How is Scottish whisky different from whisky made in other parts of the world?
Well, it’s Scottish, I believe it’s the best. It’s partly because of our heritage as we’ve been making whisky longer than anyone else, but also it’s smoother as Scottish whisky is usually double distilled. There is only one distillery that triple distills it named Auchentoshan in the Scottish lowlands. Even The Macallan’s distillation process is double and they generally use sherry casks since people like that sweet fruity taste.
Are there any up and coming whisky casks that are worth investing in from around the world?
Personally for investment, I would recommend Islay casks, simply because the demand for peated smoky whisky is growing and it’s become sought after since there are only eight distilleries in Islay. For example, if you go to the Isle of Sky in Talisker, they make peaty whisky with Glenterrace and some of the country towns. Essentially, it is a lack of supply that makes for a better appreciation in value. Another good location is Ireland since all Irish whisky is triple distilled.
How has it become such a lucrative alternative asset opportunity over the last 10 years?
In the 1980s there were 400 distilleries in Scotland and single malt whisky at that time wasn’t that popular and was considered an old man's drink. People tended to prefer gin, vodka and alcopop mixers. The Macallan was the first distillery to bring single malts to Asia, which consequently rose in popularity as the market started to enjoy single malt whisky as opposed to blended. It started in Singapore and Hong Kong about 10 years ago, when in the mid to late 90s whisky started picking up in Asia and other parts of the world. They also realised that there was more to whisky than the blended variations like Johnnie Walker and Chivas. At the time, blended whisky was a lot cheaper than single malt since it had a large variety of aged whisky in a single blend. I really admire Master Blenders for their skill at recreating the exact same flavour profile year on year using lots of different blends. With single malt whisky, it has proved more popular as people want to become more educated on the spirit, there is now a larger number of people that can afford it and especially in Asia, many wish to be seen buying the best. These days, there’s an acute thirst for more in-depth knowledge about single malt and distilleries. This translates into a growing trend for people wishing to own their own cask and ultimately try to bottle it themselves as a cask strength whisky as opposed to an original distillery release.
What kind of returns can people expect investing in a cask for 5, 10 or even 15 years?
Our general rule of thumb, based on our selling history is between 12-15% per annum based on your investment. Irrespective if you hold it for 5, 10 or 15 years the appreciation is generally the same. Some whiskies will appreciate a lot faster, in my opinion, I imagine with Islay whiskies you may get a high return as well as with some of the heavy weight distilleries. Perhaps their appreciation would also slow down as the younger unknown distilleries start to come into the forefront. People may desire them more given that they are lower in price, and this in turn will raise the value long term. With a lower budget, these are probably the better investment as opposed to buying The Macallan, Dalmore or Bowmore, which are traditionally the leading names in the whisky world. Firstly, with an expensive price this potentially leaves a smaller room for growth over the years within a person’s possession. However, you also need to factor in the availability, since casks from the top distilleries are also harder to get and so the value is traditionally higher. Since 1993, The Macallan has decided to keep all of the casks back for themselves and to do their own special bottle releases, where they make more money with sales. The Macallan has stopped selling casks from 1993 to the public, so you can’t buy any casks younger than that year. All The Macallan casks are special, but only available pre-1993. If considering, you have to think carefully looking at the ABV, what the agers have already taken from the cask, otherwise if you have a 15 year plan, they may find after 10 years that they have nowhere left to go and it needs to be bottled.
Is there a careful selection process when investing in scotch whisky casks, or can any will do?
There is definitely a careful selection, most casks need to be regauged at that point and it’s essentially a health check. If you are going to sell it, you will have it regauged, that will give you the ABV and the estimated number of bottles that are in the cask. They also look at the colour and there will be someone to taste it. If you need all these notes written down by an industry expert in Scotland, they will do it for you for a price. Not every cask is regauged, and there isn’t really a need for it since when that distillation happened there were hundreds of casks filled at the same time. So, they only need to do one or two tastes from that batch.
How has sales been during Covid-19?
Generally, at the start of Covid-19 it wasn’t affected much until about a third of the way into the pandemic. I think sales slowed because people were a bit afraid, now sales are picking up again, especially with the volatility of the other asset classes. If you look over a 10 year period with stocks and shares, what you put into the FTSE 10 years ago to this day has 1% appreciation. If you look at whisky it is gone up by 560%. Whisky never goes down in value, it may slow in value coming up or during the Covid-19 months. The appreciation this year is 6.8%, so it’s not reaching the magical 12-15% but that’s understandable because people are still tightening in their belts and now they are starting to realise that whisky is a good alternative asset and for the first time in 10 years gold overtook whisky as the best performing asset class.
Which has been the most popular to buy?
Glenrothes has been the most popular, as the distillery is owned by The Macallan. It is distilled in a similar way with the use of sherry casks and sherry butts. It’s started to pick up very strongly in Asia now with demand since you get more whisky for your investment.
By Rick Jenner
December 2020
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