Making money on malt
From rare bottles of Macallan to aged casks, whisky investment is having a moment, says Helen Dalley
Fine single malt Scotch whisky casks have been the highest performing alternative asset of the 21st century according to the 2020 Knight Frank Luxury Investment Index, which found that the ROI on whisky investments grew by 586 percent in the last decade.
Last October, Sotheby’s made history in the world of collectible spirits when the sale of The Ultimate Whisky Collection achieved £7.6 million (US$10 million), the highest total for any whisky collection ever offered at auction. Headlined by a bottle of The Macallan Fine & Rare 60-Year-Old 1926, which set an auction record for any bottle of wine or spirit at £1.5 million (US$1.9 million), the sale was 100% sold, with all 391 lots snapped up by collectors eager to acquire sought-after and iconic bottlings. Assembled by a private US connoisseur over some 20 years, it was the most comprehensive catalogue of whisky ever to be offered by a single owner in a single auction.
Rare bottlings have come online at the major auction houses at Bonhams Hong Kong, too, with an auction simply entitled Whisky this January seeing a bottle of 50-year old Macallan housed in a Lalique decanter fetch HK$1,054,000. A month later, the Nippon Whisky Collection Online fared similarly well, with entry-level investment bottles from Karuizawa, Chicibu and Hanyu coming in under HK$20,000. It will host another auction, Fine & Rare Wine & Whisky, on 21 May.
DEMAND FOR CASKS
Jonathan Macey, CEO of Hong Kong-based auction house Macey & Sons, says it is seeing increased interest in whisky cask investment. “Last January, the amount of casks we were selling doubled and we have never been busier,” he notes.
Macey, who set up the auction house in 2012 and deals in art & silver alongside whisky, says Zoom has been a lifeline during the pandemic. The auctioneer has been busy arranging live tastings where clients sample whisky alongside its specialists in Scotland, who are on hand to deliver tasting notes.
One of the advantages of whisky investment over art or jewellery is that people don’t need to see the whisky before they buy it, says Macey. He believes the days of selling face to face in the auction house may well be over. “Everything’s gone digital and you have to adapt… people are more relaxed sampling at home, and there’s more chance of them buying as they’re not being sold to.” The CEO adds that around 95 percent of people who sign up for a live tasting call will make a purchase.
Macey says whisky casks are still a relatively young market, having been around for less than 10 years. “The growth of casks is huge, and the major auction houses are now putting them on as lots, as we have done, alongside rare bottles. If an auction house is selling casks, you don’t need to move them – you can be anywhere in the world,” he points out.
At present, around 87 percent of its customers are women, most aged between 25 and 35. “If you turned the clock back 10 years, then a lot of whisky investors would have been men in their 60s. There’s a lot of good whisky bars and places to enjoy whisky-based cocktails in Hong Kong so perhaps that’s what’s driving it, plus some of the top whisky sales people are female. The staff are getting younger, too – my two sons, both in their 20s, work alongside me,” says Macey.
Which whiskies are finding favour at the moment? “Glenrothes has enjoyed tremendous success recently, while Macallan’s whiskies aged in sherry oak casks go down well in Hong Kong, particularly with women, who like the sweet sherry flavour. Hong Kongers also like strong, smoky, peaty whiskies like Laphroaig,” says the CEO.
Scotch whisky remains the most popular over others, and it’s the passion, history and the journey of these whiskies that makes them so desirable. “I went into the warehouse at Macallan and it felt like one of the seven wonders of the world. The casks that are built in the distilleries are lovingly looked after, and it’s fascinating how the wood changes the colour of whisky. It was like Willy Wonka’s chocolate factory for whisky aficionados… it’s almost a spiritual experience,” he notes.
Those looking to build up a whisky investment portfolio should go in softly at first, Macey advises. “Look at investing in one or two casks and think of spending up to HK$150,000. I don’t want people to spend HK$1 or HK$2 million. I’d also advise clients not to put all their eggs in one basket, and accept that whisky can go up and down in value.” You can expect to earn around 10 to 20 percent annually on your investment, says Macey. “I’ve made 13.2 percent on my collection this year, and 12-15 percent per annum is a fair market appraisal.”
Macey is expecting China to open up and to see some record breaking prices at the auction houses, as demand for whisky is stronger than ever. To meet demand, the owners of the distilleries it works with are expanding. Gordon & MacPhail, for example, is currently building another distillery in Scotland.
The CEO, who founded Macey & Sons in 2012, would like to have more retail outlets for casks alongside its cask master shop in Central. “We’d love to have our own warehouse in two or three years’ time, but they are not cheap to build, and perhaps establish an office in London or Scotland. Who knows, maybe we’ll even distil our own whisky one day.”
You can expect to earn around 10 to 20 per cent annually on your whisky investment
A SAFE INVESTMENT
Tailored whisky brokerage Rare Finds Worldwide offers collectors and investors the opportunity to increase their wealth with rare single malt scotch whisky. It gives clients access to some of the most prestigious single malts in the world including premium casks from distilleries such as Macallan, Dalmore, and Bowmore, says the company’s resident whisky & investment specialist Freeman Ho.
While some clients buy out of passion, or for selfconsumption, others are focused on ageing casks to gain a substantial return. “Private casks aren’t that accessible to that many people, and we have a good relationship in Scotland with key distilleries. As more people get into whisky, enthusiasts are going beyond the basic range and turning their attention to more obscure ones – and you can even get your own very special bottling,” notes Ho, who believes single malt isn’t just a drink but can be a hobby.
In terms of trends, Ho agrees with Macey that casks are gaining prominence. “There’s a rapid rise in the number of bottles hitting the market every year, and you may have to wait many years to see your return. With bottles, there’s also a lot of information to learn, and you need to keep track of the auction market and prices.” Casks, on the other hand, are more risk averse and tend to have a more rigid price, he says. “Buying casks is not like investing in the stock market… it’s a physical asset.”
Scotch whisky remains the most popular of whiskies over the US, Japanese and other varieties due to its heritage and variety, says Ho. “Scotch whisky has more than two centuries’ worth of history, while Taiwan only has two decades, for example,” he says. There are currently than 150 active malt distilleries in Scotland while Japan has 10 and Taiwan just two. “They have great whiskies, but there’s just not that variety. For collectors and connoisseurs, Scotch
whisky can offer so much more.” To safeguard this heritage product, there are a lot of regulations on Scotch whisky casks, meaning investors are more protected than they would be if investing in casks from other regions, adds Ho.
If you’re keen to invest in whisky, he advises buying something you’re passionate about – and to reflect on how long will you hold onto the cask before exiting the asset. “With whisky, you need to have patience, as the investment will grow exponentially rather than proportionally,” he points out.
Middle-aged casks of 20-30 years old from a renowned distillery can cost anything from £30-60,000, while younger casks of around eight to 12 years old cost around £8-10,000. “There are a lot of young casks from unknown distillers, that you could invest in from £2,000, but I wouldn’t really recommend as these distilleries haven’t proven themselves.” Macallan casks, on the other hand, can cost, more than £100,000, with rates of return at around 15 per cent, says Ho.
Ho expects bottle and cask prices to increase steadily over the next 12 months and also predicts independent bottlings will rocket as demand increases. His advice? Stock up now.
As more people get into whisky, enthusiasts are going beyond the basic range and turning their attention to more obscure ones. You can even get your own very special bottling
SPECIALIST RETAILERS TAKE OFF
Owner of whisky retail store Caskells, John Rhodes, sells rare & collectible whiskies including the Kiyosato 26th anniversary (HK$46,000) to something more affordable like a Laphroaig 25 year old (HK$6,800) at his store in Wan Chai. He says while there’s been a downturn in business with only two people maximum allowed into the store, it has hosted events online. “Whisky is a social thing,” he says, adding that he finds nosing whisky more enjoyable than the actual drinking of it. “You can’t beat the smell of a nice aged, complex whisky.”
Asia has become an important region for the whisky industry, with independent bottlings and casks driving sales, along with old vintages like the Gordon & MacPhail 72 year old, released this March as a limited edition, which fetched HK$421,600 at Bonham’s and exceeded the presale high estimate of HK$380,000. “When this whisky was bottled in 1949, the UK still had food rationing, so it represents a bygone era, and as there is a finite resource of these old whiskies, they continue to go up in value. Prices will stay high, so it’s a safe investment,” says Rhodes. It’s a market that continues to evolve, he elaborates. “People are starting to look beyond the big brands to independent bottlers – they like that individualism, and the big names are responding to that.”
To meet demand, Rhodes has recently opened a new retail shop in the Peninsula hotel. The uptick in sales is being driven by a young audience, he elaborates. “Whisky used to be an old man’s drink, but now it’s not.”
Before building up a whisky collection, you need to ask yourself what you want it for, says Rhodes. “Do you want an interesting drinking collection so you can enjoy those whiskies when you retire, or is it more for investment?” he questions. If you’d like to start with a modest investment, consider looking at new distilleries like Daftmill, whose first bottling has since doubled in price. “It’s a way to get into investing without parting with too much money,” he observes. Other relatively new distilleries with some interesting bottlings include Islay distillery Ardnahoe, which was established in 2015. But don’t forget, too, that some bottlings may be susceptible to fakes so if you’re buying online, make sure there are good pictures to authenticate the product and do your research on the vendor.
As social distancing measures ease up, Rhodes is hoping to host some dinners and have some fun. “Sometimes people take whisky too seriously, but it’s just a drink – enjoy it!” While events will be on hold until later in the year, he is looking forward to getting his second retail shop off the ground. “We’re not expecting much in the first few months, but once the hotel opens to international tourists, we hope things will pick up.”
IT’S ALL ABOUT THE CASKS
With offices in Hong Kong, Sydney and LA, Caskx is a burgeoning whisky investment business headed up by founder and CEO Jeremy Kasler, which works with distilleries including Highland Park and Glenfarclas. Investors can request samples of portfolio holdings, receive photos of casks or arrange a distillery visit to draw a glass from the cask themselves. He says the pandemic has had a good impact on business. “People are drinking and thinking more about whisky as they’ve had more time on their hands.”
Kasler says it spends a lot of time educating people and making the journey as transparent as possible. “We establish if they already have a love for whisky and talk about their budget, risk appetite, setting up a portfolio and exit strategies,” he elaborates. Some clients are clinical about their investment while others want to know all the history. Some are even teetotal, he adds.
Caskx offers planned monetisation strategies, but Kasler is keen to stress it tends to under promise and overdeliver. He sees whisky casks as a medium to long-term investment, with returns of around eight percent per annum. “The people that we’re dealing with in the current climate don’t want short-term gains, it’s about wealth preservation, and knowing that their money is safe in 10 years’ time.”
Kasler advises educating yourself about casks before parting with cash instead of relying on a sales person or broker. “It’s not bitcoin so the value won’t double overnight,” he warns. The CEO says it’s important to enjoy the experience, too. “There are so many ways to invest money, but not many ways to enjoy the process, with whisky samples sent to you every year. While this isn’t about you buying to drink and you sell it as a cask, a lot of investors do end up buying it and it becomes their favourite whisky,” he says.
Hong Kong is an important market for the brand and they hope to fly people out from the distilleries when it’s safe to do so. “We know that people want to go out and enjoy themselves, and we’re planning to put on double the amount of events we usually would, and are looking forward to drinking whisky with like-minded people. It’s not just about making money but enjoying the journey.”
Asia has become an important region for the whisky industry, with independent bottlings and casks driving sales