Dram busters: why whisky is a winner
With a surge in single cask malt prices and high prices paid at auction, now is the time to invest in this most spirited of markets
Ihave always enjoyed a glass or three of fine malt but it took a trip to the Spey in 2001 to realise that there is serious investment potential in it, too. My hostess’s father had bought a cask of Glenlivet (the local distillery) – 1976, I seem to remember – and, once it was ready, had it bottled, naming it after their house. Bottles of the linctus – it had come out at about 48% proof and was best with a splash of water to stop it anaesthetising your taste buds – were everywhere to hand, even in bedside decanters in case we woke having nightmares about that day’s long-distance ‘involuntary release’. On departing – and oh how I wish I had more friends like this – I was given a bottle as a memento of a glorious week. Back home I soon opened it with a bunch of mates who marvelled at just how scrumptious it was.
“Oh dear,” a chum who was publishing a Scottish whisky book and an expert on the subject muttered. That bottle was a collectors’ item, he explained; single cask malt with the estate’s name on it and worth several hundred pounds. The news left me feeling relieved at my ignorance lest I had been tempted to cellar it as an investment, rather than enjoy drinking it as intended. “Probably more like £100 to £150 back then,” reckoned Ryan Mccafferty, operations director and whisky expert at Cask 88 in Edinburgh. “Although probably more like £800 to £1,000 at auction today,” he added, reflecting the huge upwards lurch in single cask malt whisky prices in the past couple of years. At that sort of price a chap starts wondering whether to sell it, buy a case of standard – but still delicious – Glenlivet and still have enough left over to invest in a few days spooking salmon. How much pleasure can you get from a bottle of malt?
Rather a lot if the jaw-dropping – crazy is another word for it – prices paid for super-premium malt are anything to go by. Had you had a spare £848,750 (£700,000 hammer) at Bonhams in Edinburgh last October, you could now be congratulating yourself
for paying the world record price for a bottle of single malt. Yes, it was a Macallan ‘special edition of 12’; distilled in 1926 and bottled in 1986, making it a ‘60-year-old’. And, yes, it sported a label designed by Valerio Adami (an Italian ‘pop artist’); a second set of 12 was by Sir Peter Blake of Sgt Pepper’s record sleeve fame. But nearly £1 million? For something you have to drink to enjoy but is then only worth the value of the empty bottle? Nor was this a one-off aberration.
Others of these special editions have sold recently at auction, fetching lower but not dissimilar prices. Two were sold in a shop in Dubai airport in April 2018; in hindsight, out-and-out bargains at ‘only’ $600,000 each. You can see why some view malt as a new get-rich-quick scheme.
Macallan is the key word here. It is the must-have brand for billionaires – mainly from the Far East – with a money-noobject urge to own and impress. Dalmore and Springbank are two of those in the next division but Macallan stands supreme. And that has, of course, affected the whole brand. A couple of years ago an 18-yearold Macallan bottled in the late ’60s or early ’70s fetched a princely £700 to £900 a bottle at auction. That same bottle will now cost you about £2,600 (hammer). Top tip: get searching your cellars for bottles of old Macallan (old any malt, in fact) right now.
INITIAL OUTLAY
However, you do not need to pay a fortune to invest – whether for possible profit or for low-cost future (often way in the future) tippling – explains Mccafferty. An initial outlay of about £2,000 should be enough for him to source a cask of just-distilled whisky from a small distillery. The more prestigious the brand the higher that initial outlay and the more difficult to source. Want a cask of new Macallan? Apparently you have to enter a lottery. The lucky few then put down a deposit that permits them to buy a cask in seven years’ time; balance payable on actual casking. So it will be 17 years before you are the proud owner of a ‘10-year-old’ singlecask Macallan, a whisky that may well need another 10-plus in the wood to get the most from it. Meaning it will be 27-plus years before the winners hear the distinctive glug glug glug as the golden nectar heads for the bottom of the cut-glass tumbler. No wonder enthusiasts want to speed things up and buy something sufficiently mature to give them a chance of being compos mentis enough to enjoy it when it is finally ready for drinking. Mccafferty has, for example, a barrel of 11-year-old Glen Moray for around £4,000. He reckons it would have cost £1,000 to £1,500 when distilled on 9 November 2007.
Due west in Glasgow last September, Mulberry Bank Auctions reacted to the surging interest in buying casks by holding the first ‘cask only’ auction – its next one is on 27 February. I put it to Stewart Smith, its whisky expert, that if malt prices continue to rise then, were I to invest in that £2,000 ‘new’ cask from Cask 88, I could probably sell half come bottling day and as good as end up drinking the other half for almost free – after all, there are various specialist investment sites extolling malt as an amazing opportunity: no tax on profit for starters. He counselled caution. Keep the barrel and sell it later at auction and I could make a goodly profit. But that was not the point of the exercise, surely, which was primarily about enjoying it. How, he asked, would I get rid of half: about 100 bottles? Auction them, perhaps five at a time so as not to have too many in any one auction? That could take years. Sell half the cask? Difficult. Go around the shops selling them? Hardly. As ever, there is more to this than meets the eye.
There is also far more to keeping a cask in perfect condition than you might suppose. At
Macallan is the key word here. It is the must-have brand for billionaires
Smith’s recent auction, the top lot, estimated at £70,000 to £90,000, was a barrel of 1989 Macallan. However, come the sampling – vital before buying any cask of malt – buyers were worried by the unusually high rate of evaporation; there were only 108 bottles still in there. Worse, perhaps, when looked at in the glass there was a slight greenish tinge to the famous golden Macallan hue. From copper nails in the barrel was one possibility. There was nothing actually ‘wrong’ with it, and it tasted superb, but to the experts, the ones who pay these top prices, it was not perfect. Result: no sale. Conclusion: do indepth research before paying a high price for a bottle drawn from a single cask malt. ‘Normal’ malt, the type we see on the shelves, is blended from a number of casks to a standard colour, taste and alcohol strength – all from the same year and distillery – so any slight vagaries will disappear in the mix.
PERFECT CONDITION
Conversely, a hogshead of 1988 Highland Park – a great name but not deemed a premium brand in the Far East – with 240 bottles in it and in perfect condition beat its top £60,000 estimate to sell for £62,000 (about £77,000 all in). Smith’s cheapest lot was a hogshead of 10-yearold, 2008, Craigellachie – not one of the better-known distilleries – with 238 bottles in it, which sold just under the bottom estimate for £7,600 hammer. He cautions that, once a whisky is 10 years in the wood, it needs sampling roughly once a year. This costs about £100 a time as the cask has to be located, sample drawn and then resealed. The longer the spirit stays in the cask the more the tannins in the wood affect the contents. Leave it too long and you can overpower and ruin it. Too soon and it will not have reached its full potential. It is for good reason that distilleries employ experts to look after the barrels as they mature and decide when is the best moment for bottling.
ANGEL’S SHARE
Cask is a generic term to describe the wood container the malt ages in – whisky stops aging the moment it is bottled – and come in various sizes. They must be made of oak and are usually ‘second-hand’ American bourbon casks. Bourbon rules state that a cask can only be used once, meaning that they can be bought reasonably cheaply: about £50 to £100 each. In contrast, oak casks that have held sherry cost about £1,000 each, making for a more expensive, premium brew from the outset. Casks can normally be used several times before the flavour from the wood starts to fade. Each cask is different; tastes slightly different – although each distillery has its own house style – and behaves differently as it ages. The spirit will evaporate while it is in the cask, at about 2% per year – the so-called ‘angel’s share’. The smallest typical cask size is a barrel, which starts off containing about 200 litres. Next up is a hogshead; about 250 litres. The daddy of them all, at about 500 litres, is a butt.
Most cask buyers store their malt either in the distillery or a bonded warehouse, which costs about £200 plus VAT per year. Each has its own contract terms as to what you get within that price and what costs extra. Only when you bottle it do you pay excise duty; currently £28.74 per litre of pure alcohol — so if it is 50% proof and 200 litres are left in the cask you pay duty on 100 litres of it, which equals £2,874 plus VAT. Then add bottling and labelling costs – you can create your own label – of about £1 to £2 per bottle. Mccafferty guesstimated that, at today’s prices (ignoring inflation), with your £2,000 initial cost and that cask yielding 200 bottles after 18 years of storage fees, it will cost about £40 a bottle for your own ‘2019, 18-year-old, single cask malt’. So, as long as you love what you have spent 18 years creating – you now have 200 bottles – and given that folk like us still love drinking fine malt, that should prove excellent value come that far-off day. And you’ll soon find you have legions of thirsty friends longing to toast you in your own malt for being so clever and far-sighted.