The (Not So) Secret Science Of Whiskey Value When Investing
When people discover I’m the founder of an ultra-rare whiskey company, I can guarantee at least one question: “Jay, which bottle of whiskey should I buy that’s going to grow fastest in value?” It’s become an even more popular request since the news broke of a man who sold his collection of Macallan (his father gifted him a bottle every year on his birthday) to help pay for a new house. There’s nothing like the chance of windfall riches to pique people’s curiosity.
My answer always begins with the words, “It has very little to do with luck.” Whiskey value depends on several variables, most of which are predictable. Creating a great whiskey may well be an art, but shrewd whiskey investing is much more of a science. Essentially, the secret depends on three factors.
1. Less Is More
In much the same way as absence makes the heart grow fonder, rarity drives the whiskey price higher. Boiling it down to basics: the fewer bottles of an individual whiskey produced, the more valuable they are.
Going back to the story of the man buying his house with his birthday whiskey collection, his father chose wisely with the Macallan: it will always be desirable because it’s a top-shelf spirit. An investment of around £5,000 grew to £44,000. It’s a fairly decent return but is dwarfed by the world record price for a single bottle of 60-year-old Macallan (£1.45 million). The difference between millions and tens of thousands is rarity.
Whiskey is a difficult and expensive thing to make, so distilleries recoup their costs by producing lots of it. Jameson’s — the most popular Irish whiskey brand in the world — churns out more than 30 million bottles every year. Even a mid-shelf single malt like Glenmorangie will shift around 10 million bottles a year. While the whiskey might be good, it’s never going to rise in value significantly because there’s so much of it on the market.
While high volumes underpin standard whiskey production models, distillers do mix it up. A company might produce a very limited run of a specific whiskey, numbering the bottles. Obviously, the lower the number of bottles produced, the rarer that whiskey is, the more desirable it is to buyers and the more valuable it becomes.
Distilleries will absorb losses to release these special editions in the same way that a car company, such as Volkswagen, will sell models of its ultra-luxury Bugatti brand for around £1 million when they actually cost £5 million to produce. For a brand, the payoff comes in the form of priceless marketing and PR. For a whiskey buyer looking for the best ROI, the higher initial cost of rarer, limited production whiskeys will pay off in terms of much faster and more dramatic increases in value.
2. Special Events
As well as limited runs, there also releases linked to special events. Combine these two factors and whiskey value is likely to rise even further.
The Macallan distillery is again good at this approach. In 2012, for example, it released a special run to celebrate HM The Queen’s Diamond Jubilee (60 years on the throne). In honor of the year, just 2,012 examples were produced, retailing at the time for around £300. Savvy whiskey buyers snapped up the limited edition and, in just eight years, I’ve observed these rare bottles are now changing hands for around £8,000 (a 2,500% ROI). On the other hand, a standard bottle of 2012 Macallan has seen no significant price rise because it isn’t particularly rare and has no special associations.
3. Top Quality
Finally, whiskey value is dictated by quality, and one of the most effective shortcuts to discerning quality is to listen to the opinions of experts as expressed through international awards. In the way that an otherwise unknown book suddenly shoots to the top of bestseller lists if it wins a major literary prize, some of the smaller, bespoke whiskey houses gain instant recognition if they win an award.
Most recently, we have seen this in effect with the Irish brand, Teeling. As soon as the distillery’s Teeling 24 was awarded the gold medal at the World Whiskey Awards for best tasting single malt, prices leaped from around $400 U.S. a bottle to $1,500 U.S. a year later. Hakushu 25 is another example: In 2013, bottles were selling for around £700, but this rocketed to well over £3,500 when it won the award in 2018.
How To Make An Investment Decision
Rare whiskey buying as an investment, like any other luxury commodity, demands deep understanding, a keen eye for detail and sound judgment. While million-dollar bottles of whiskey are incredibly rare, there are significant returns to be had for those willing to do some research, watch for upcoming releases and stay one step ahead of the market.
My advice to wannabe investors is to understand what you’re buying. Research is key: keep abreast of the more established distilleries, know what releases are around the corner and be prepared to act first and fast as special runs come onto the market. It’s even more important when it comes to fast-emerging brands. Many of these new players are innovating as never before to create whiskey of extraordinary quality in very limited runs. Getting in on the ground floor here can help investors achieve the “buy low, sell high” holy grail — but only if they understand which distilleries and whiskeys will fly.
Self-control is obviously another prerequisite: sitting on some of the rarest whiskey ever made and not being able to taste it can be torture for someone who loves the spirit as I do. But I’ll let you into another secret: one of the reasons I started my own luxury whiskey brand was because, as a maker, I get to sample our exquisite creations and keep some back for my collection. So you can have your investment — and drink it.