Stay liquid: Put your money in whiskey
Some whiskies - and not just those forgotten gems lurking at the back of a few cocktail cabinets - will climb hugely in value. Here's how to find them.
(Fortune) -- Last year at the venerable McTear's auction house in Scotland, an anonymous Russian paid a record $58,000 for a Bowmore malt whisky reckoned to have been bottled around the time his ancestors were facing the 1854 charge of the British Light and Heavy Brigades during the Crimean War.
Spirits don't deteriorate in the bottle so that Bowmore should be as fresh as the whisky that no doubt fueled many of those who participated in the British cavalry's reckless charge. The same, alas, cannot be said about wine: even the best become undrinkable with age which makes them a wasting asset.
So are spirits like whisky the better investment vehicle?
Some people clearly think so and last October in Moscow Sothebys auctioned the first of a limited release of Domaine de Joy armagnac for a record $24,000 to another anonymous Russian. But as with any collectable item, rarity is everything.
Most whiskies - the major focus of investor attention in the spirit market - will not increase in value because they are for the most part branded blends produced in large quantities with no rarity value. Bottles of Dewars stashed away in hopes of making a killing will only deliver if prohibition returns and they can be used to open a speakeasy.
Yet there's little doubt that some whiskies - and not just those forgotten gems lurking at the back of a few cocktail cabinets - will climb hugely in value. Like the record-breaking Bowmore, these bottlings are likely to be found among the rarer single-malt whiskies - those produced in pot stills by a single distillery from malted barley. It's these malts that give character to the big, grain-based blends (Cardhu, for example, is the "signature" malt in Johnnie Walker Red Label) and the majority still disappear into the blandola.
But, increasingly, they are being sold in their own right to a fast-growing international group of aficianados who will pay top dollar for top whiskies. In their wake have come the speculators. "We're seeing a larger proportion of people buying to invest," says Martin Green of McTear's. With demand growing faster than supply, prices are up across the board and the value of some bottlings has rocketed.
Malt maniacs who attended the 2001 re-opening of the Bruichladdich (pronounced brook-laddie) distillery on the Island of Islay were able to buy a limited-edition 1970 malt whisky with the words "I was there" on the label. Priced at $75 back then, those bottles are now changing hands for as much as $1,400.
Last year the fabled Macallan distillery on Speyside released a limited batch of 50-year-old single malt in Lalique decanters for around $8,000 each. Today they are fetching over $12,000 if they can be found.
But how to identify those malts that will appreciate the most? No official ranking of whiskies exists and there is no guru with the market-moving clout of Robert Parker to rate them. Nor is there a developed secondary market where investors can buy and sell their stock.
Sukhinder Singh, co-founder of the London-based Whisky Exchange, advises collectors and investors alike to follow some basic rules. Provenance is important. Reputable names like Macallan, Dalmore, and Glenfiddich are more likely to command a premium than more obscure labels. Whiskies from so-called "lost" or defunct distilleries like Port Ellen or Rosebank are becoming increasingly hard to find and prices are firming fast. Ardbeg, Lagavulin and Laphroaigh - all from the island of Islay-have a cult following as strong as their flavors.
Above all, says, Singh, a whisky must taste good if it is to increase in value. "The ones that appreciate are those that are appreciated: they get drunk and become rarer." There is a whisky futures market otherwise know as buying it in the barrel.
With an eye to their cash flow, a number of distilleries will sell you a barrel of newly-distilled spirit for bottling once it has matured. The rules require a minimum of three years in the barrel but the longer it's left the better. The result can be great savings (or profits) but there are risks.
The "angels" take their share of the maturing spirit through evaporation (roughly 2% a year) and there's a chance your cask will be a dud leaving you to wade through 350 bottles of indifferent whisky. U.S. investors may have problems with their state liquor board when it comes to taking delivery. As the cheeky folk at the Bladnoch distillery, say, buying in barrel is for people "with more money than sense." But give them $2,000 dollars and they will happily sell you a cask.