Forbes Interviews Crowns 3

Single Malt Scotch

An investment alternative for investors with taste

Story : Phisanu Phromchanya Pictures : Noppol Paksuttipol/AFP

With fragile political situation and no clarity of how the things will unfold in Thailand, investors who hold on to key assets such as equities and other financial instruments are inevitably exposed to substantial political risks.

Thus, their investment portfolios could post significant losses should political situation worsen. The current unstable condition could be a fine opportunity for investors to look for diversification into new investment alternatives such as collectibles.

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For diversification and risk management purposes, a number of global investors have poured their funds into tangible assets such as jewelry, classic cars, art, watches, coins, stamps, and wine. Besides portfolio diversification, these assets are also considered to be low-risk investments that generate satisfactory returns.

One of the collectibles that is still very new to Thailand and possesses hefty growth potential in the years to come is whisky, which in this case refers specifically to premium single malt scotch.

“We’re seeing more and more people becoming creative with their investments. People are investing into collectibles. You’re seeing certain investment in classic cars, stamps, fine wine, and whisky now is really at the forefront of these.  It is therefore providing people with a safe haven for their money as it is a tangible asset as well as being counter cyclical,” said Charles Seddon, Chief Consultant at Crowns 3 Worldwide Consultancy — an international luxury investment concierge with expertise in whisky, wine, and art – told Forbes Thailand.

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“Whisky is a great way to diversify. In any investment, you need to look at certain criteria of what suits that particular individual. A lot of people like stability, a lot of people like diversification, a lot of people like ROI (return on investment). What I’m seeing is many investors are now diversifying and spreading the risk successfully into Scottish Single Malt”

Whisky: an interesting investment alternative

Ever since the late 1990’s there has been an increasing demand for Single Malt Whisky, especially in Asia and large parts of Europe. The flourishing whisky markets at the moment are Singapore, Hong Kong, India, Russia, China and South America, with escalating demand from eager investors constantly pushing prices of exclusive vintage and rare single malt scotch. Of course there is limited supply of such premium whisky available in the market since it requires up to 3 decades of production process. Thus, the thin supply does not match ever increasing demand and this is resulting in an excessive surge in whisky investment return and thus attracting new investors to cast their eyes on this alternative investment.

Over the past 10 years, annual sales of single malt scotch in the global market grew around 190% to USD1.1 billion in tandem with greater popularity of single malt scotch. Yet, only a limited portion is investment-grade.

While prices of other assets have been fairly volatile, “I’ve seen a huge leap in the (whisky) market over the past five years. In the U.K. market alone in the last three years, prices of the top performing 100 collectible whiskies have seen an increase of 230%, so yes certainly these are being seen as objects of desire as well as giving our clients a great return. Crowns 3 are in a very fortunate position as they have carefuly acquired their stock which dates back to Macallan Fine and Rare 1926, pre war crystal decanters, rare one off limited editions and extremly rare casks” Seddon said.

Liquid but drinkable investment

The status of whisky has been changed significantly. It is no longer viewed as a drink that belongs to people in the previous generations but premium-grade collectible whisky has become a symbol of high-end drink that indicates both social status and luxurious taste of the owner. Rare and vintage whisky is considered to be “piece of history that you cannot replicate, you can never go back in time to produce more of these classics.”

While art and wine also share similar characteristics, the available supply of rare whisky in the market is extremely limited. Therefore, investors are very keen in seeking collectible whisky to add into their collections.

Besides very thin supply, it should also be noted that rare and vintage whisky is now becoming a popular valuable gift for occasions like sealing a business deal. Receivers of these gifts may not recognize their intrinsic values and drink them off. Every bottle of rare whisky that is consumed will be taken off the very limited supply in the market and put upward pressure on the price of remaining stocks available.

“Some five-star hotels may purchase whisky in the cask to sell to their VIP clients for consumption. Once consumed, the supply of that certain whisky is gone forever,” Seddon said.

Reference prices of whisky are based mainly on the auction prices. Asian auctions normally settle at relatively higher prices than those in the U.K. market though the trend in recent years has been clearly on the rise for both markets.

“There is a certain volatility, but because the available stock of vintage whisky is extremley limited we don’t really see too much volatility or price fluctuation…I don’t have a crystal ball and I’m not going to guarantee anything to anyone but we are seeing dramatic gains in a very exciting market. It is important to note when you’re investing in whisky there are risks like in any walk of life, but I do firmly believe that as long as you have good advice from an expert or cosultancny like Crowns 3 the investment should always see you in good stead.”

“The biggest risk in this market is that the world stop drinking single malt whisky and that’s not really going to happen,” Seddon said.

The market for whisky investment is still in the initial stage, fairly small, and very unique. It requires time to make a decent return from this new investment alternative, which may only suit investors with abundant and obligation-free cash on hand. The volume of rare and vintage whisky sold through the U.K. market, one of the world’s key whisky auction markets, has risen to 8,500 bottles in 2012, with total auction value of USD 5.7 million, from 1,500 bottles in 2008. Auctions in Hong Kong usually reap higher prices than those in the U.K. and currently have total auction value of $1.5 million. Bonhams Hong Kong are now holding 3 auctions per annum. In january of 2014 Sotheby’s Hong Kong achieved a world record price of $ 630,00USD for the Macallan M decanter.

“We always advise our clients to look at this as a 3-5 years investment. Of course the longer one holds their collection the rarer it will become, Of course we also have clients that will look at this as a longer term investment of 10 years and more, so really it can be as flexible as you like” Seddon said.

How to make money from whisky investment?

The golden rule for whisky investment is to buy the right whisky at the right price. There have been quite a number of investors who entered the market and chased whisky simply because they read some articles without taking the proper advice from experts in the field. Making such moves without clear understanding of the market could be risky while return from such investment may not be as good. Here are some investment tips that Crowns 3 recommended to clients:

1. Look to build a collection

2. Look for limited edition runs – small production

3. Look for whisky of closed distilleries such as Port Ellen, Rosebank and Brora. These are no longer produced as the distilleries themselves closed during the 80’s and 90’s

4. Look to secure official distillery bottlings

5. Look for vintage bottlings

“Over the last 6 years Crowns 3 have been accumalating one of the largest and most comprehensive collections in the world and although prices have risen dramatically during this period we still continue to look out for those lost little treasures” Seddon said.

To start investing in whisky, potential investors are required to have at least USD50,000 to USD100,000 of available funds with no foreseeable obligations, preferably over USD100,000. We suggest that investors accumulate whisky in the top 10 brands, which are like blue chips of the whisky market.

10 Most Collectible Single Malt Scotch

– The Macallan
– Port Ellen
– The Dalmore
– Balvenie
– Ardbeg
– Brora
– Bowmore
– Glenury Royal
– Highland Park
– Glen Grant

Buying by cask

Besides bottled whisky, investors can also consider acquiring whisky aged between 18-year up to 50-year by cask from selected distilleries. Regarding this type of investment, Crowns 3 recommends to buy a Macallan, Bowmore or Dalmore cask between the age of 18 – 24 years old and keep it in the cask until it reaches 30-years of age, the appropriate maturity for bottling and reaping decent return. For instance, the average price of a single bottle of 30-year Macallan 5 years ago was $ 550 USD while the current market price is at about $2,000.

Seddon adds “We have put together the most extensive range of vintage single malt casks on offer anywhere. The demand for private labels is to celebrate various occasions and represents great profits for the Crowns 3 client. We are currently offering these to commemorate personal milestones, anniversaries and weddings. Luxury hotels, restaurants, corporations and private banks have been very active in the private label business, an extension of the bespoke experience they too can offer their clients and guests.”

Since casks are not totally airtight, a certain portion of the spirit is naturally evaporated during the maturation. The rate of loss, called the angle’s share, is usually at 1%-2% each year, depending on climate and location.

Most attractive collectible whisky at the moment

When asked of whisky that he would invest his own money in under the current market condition, Seddon said he would go for The 38 years old Ultimate Glenfiddich, a limited edition with only 600 bottles produced and sold specifically for the Chinese market. Each bottle is hand blown in crystal and is decorated with 24-carat gold and contained in exquisite curio case. The Ultimate 38 was sold out last year and we have already seen massive gains in the secondary market. The current market price in China is around GBP8,000 and in Hong Kong is around GBP6,000-7,000 per bottle

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The wolrd’s five most expensive whisky

1. Macallan M Decanter 6 Ltr Imperial
The special six-liter Macallan was old at the Sotheby’s Hong Kong in January 2014 at US$632,000.
2. Macallan 64 year old in lalique
The one-of-a kind lalique crystal decanter housed the oldest and rarest Macallan ever bottled by the distillery. The 64 years old single malt whisky was sold at Sotheby’s New York in 2010 at USD460,000.
3. Damore 62 Drew Sinclair
Only 12 bottles were made. One of the dozen was sold in 2011 at USD250,000.
4. Dalmore Trinitas 
A total of 3 bottles were produced and each cost USD160,000.
5. Macallan Fine and Rare 1926
Bottled in 1986, only 40 bottles were produced. The Fine and Rare 1926 was sold at
Sotheby’s New York in 2005 at USD75,000