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Scotch: bring home the barrel

LiveMint logoLiveMint 15-09-2017 Aparna Iyer

Scotch whisky has never had it better. Increasing acceptance of it across the world, and the rising awareness of the value of rare whiskies in vintage bottles has given it a big boost.

But what has really given Scotch the edge is its rapid rise as an investing avenue over the last five years.

Scotch is no longer limited to bottles shown off as collector’s items or opened after a day’s labour on the golf course. It is a commodity to be bought with the clear objective of making a profit.

Unsurprisingly, Asia is a hot market for Scotch investments. Unlike their US and European counterparts, who buy Scotch mainly to collect or consume, Asians have been buying whisky bottles off the rack with the motive of selling them down the years.

And, why not? Scotch whisky has proven why it is called liquid gold by giving the highest return, surpassing even equities, in the first half of 2017.

Data from Rare Whisky 101, a consulting firm that compiles an index, shows that Scotch gave a return of 11.5% for the first six months of 2017, the highest among asset classes, including wine.

But Scotch is a long-term investment. The Rare Whisky 101 index tracking the top 1,000 Single Malt Scotch bottles returned 405% over the seven years between 2009 and 2016.

A million pounds invested in Scotch in 2009 would not net less than a stupendous £405 million (around Rs2,400 crore) today. But since whisky returns depend on how rare the bottle is, there aren’t enough bottles to quench investors’ thirst.

It is no surprise then that buying bottles is not enough. And this is what WhiskyInvestDirect, a whisky trading website promoted by Galmarley Ltd, realized back in 2015. With enough patrons in the UK willing to put their money into barrels, the company saw the opportunity for channelling this willingness into well-known Scotch distilleries such as Ardmore, Glen Moray and Glen Spey that produce and warehouse the spirit. Patrons finance the upkeep of a distillery much like private equity investors buy shares to have a stake in a company.

The website has an impressive selection of brands, which includes those made in Ardmore, Glen Moray and Glen Spey. Barrels of these are up for grabs.

According to WhiskyInvestDirect, based on average price, newly produced Scotch over the past eight years is up about 143%, excluding storage and trading costs.

But before you call your wealth manager, you would do well to check some key factors.

The most important factor is knowing the product. Atlanta-based Mahesh Patel, counted among the biggest whisky collectors in the world and founder of Universal Whiskey Experience, says, “You cannot know whisky if you do not drink it”.

Patel buys two of every Scotch bottle he wants to add to his burgeoning collection (5,000 bottles at last count). “Every bottle I own, I have tasted the Scotch in it,” he says. Developing a whisky palate is crucial, he believes.

Not everyone, however, has a sophisticated whisky palate. Moreover, Scotch has mind-boggling regional varieties. Consider the age of the whisky, the cask maturation and even the base of the spirit, and suddenly Scotch looks intimidating as an investment.

In such cases, reputed and well-known brands are the best bets. Patel suggests that returns on Scottish whisky, especially from Speyside, never disappoint. Balvenie, Dalmore, Glenmorangie, Glenlivet and Macallan are some of the names he swears by.

He recommends that budding investors attend auctions and whisky-tasting events. The UK is the hub of such events and Patel himself holds one every year in Las Vegas, The Nth.

Since Asia seems to be a budding hub for whisky investors, where do Indians stand? Not many among India’s swelling tribe of billionaires want to be seen investing in whisky. A lot of this has to do with a culture that frowns upon alcohol consumption.

One day, perhaps, rich Indians will wake up to the investing opportunity in Scotch.

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