Scotch whisky market booming, investors say
Fans say a wee dram of the right scotch could be better as an investment than as a tipple
With scotch whisky soaring in popularity and price, more people are buying single malts not just to sip, but also as an investment.
"Wine as an alternative asset for investment has been around for a long, long period of time," said Chris Watt, the North American marketing director for The Dalmore, a boutique producer of Highland single malt scotch.
"Scotch as an investment is relatively new, the market is relatively young, but the most recent data suggest that there are significant gains to be made," he said.
The millennial demographic is growing up drinking whisky, not vodka.— Whisky seller Chris Watt
Watt cites a study done by Whisky Highland, an independent investment house, that shows some cork-popping returns on investment. "If you had invested in the top 500 performing bottles at auction in 2008, in 2013, if you had sold them, you would have made a gain of 250 per cent over their original retail prices."
Watt is in town for the Liquor Control Board of Ontario's The Dalmore Dinner. For $495 Canadian per ticket, along with a four-course meal at Toronto's The National Club, attendees can taste a flight of Dalmore single malts including:
- The Dalmore Constellation Vintage 1992 ($5,266.05 a bottle).
- The Dalmore Constellation Vintage 1989 ($7,225.80).
- The Dalmore Constellation Vintage 1973 ($29,647.35).
- The Dalmore Constellation Vintage 1966 ($48,299.95).
"So folks who might not actually have the opportunity to buy some of that product will have the opportunity to taste it and compare it with what they can afford and what they do want to buy," said the LCBO's Heather MacGregor.
The Dalmore produces about 70,000 bottles of Scotch per year, a relatively small number. Prices range from about $65 for The Dalmore's 12-year-old Highland Single Malt — available in many Canadian liquor stores — to The Constellation Collection.
That features 21 bottles ranging in age from 1962 to 1992, including the 1983 vintage, of which only 43 bottles were produced. The 1983 is only available when purchasing the entire 21-bottle Collection. Watt says the Collection is valued at approximately $300,000.
Twelve of the Collections have been purchased thus far, Watt says.
In spite of prices like that, many who buy Scotch as an investment dispute the idea that it's a practice only for the rich. "Nothing could be further from the truth," says Andrew Ferguson, a Calgary scotch collector and investor.
"What's really interesting to me is that the type of people who are interested in it, who buy it are from all over the spectrum," Ferguson said. "Blue collar guys, I know of a plumber who put together a collection worth over a quarter of a million dollars of Macallan."
Experts say there are a few key things to remember when buying scotch for investment:
- Pick the right distillery: Stick to the well-known brands which already cater to collectors and investors.
- Go for limited editions: The fewer the bottles the better, ideally cask strength, single cask with a vintage.
- Buy upon retail release: A good strategy that experts say can result in quick gains.
But as with the stock market, there are risks. Take that Whisky Highland study. If, for example, instead of buying the top-performing bottles from that 2008 auction, you bought the worst-performing bottles, instead of a 250 per cent gain, you would have ended up with a loss of 61 per cent.
Canadians looking to invest in Scotch also have to consider that most of the whisky auctions are in Europe, with a few in the United States. Canadians often have to travel abroad to buy and sell investments, and it's illegal to sell any sort of alcohol in Canada without the direct consent of the local provincial liquor board (such as the LCBO in Ontario) or an officially licensed agent.
The market is certainly booming. According to Watt, more than 75,000 bottles of scotch were sold at auction in 2012, worth more than 13.1 million British pounds — about $24-million Canadian. Globally, the auction market is expected to reach 175,000 bottles per year by 2020, with total sales value of more than $69 million.
Bubble bound to burst?
Some, like collector Andrew Ferguson, who also manages the Kensington Wine Market in Calgary, wonder if the market for scotch may have peaked.
"The scotch Industry like any industry goes in cycles," Ferguson said. "The last big bust was in the late '70s early '80s." Distilleries then were increasing production just as the oil crisis hit.
Ferguson wonders, given the popularity of the whisky now, whether distilleries are currently producing too much to meet future demand. "In the last five years more than a dozen distilleries have been opened in Scotland. Half the distilleries have either doubled their production or built new production facilities to increase their production. This will start coming online in five, 10, 15, 20 years. And when it does there is definitely a risk there that ... there could be an over-supply," Ferguson said.
Still, the popularity of whisky in general and scotch in particular is such, that many, including The Dalmore's Chris Watt, see the market continuing to grow.
"Shows like Mad Men etc. have really driven Scotch back into the pop culture agenda. But importantly, the millennial demographic is growing up drinking whisky, not vodka."
Justin Gualbance, 31, said he started investing in scotch about 10 years ago. "A couple years ago, the Balvenie Tun Batch 3 came out in the U.S. and it was like, $200 US." Gualbance said. "I brought a couple bottles back and now it's going for over $1,000 US easily." Gualbance said his collection is now worth "about six figures."
It's so extensive, he said, he doesn't have room for it in his Toronto condo — he keeps it at his parents' house.