Business Day

Rare whisky no risky in­vest­ment

- Whisky · Alcoholic Drinks · Kyoto · Suntory · United Kingdom · The Macallan · Scotland · Port Ellen · Yoichi · Ardbeg · Jim Murray

ON SATUR­DAY evening, my hus­band and I stum­bled upon the con­ti­nent’s largest col­lec­tion of Ja­panese whisky. We were after a night­cap and were drawn into Ky­oto Gar­den Sushi by the jer­oboams of Ja­panese whisky wink­ing at us through the win­dow.

It turns out these vast bot­tles of Nikka From The Bar­rel were re­leased to com­mem­o­rate Nikka’s 80th an­niver­sary — and while restau­rant owner Scott Wood prefers wine to whisky, he prides him­self on his col­lec­tion.

If you have the time — and per­mis­sion from your bank man­ager — I can highly rec­om­mend a con­vivial evening spent with Scott sam­pling whisky and dis­cussing the finer points of sherry casks and sin­gle malts. If you’re lucky, he might even show you his rare bot­tle of Sun­tory XO Deluxe brandy.

The prob­lem with de­vel­op­ing a taste for fine whiskies is that it is be­com­ing in­creas­ingly dif­fi­cult to get your hands on a bot­tle. I’m not talk­ing about a bot­tle of Nikka Pure Malt, or even a Hibiki 12-year-old, but the truly spe­cial blends and pure malts that raise the whisky ex­pe­ri­ence to some­thing al­most re­li­gious.

Part of the rea­son for this is a surge in in­vest­ment in­ter­est in rare whiskies. Fig­ures re­leased by whisky in­vest­ment ex­perts Rare Whisky 101 (RW101) last week show that the value of col­lectible bot­tles of the Scot­tish spirit has risen by 19.8% since the start of the year, and a whop­ping 25% over the past 12 months.

Last year, in­vest­ments in rare Scotch whisky sig­nif­i­cantly out­paced other as­sets such as wine, gold and oil, with the Rare Whisky Apex 1000 in­dex gain­ing 14.4% com­pared to gold, which was down 10.4%, and oil, which lost 35%.

The Rare Whisky Apex 1000 is the world’s broad­est and most com­pre­hen­sive in­dex for Scotch whisky and pro­vides a fas­ci­nat­ing in­sight into an as­set class that, un­til re­cently, was lit­tle no­ticed. The in­dex is com­piled by track­ing ev­ery bot­tle sold at UK auc­tions over the past 12 years and iden­ti­fy­ing the best-per­form­ing 1,000 Scotch whiskies. Since 2008, when the in­dex was launched, the top­per­form­ing 1,000 whiskies have in­creased in value by 338%, com­pared to the top 100, which have in­creased by more than 700%. Yes, a 700% re­turn in 12 years.

Other more niche in­dices, such as the Rare Whisky Karuizawa in­dex, which tracks the per­for­mance of a se­lect col­lec­tion of bot­tles from this silent Ja­panese dis­tillery, and the Rare Whisky Port Ellen in­dex, which tracks the per­for­mance of the first eight of­fi­cial re­leases from the Port Ellen dis­tillery, give even more gob­s­mack­ing re­sults.

Per­haps un­sur­pris­ingly, this im­pres­sive re­turn on rare whiskies has spawned a pri­vate eq­uity fund ded­i­cated to sin­gle malts.

The Plat­inum Whisky In­vest­ment Fund was launched in 2014 and man­ages more than 7,500 bot­tles of rare sin­gle malts in­clud­ing a bot­tle of spe­cial-edi­tion 60year-old malt from the Ma­callan dis­tillery in Scot­land that is val­ued at $200,000.

In Fe­bru­ary 2016, the fund had al­ready re­alised a stag­ger­ing 26% re­turn on in­vest­ment since launch, and it doesn’t seem to show any sign of slow­ing down.

The re­sult is that buy­ing a re­ally spe­cial bot­tle of whisky is an in­creas­ingly costly en­deav­our — if you can even find one. In­creased in­ter­est in rare Ja­panese whiskies has also made it ex­tremely dif­fi­cult for afi­ciona­dos to get their hands on age-state­ment whiskies older than 12 years.

Ac­cord­ing to Bloomberg, some Ja­panese dis­til­leries have even gone so far as to pull back stock of pop­u­lar age-state­ment whiskies and re­place them with sim­i­lar tast­ing no-age-state­ment whiskies just to meet the de­mand.

For ex­am­ple, Nikka an­nounced last year it was delist­ing 14 of its most pop­u­lar sin­gle malt and age­ex­pres­sion whiskies. The com­pany was con­cerned that lev­els of Yoichi and Miyagikyo malt whiskies, which are used as the base for most of the firm’s whiskies, were run­ning too low and could threaten the fu­ture of the busi­ness.

In their place it launched sev­eral new no-age-state­ment ex­pres­sions. Sim­i­larly, Sun­tory stealth­ily re­placed its very pop­u­lar Hibiki 12year-old with Hibiki Ja­panese Har­mony which, I am told, tastes re­mark­ably sim­i­lar.

As with any in­vest­ment, the trick with suc­ceed­ing in rare whiskies is to know what you are buy­ing. Ac­cord­ing to RW101, the two most cru­cial fac­tors to con­sider are age and vin­tage.

It stands to rea­son that even the most ded­i­cated of in­vestors may, from time to time, suf­fer a lapse in judg­ment and open a pre­cious bot­tle, re­duc­ing the to­tal num­ber avail­able and in­creas­ing the scarcity of the re­main­ing few.

Just writ­ing this piece has made me suf­fi­ciently thirsty for a dram to have me check my bank bal­ance and sev­eral on­line whisky stores, so I can’t imag­ine the self-re­straint

The prob­lem with de­vel­op­ing a taste for fine whiskies is that it is be­com­ing dif­fi­cult to get your hands on a bot­tle It stands to rea­son that even the most ded­i­cated of in­vestors may suf­fer a lapse in judg­ment and open a pre­cious bot­tle

nec­es­sary to keep your hands off a rare bot­tle.

In the con­text of scarcity, it also makes sense that bot­tles from closed or “silent” dis­til­leries are more valu­able, as are lim­ited re­leases or small-batch whiskies. Peaty whiskies seem to ap­pre­ci­ate bet­ter than oth­ers, and his­tor­i­cal dis­til­leries such as Ard­beg and Ma­callan also seem to be favoured by in­vestors.

In­ter­est­ingly, Ja­panese whiskies are con­sid­ered to be more volatile than Scotch. And a large part of this has to do with a jour­nal­ist. Ja­panese whiskies had been gain­ing in pop­u­lar­ity for sev­eral years, and then whisky writer Jim Mur­ray pro­claimed the 2013 Sun­tory Whisky Ya­mazaki Sherry Cask the world’s best whisky in his 2015 World Whisky Bi­ble. The ef­fect on Ja­panese whisky prices was stun­ning. The Rare Whisky Karuizawa in­dex in­creased by 74.92% be­tween De­cem­ber 2014 to Septem­ber 2015, an un­prece­dented rise in prices that has since seen some re­trac­ing.

If you are not an in­vestor, the good news is that the flour­ish­ing mar­ket in col­lectible whiskies is in stark con­trast to global sales fig­ures for the wider in­dus­try. Ac­cord­ing to the Scot­tish Whisky As­so­ci­a­tion, the vol­ume of Scotch ex­ports was down 2.8% last year to 1.16-bil­lion bot­tles from 1.19-bil­lion in 2014.

Although this prob­a­bly won’t have any ef­fect on in­ter­na­tional or lo­cal prices, it gives me hope that, even with the weaker rand, the nor­mal drink­able stuff is un­likely to spike in price quite as much as the rare col­lectibles.

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