Collectible liquor market: raising an investor's spirits?
While fine wine has long been of interest to collectibles investors across the globe, it appears that spirits are now coming of age, with many buyers willing to pay thousands for the right bottle.
Demand for craft and fine spirits has risen significantly in recent years and investing in this emerging new asset class can also fulfil the 'passion investing' element for many buyers as well as being a savvy way to diversify an investment portfolio.
Spirits investing has only been legal in the US since 2007, with the first legal spirits auction since Prohibition taking place in New York in that year. Despite this, collectors say that many bottles have been sold under the table for years, which ensures that tracking the performance of this investment sphere is made far more complicated.
Frank Coleman, senior vice president of the Distilled Spirits Council, which campaigned for spirits auctions to be legalised, said: "We did this to level the playing field with wine. Since then, prices, particularly for old, rare or limited single malt scotches, have risen tenfold or better. Rare Japanese whiskeys are also very hot right now. But, it is also true for some rare or sought-after American whiskeys, cognacs and other distilled spirits."
Another liquor expert, Per Holmberg, head of wine and spirits auctions for the US-based Christie's auction house, warns that many investors need to be willing to take a longer term view of investing in this sphere. Waiting at least ten years in order to see a strong return on a special bottle is commonplace, and there is still no way to predict exactly what that return may be, thanks to the relative newness of the asset class and its trading among investors.
The price that the bottle could be worth depends on numerous factors, such as the distillery, the price, the hype, the age, and the packaging, said Dr. Nick Morgan, head of whisky outreach for one of the biggest whiskey producers in the world, Diageo. Mr Morgan says that "Five years ago would've been a good time to start buying [rare whiskeys] but the real question is … how do you know if a bottle is worth the speculation?"
It is essential to read the label carefully – if the bottle claims to be a limited edition, make sure to find out how many bottles were released, as this can make a major difference in terms of saleable value. Indeed, many industry experts said that bottles that were part of extremely rare releases, or from closed distilleries, were not likely to drop in value, but investors should be wary about items that claim to be rare but are actually mass produced on an annual basis by major brands. These bottles will likely be too common to be a truly desirable collectible, something which will be reflected in their value.
Auction house Christie's had its first auction of American whiskey in June of this year, with lots including a rare one from the Willett Distillery, which eventually sold in a bidding war for more than double its $5,000 estimated price. Eager to cash in on this success, private collectors encouraged the auction house to include more spirits offerings and the house did no this autumn, selling bottles of rare bourbon.
Coleen Pantalone, a personal finance professor at the Boston-based D'Amore-McKim School of Business at Northeastern University, issued a word of warning to potential spirits investors, saying: "Investment in wine and spirits is fun. But it is risky. These are highly illiquid investments and they only increase, if you are right, over the long haul." Indeed, while stocks and bonds can fairly easily be sold on to another buyer, spirits investments could be harder to shift due to changing tastes.
"Buy your wine and spirits for the pleasure of having a cellar, not because you might make a killing someday," Ms Pantalone went on to say.