In recent years, whisky has climbed the ranks of alternative investments. It’s become a highly collectable asset, with a bottle of 1926 Macallan changing hands for 1.5 million at Sotheby’s in a new world record.
But is it profitable for the armchair investor to consider putting money into what the Scots call ‘the water of life.’
We’ll explore the subject of whisky investments, including the pros and cons, in our detailed guide.
Is Whisky a Good Investment?
The principal reason people invest in whisky is because it’s a tangible asset that usually increases in value over time. Aged whiskeys from reputable distilleries command high prices, and appear to retain value even during recessions and inflationary periods.
In fact, over the last decade whisky has proved to be a better investment than cars, first-growth Bordeaux or collectable watches. The Knight Frank Luxury Investment Index shows 586% price growth for the decade up to 2020 on some bottles of single malt.
With figures like these, it’s common to find whisky described as a ‘safe haven asset’ or ‘liquid gold’ because the price accrual hasn’t been affected by the vicissitudes of the macroeconomy.
While this is true, whisky prices have also boomed in response to cultural shifts in how we perceive this ancient tipple. In particular, rising wealth in Asia has increased the marketplace for fine whiskies, as super-premium whisky is seen as a mark of sophistication in countries like China and India.
But it’s not just Asian High Net Worth Individuals (HNWI) who are fuelling the boom in the whisky economy. Millennials the world over are changing the old-fashioned gentleman’s club image of the drink, and the rise in online investments has made it easy for them to fuel their passion.
Certainly, it seems as if the whisky industry will keep on growing for the foreseeable future. But like all investments, skill and diligence are required to pick one that will deliver the best return. It’s a physical asset, meaning casks or bottles can break over time. And because of the current success of the asset class, there are plenty of scams out there where inferior whiskies are passed off as the real deal.
In short, most experts say you should only invest in whisky if you know exactly what you’re doing and are working with a reputable brand with an established market. Whisky should only make up a part of your investment portfolio as part of a diversified strategy.
Of course, if it all goes wrong, you can console yourself with a good drink.
Pros and Cons of Investing in Whisky
- Whisky can be a lucrative investment, with some rare bottles selling for hundreds of thousands of dollars.
- The market for rare and collectable whisky is growing, with many investors seeing it as a promising alternative to traditional assets like stocks and real estate.
- Whisky is a tangible asset you can hold onto and sell in the future.
- Many people enjoy collecting and tasting whisky, so investing in it can be a fun and enjoyable hobby.
- The whisky market can be volatile, and the value of your investment can go up or down depending on various factors.
- Whisky can be risky, as it’s difficult to predict which bottles will increase in value and which won’t.
- It can be expensive to buy rare and collectable whisky, especially if you’re looking for a bottle that is in high demand.
- Storing and caring for whisky can also be costly, as it needs to be kept in a cool, dark place to prevent it from deteriorating.
How Does Whisky Investment Work?
There are two main ways to invest in whisky.
Single Bottle – The simplest way to invest in whisky is to buy a single bottle. In this case, the index on Rare Whisky 101 is a good place to start. Their index shows the most highly traded bottles at UK auctions for single malt whisky, meaning you can make a selection based on accurate data.
As an example, a wise investor in 1993 might have purchased a bottle of Black Bowmore Aston Martin DB5 1964 for less than £100. That same bottle would now be worth £50,000.
Whisky By the Cask – Buying whisky by the cask allows you to invest directly with a distillery on the product that is still aged in their cellars. Some of the distilleries now allow for direct investments or, alternatively, a broker will buy casks then store them in an insured and bonded warehouse, where they can be sold to investors.
When you’re ready to exit the investment, you can sell the cask to independent bottlers, auction houses or investors. In most cases, aged cask whisky ends up in a blended Scotch product.
How to choose the right whisky to invest in
Here are a few factors to consider when selecting a whisky to invest in:
(1) Rarity: As with any collectable item, rarity is a critical factor. Limited edition or one-off bottlings, especially those from closed distilleries or with unique characteristics, often command high prices at auction
|Macallan 1946||Single Malt||£460,000||Distilled in 1946 and bottled in 1986, it is considered to be one of the rarest and most expensive whiskies in the world.|
|Glenlivet Winchester Collection Vintage 1967||Single Malt||£18,000 per bottle||Only 100 bottles were produced, this is a highly sought-after and limited edition single malt scotch whisky.|
|Johnnie Walker Blue Label Ghost and Rare Port Ellen||Blended Scotch||£250 per bottle||This limited edition blended scotch whisky features rare and ghost whiskies from the legendary Port Ellen distillery.|
|Hibiki 21||Blended Whisky||£600 per bottle||A highly prized Japanese blended whisky made by Suntory and aged for 21 years.|
|Ardbeg Galileo||Single Malt||£150 per bottle||A limited edition single malt scotch whisky that was aged in ex-Marsala wine casks and is highly prized by collectors.|
(2) Age: Generally speaking, older whiskies are more valuable because of their more developed flavour profile. However, there is no guarantee that whisky will increase in value simply because it is old. Or indeed that younger whisky’s aren’t good investments. Here are some more recent whiskies that have performed well.
|The Macallan 18 Year Old Sherry Oak||Single Malt||Known for its rich, fruity flavour, some bottles from the 1980s and 1990s have sold for several thousand pounds at auction.|
|Yamazaki 18 Year Old||Japanese Single Malt||Highly sought after by collectors and has won numerous awards. Its value has increased significantly in recent years, with some bottles selling for thousands of pounds.|
|Springbank 21 Year Old||Single Malt||Produced in limited quantities and has a loyal following among whisky enthusiasts. Its value has increased recently, with some bottles selling for over £1,000.|
|Ardbeg Corryvreckan||Islay Single Malt||Highly regarded by whisky critics and has won numerous awards. Its value has increased recently, with some bottles selling for several hundred pounds.|
|Kavalan Solist Vinho Barrique||Taiwanese Single Malt||Highly regarded by whisky enthusiasts and has won numerous awards. Its value has increased recently, with some bottles selling for several hundred pounds.|
Brand recognition: Highly-regarded distilleries, especially those with a long history of producing exceptional whiskies, are generally a safer bet than lesser-known distilleries.
Condition: Bottles that have been well-preserved and kept in their original packaging are likely to be more valuable.
Investment potential: Look at historical sales data and expert predictions to see whether a particular bottle will likely increase in value over time. Keep in mind that there are no guarantees when it comes to investing in whisky – the market can be unpredictable, and many factors can impact a whisky’s value.
What Returns Could you Expect when Investing in Whisky?
Returns on whisky investments can range from modest to substantial, depending on the investor’s level of expertise and the specific bottles or casks acquired. According to some reports, high-quality, rare whiskies have seen annual returns of around 10% to 20%, although this should not be considered a guarantee. It’s crucial to note that these numbers are historical averages and may not necessarily reflect future performance.
Investing in whisky casks can also be profitable but tends to require a longer-term commitment.
How Safe is Whisky Investment?
The whisky investment market should be entered into with caution and with sound professional advice. While returns can be impressive, the online market for whisky investments has its fair share of scams and con artists, with unremarkable whiskeys sold off as super-premium and fine-print technicalities that put investors’ money at risk.
If you’re assessing a particular whisky investment, you should:
- Avoid any distiller or broker that promises an unrealistic percentage per annum.
- Beware anyone offering you a ‘guaranteed return.’
- Ensure you understand the legalities of Scotch whisky cask ownership. In particular, you’ll need a Delivery Order, a contract between the cask seller and buyer addressed to the warehouse keeper who is storing the cask. The DO confirms the transfer of ownership and, without it, you won’t own the cask.
- Cask whisky investment is not regulated by the UK’s Financial Conduct Authority, meaning you will not be liable for compensation in case of a scam.
Is Whisky Investment Tax-Free?
Investors commonly ask what the tax implications are of investing in whisky.
Whisky casks investments are free of capital gains tax because they are classed as a wasting asset, i.e. assets with a predictable life of 50 years or less
Whisky bottle investments are subject to capital gains tax because they could last longer than 50 years. If you sell your whisky bottle for a value exceeding £6000 per item, you will then pay CGT
What are the Costs of Investing in Whisky?
It is possible to invest in a cask of whisky for as little as £1000, depending on the distillery, age and the size and style of the cask. But the initial outlay is not the only cost you’ll need to factor in.
Whisky cask investments typically come with an annual cost to store your goods in a bonded warehouse. This is typically £40 pa per cask.
While some warehouses provide damage insurance, others require the investor to get this in addition. This cost will vary depending on the value and location of the goods insured.
Duty, Vat and Bottling Costs
If the cask is eventually bottled, duty and vat will have to be paid on it. If you merely sell the cask on to another investor, or a whisky wholesaler, this won’t be an issue you’ll need to worry about
Whisky Investment for Beginners
As a recap, here’s a total beginner’s guide to how to invest in whisky.
- Start with Research: Begin by conducting comprehensive research on whisky brands, types, and market trends. Familiarize yourself with the key players in the industry—Scottish distilleries are often a good starting point, given their long-standing reputation. However, don’t overlook emerging markets, such as Japanese and American whiskies, which have garnered significant interest in recent years.
- Initial Investment and Budgeting: Determine the budget for your initial investment. Starting small is advisable; you can always scale up as you gain more knowledge and confidence. Consider investing in bottles initially, as casks require a more substantial financial outlay and come with additional responsibilities like storage and insurance.
- Authenticity and Provenance: The authenticity and provenance of the whisky are of paramount importance. Always purchase from reputable sources and ensure that the bottles come with appropriate documentation. This will not only guarantee the quality of your investment but also make it easier to sell in the future.
- Storage Conditions: Proper storage is critical for preserving the quality of your whisky. The investment could be compromised if the bottles are exposed to fluctuating temperatures, humidity, or direct sunlight. Professional storage facilities, although an additional expense, can offer optimal conditions for whisky aging and preservation.
- Diversification: Although whisky can be a rewarding investment, it should not be your sole focus. Diversification is crucial in any investment portfolio to mitigate risks. Whisky investment can serve as a valuable component in a diversified portfolio but should be balanced with more traditional investment vehicles.
- Legal and Tax Considerations: Before making any investments, acquaint yourself with the legal and tax implications in your jurisdiction. In some cases, the sale of alcoholic beverages may require special permits or licenses, and profits may be subject to capital gains tax.
- Consult Experts: Finally, seek the counsel of financial advisors and experts in the field of alternative investments. Their insights can offer valuable perspectives and help you avoid common pitfalls.
Whisky Investments FAQs
How Can I Verify the Authenticity in Whisky Investment?
Investing in whisky can be a potentially profitable venture, as the value of rare and collectable whisky has increased over time. However, it is important to keep in mind that investing in whisky, like any other investment, carries risks and is not guaranteed to be profitable. It is important to thoroughly research and consider the potential risks and rewards before making an investment decision.
How much money do you need to invest in whisky?
The amount of money you choose to invest will depend on your financial goals and risk tolerance. If you are just starting as a whiskey investor, you may want to start with a smaller investment and gradually increase the amount as you gain more knowledge and experience. Typical cask whisky investments range from £1,000 to £65,000.
How Can I Verify the Authenticity in Whisky Investment?
Authenticity is a cornerstone of whisky investment. Always procure bottles from reputable dealers and seek appropriate documentation, such as certificates of authenticity, to confirm the whisky’s provenance.
How Do Macroeconomic Factors Affect Whisky Investment?
Macroeconomic conditions, such as interest rates, inflation, and trade tariffs, can have a significant impact on whisky investment. For instance, increased tariffs can raise the cost of exporting whisky, potentially affecting its market value and investment returns.
Is There a Seasonal Aspect to Whisky Investment?
Seasonal factors, such as distillery release schedules and annual whisky festivals, can influence market dynamics. Timing your purchases and sales around these events can be an advanced strategy in whisky investment.
How Do Currency Fluctuations Impact Whisky Investment?
Currency exchange rates can affect the cost of purchasing foreign whiskies as well as the profitability when selling in different currencies. Monitoring currency risks should be a part of any international whisky investment strategy.