Collectors pass up wines for whiskies as prices soar
“That was my eureka moment,” said Chan, who paid about HK$6,000 ($774) for the bottle two years ago. “The Ace of Spades was very, very rare already.”
Last week, a similar bottle went for HK$85,750 at a Bonhams auction in Hong Kong, 14 times what Chan paid and slightly more than the price of an entire case of 1982 Chateau Margaux that Sotheby’s sold in New York seven weeks earlier.
Forget Bordeaux first growths. Investors are falling over themselves to snag iconic single-malt scotches like Macallan, Bowmore and Dalmore, and Japan’s rare Karuizawa and Yamazaki whiskies. Bars dedicated to the amber liquid have sprung up from Manhattan to Singapore, and prices are rising to dizzying levels. Sotheby’s sold a 6-litre Lalique decanter of Macallan “M” single malt in January for a record HK$4.9 million.
“I’m not really an advocate of buying whiskey and flipping it,” says Heather Greene, director of whiskey education at the Flatiron Room in Manhattan, a haven for spirit lovers that offers tasting classes to aspiring connoisseurs. “But I’m getting questions from people asking if they should buy a couple of cases and sell them for double.”
Double? Try quintuple. According to the Investment Grade Scotch index, published by Whisky Highland in Tain, Scotland, the top 100 single malts delivered an average return of 440 percent from the start of 2008 till the end of July this year. That compares with a 31 percent gain in S&P 500 stocks index and a sobering 2 percent drop in the Liv-ex 100 Benchmark Fine Wine Index.
The surge in prices is great news for Mahesh Patel, an Atlanta real-estate developer who has amassed a collection of more than 5,000 bottles over the past 25 years.
“Everything I have is appreciating,” says 47-year-old Patel, whose cache is insured for close to $6 million. “I am a believer of buying two of everything. One to open and enjoy, the other you put away if it’s rare.”
One exception to his two-bottle rule is a Dalmore Trinitas 64 Year Old, which he bought in 2010 for 100,000 pounds ($166,455). Only three were ever made.
As the value of top malts rises, the temptation to keep bottles for investment gets stronger.
“Current prices make me hesitate about drinking as freely as two or three years ago,” says Chan, whose 500-bottle collection includes all 54 of the Hanyu playing-card series (including the two Jokers).
One reason for the price surge is that distillers simply can’t react to the increase in demand fast enough: Whiskey takes so long to age. Even a standard duty-free Glenfiddich or Glenlivet spends 12 years in the cask, and investment-grade scotches many more. The 1962 Macallan the villainous Raoul Silva offered James Bond in “Skyfall” was aged for half a century.
Whiskey, derived from the old Irish phrase for “water of life,” is made from a mash of fermented grain, yeast and water that is distilled and then aged in oak casks. A single-malt is produced from malted barley at one distillery.
As each cask ages, some of the spirit evaporates, a loss known as the “angels’ share.” A 50-year-old barrel can lose as much as 60 percent of its contents.
Some of the most-coveted whiskies come from casks left over from “silent distilleries” that ceased operation decades ago. A batch from Port Ellen on the Scottish island of Islay, which was shuttered in 1983, is still releasing vintages as they come of age. The 1978 sold last year, one bottle per customer, for 1,500 pounds.
A box of Mackinlay’s Rare Old Highland Malt was exhumed in 2010 in the Antarctic, where it had been left by explorer Ernest Shackleton in 1907. Protected by the Antarctic Heritage Trust, the 11 bottles will never be uncorked, but a wee dram was drawn from one by syringe and a replica produced by Whyte & Mackay in Scotland.
“I’d like to taste the original,” says Mark Gillespie, who runs virtual tastings on WhiskyCast from Haddonfield, New Jersey, and sampled the reproduction.
The rising demand for rare malts prompted Rickesh Kishnani, chief executive officer of Hong Kong-based Platinum Wines, to start the world’s first whiskey fund in June after raising $4 million in the first round of financing.
“There will be a gap in the market for 10-15 years between the supply of rare old single malts and growing demand, particularly in Asia,” says Kishnani.
Part of that demand is coming from wine collectors who are switching to the hard stuff after a 35 percent decline in the Liv-ex 100 from its June 2011 peak.
“My wine portfolio is not doing very well right now so I am diversifying into whiskey,” says S.K. Yu, who attended the Aug. 15 Bonhams auction of Japanese single malts.
He’s entering a more exclusive arena. There are only about 100 single-malt distilleries in Scotland according to the Scotch Whisky Association, compared with more than 8,000 winemakers in Bordeaux, which produces less than 2 percent of the world’s wine.
Whisky Highland founder Andy Simpson estimates the auction market for whiskey in the U.K., where the bulk of trading occurs, will reach 6.75 million pounds this year, up from 5 million pounds last year. In 2013, wine auctions raised about $278 million worldwide, a decline of 15 percent.
Added to the mix are whiskies from Japan, which opened its first commercial distillery, Yamazaki, 90 years ago. Japanese malts have been made more popular in the West by films like “Kill Bill” or “Lost in Translation,” featuring actor Bill Murray touting Suntory’s Hibiki 17-year-old blend.
“They made it easier for Japanese whiskey to cross the floor from the New World to the Old World,” says Marcin Miller, managing director for Europe at Number One Drinks Co. in Norwich, England, which distributes Karuizawa, Hanyu and Chichibu single malts.
The holy grail of Japanese whiskies is the Karuizawa 1960. Released in 2013, only 41 bottles were produced after 52 years of aging in the cask, and each cost about 12,500 pounds. It has an aroma of scented wood, dark chocolate, orange peel, citrus and honey, and tastes of pepper, malt, orange marmalade and liquorice, according to Chan, who tried it at an exclusive 12- person sampling at the Auld Alliance whiskey bar in Singapore.
Inevitably, whiskey’s popularity is spawning counterfeits, says Luigi Barzini, spirits specialist at London-based merchant Berry Bros. & Rudd. “There are a lot of fakes across Asia and some in Italy,” says Barzini. “It’s a big problem for all of us.”
Still, buyers are undaunted. “It’s crazy,” said David Wainwright, senior managing director of Zachys Asia, which is selling 70 lots in a Sept. 6 auction in Hong Kong. “Demand has exploded.”
The frenzy is making others nervous about the growing number of speculators. “A lot of people are jumping in now who didn’t think about whiskey as in investment four or five years ago,” says WhiskyCast’s Gillespie. “The needle is getting closer to the bubble.”
That doesn’t bother Patel terribly much. “I don’t see this as a paper investment, it has inherent value,” he says. “At the end of the day you can still open the bottle and enjoy it.”
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