Glenfarclas in Speyside – agrees.

“The fact that distilleries have increased their release prices hasn’t slowed down the secondary market; it’s made it grow even faster, and the surge in online auction houses has helped – a lot of people are flipping whiskies soon after they buy them at auction,” he says. While Grant welcomes the growing global interest in whisky, he finds it sad that so many people are now buying whisky to make money from it.

“Whisky has become a tradable commodity like gold or oil, which is sad as it’s meant to be shared and enjoyed with friends. We make it for people to drink,” he says. The fact that whisky doesn’t tend to evolve once bottled, meaning it has a far longer lifespan than wine, is adding to its investment allure. “Whisky is viewed as a much safer investment than wine, and also a more accessible investment for new collectors who can quickly learn the basics about Scotch and Japanese whisky and get involved in buying and selling it online,” says McClune.

The Whisky Exchange’s Singh agrees. “You can keep a whisky for 100 years and its quality won’t change, provided you store it properly at a consistent temperature,” he says. In terms of power brands, The Macallan remains untouchable as the most desirable whisky brand by miles. Easy to pronounce, it has a strong reputation in China and is lusted after by collectors all over Asia. Luxury limited-edition releases such as the Lalique series have added to its appeal, and the brand continues to enjoy the lion’s share of the highest hammer prices achieved for Scotch at auction.

Last April, The Macallan Lalique Legacy Collection – a set of six crystal decanters containing rare Macallan single malts aged between 50 to 65 years old, housed in an ebony cabinet – sold for £752,634 at Sotheby’s in Hong Kong. “Macallan has nailed it by doing everything right, having steadily built up its brand reputation via its vast back catalogue of exceptional quality older releases,” says Andy Simpson of Rare Whisky 101.

“Macallan ticks all the boxes as it appeals to drinkers, collectors and investors. Macallan’s heavily Sherried style is really popular because people love its unctuous Christmas cake aromas and rich chestnut colour – people buy with their eyes.” On the Scotch front, among the other most wanted whiskies are rare drops from Dalmore, Bowmore and Glenfiddich, while leading the pack on the Japanese whisky front are the aforementioned Yamazaki, Karuizawa and Hanyu Distillery’s Card Series collection.

The latter is the ultimate collector’s item; each of the 54 bottles in the series represents a different playing card and boasts an eye-catching bespoke label. Having closed 18 years ago, bottles in Hanyu’s Card Series are incredibly hard to get hold of, and entire collections are as rare as unicorn tears. Last September, a full set sold at Sotheby’s Hong Kong for £344,686.

“As with all other luxury categories in our business, trends come and go, and at the moment whisky in general and Japanese whisky in particular is incredibly popular, and is attracting the attention of both whisky collectors and the general public,” says Paul Wong of Sotheby’s. Japanese whisky’s high hammer prices at auction is a relatively recent phenomenon.

Prices really started to soar in 2015, the same year Suntory’s Yamazaki Single Malt Sherry Cask 2013 was named the best whisky in the world by leading authority Jim Murray in his annual Whisky Bible, who praised its “exquisite boldness” and “light, teasing spice”. While incredibly popular in Asia, Japanese whisky is also selling well at auction in the UK.

Last April, a bottle of Karuizawa 1960 sold for £100,100 through Whisky Auctioneer, setting a record for the most expensive whisky sold at auction in Europe. According to the auctioneer, the 290-bottle sale featured “the world’s largest known collection of Karuizawa”, amassed by a European fan.

Cult following Karuizawa is so collectable that it has its own index – the RWK (Rare Whisky Karuizawa) Index, which tracks the performance of bottles from the dormant distillery, which stopped production in 2000.

“Karuizawa has a cult following, and the average value of the bottles has gone up by 75% since 2015,” says Simpson. While it’s exciting to witness this feverish demand for rare whisky, the current high hammer prices can’t be sustained in the long term, and there is a danger that the whisky bubble may soon burst, though many in the industry are loath to admit it.

“The global marketplace reached by online auctions is what makes them so successful and leads to record-breaking prices, and I doubt we’ll see a change in the current trend,” says McClune of Whisky Auctioneer. Andy Simpson of Rare Whisky 101 is equally gung-ho about the bright future of rare whisky at auction. “There will be more auction records in 2018. Macallan 1926 will be coming onto the secondary market this year and we’re not seeing demand for old and rare whisky softening at all at the moment,” he says.

“Approaching on the horizon are the dynamic economies and burgeoning middle classes of mainland China and India. If they come to the table then we’ll witness demand unlike anything we’ve seen in history.” Will the bubble burst? George Grant of Glenfarclas admits that whisky is in a bubble at the moment, but isn’t too worried about it bursting just yet. “China has entered the market and we’re only just scratching the surface there – there is so much more business to come.

The good thing about the rare whisky market is that demand isn’t being driven by one region or country; it’s coming from all over the world,” he says. Glenfarclas is flying in Asia, which now accounts for 20% of the company’s sales and is set to become a hugely important market.

In late 2016, 100 sets of its Pagoda Reserve Trilogy were released exclusively in Singapore. Formed of the 1956, 1976 and 1971 vintages housed in ornate decanters with an elaborate pagoda-shaped stopper, the few remaining collections on the market are now going for £75,000 a set. “People are paying higher prices for rare whiskies than we would expect them to sell for in the Far East.

It all comes down to scarcity – as with the fine art world, quality will always sell, particularly if something is very rare,” says Martin Green of Bonhams, which reported its most successful year ever for whisky last year, with sales of more than £900,000. “We’re undoubtedly benefitting from the global interest in whisky collecting, which is now very much an international pursuit.

We have regular bidders from China, Hong Kong, Singapore, Japan and Taiwan, all the countries of mainland Europe, north and south America, Scotland and the UK,” says Green. While the rarest and most sought-after bottles remain the preserve of the lucky few, old and rare miniatures have started popping up at auctions with increasing frequency in a trend that has led Whisky.Auction to launch a dedicated monthly miniatures auction.

The January auction featured 1,199 lots, topped by a 5cl bottle of Macallan Spiral Label from the 1970s, which sold for £625. “Miniatures offer a great entry into old and rare whiskies for which full bottle prices are out of reach for many.

They open up rare whisky to a new audience,” says Isabel Graham-Yooll of Whisky.Auction. Another growing trend is that of whole-cask sales. Just last month a cask of Macallan 1989 went under the hammer for £242,000 at an auction in Blackpool run by Whisky-Online Auctions following a bidding war that lasted over four hours.

The sum is an astonishing return on investment for the seller of the cask, who paid £2,700 for it in 1994. “We’ve been auctioning rare bottles of whisky for several years, so when the opportunity came along to start auctioning casks it seemed like a natural progression,says Wayne Ormerod, founder of Whisky-Online Auctions. “We’ve been pleasantly surprised by just how successful it has been.

We expect the result will attract the attention of other cask owners who want to find out how much their own liquid gold could achieve at auction.” Keen to keep on top of the trend, in 2016 Rare Whisky 101 launched a cask-brokerage service aimed at cask owners looking to liquidate their stocks before the angels drink more than their fair share.

“There is definitely a finite time to sell a cask,” warns Dave Robertson of Rare Whisky 101. There is also the issue of authenticity to contend with, so a reliable track record from the seller is a must. Fake booze Another issue threatening to spoil the party is the growing trend for increasingly sophisticated fakes, which are making their way onto the secondary market.

Last March, Whisky.Auction uncovered a large-scale whisky-counterfeiting operation in north London similar in nature to convicted fraudster Rudy Kurniawan’s wine lab in his Los Angeles home.

A 41-year-old man from Finchley was found to be creating fake whiskies by refilling old bottles with young liquid with a level of sophistication never before seen in fake spirits production. The suspect was arrested and all of the bottles confiscated, but the news is a stark warning to both whisky auctioneers and bidders that the market may be peppered with fakes.

One way of getting around the problem is to adopt the Prooftag authentication technology used by the likes of Châteaux Lafite and Margaux in Bordeaux, which a few distilleries are starting to do. “In any luxury market like wine, watches or handbags, fakes are inevitable and I predict we’ll see some really good quality fakes hitting the market,” warns Andy Simpson of Rare Whisky 101. But while the threat of fakes may loom large, the growing global thirst for old and rare whiskies is showing no sign of slowing and hammer prices look set to reach ever-higher heights this year.

And while a segment of the market is investing in whisky purely to make money, many are doing it out of a pure passion for the product, and are buying these liquid treasures to crack open and enjoy.  As Sukhinder Singh of The Whisky Exchange points out: “Whisky is rarely a phase – people tend to fall in love with it for a lifetime and it becomes an obsession. There will always be plenty of people looking out for what’s coming next, so old and rare releases will always be sought after.”