PLEASE NOTE: the following article was written in 2019 and therefore some of the references are now dated but hopefully the advice is still current!
Welcome to the final article in the Pearl Diver series where we will consider the selling strategies and choices we have when it comes to collecting whiskey. We will also look at the critical subject of how to store a whiskey collection. There are two more suggested golden rules to consider and we will also recap all 10 rules that we have used in the full series.
But first… let’s talk about fake whiskey .. they are out there folks!!
Beware of Fakes!
Last year (July 2018) McCallan removed some of their bottles from their museum in their brand new visitors centre as they feared a few historical important bottles they had acquired were fakes. It is enlightening and frightening to think that a distillery themselves could purchase fake bottles of their own whisky.
There are a number of factors that will influence whether you are likely to be operating in a market where fakes are prevalent. There are a number of precautions you can take to lessen the risk. The obvious safest way to buy is in the primary market only. I.e. straight from distillery or appointed retailer. Keep your purchase receipt which will make it easier to sell to secondary markets that may be wary of buying fakes themselves. Buying from reputable auction houses does not completely eliminate the danger of buying a fake, but it certainly improves the odds considerably. The lower the bottle price the less likely that counterfeiters are going to be interested in faking those particular bottles. It is likely that its only probably prevalent above €400 bottles.
If you are buying across borders especially from a country where the whiskey did not originate in the first place and it’s a leading distillery product in their leading collectables then there is greater risk of coming across fakes. Study photographs closely and know what the original distillery seal looked like for the age of the bottle. Ask the auction house to show you the very top view because while many distilleries use plain sided seals the very top should have the appropriate design for the period. However fakes are hard to spot, even if they look perfect they could still be fakes.
Keep your receipt from where you bought your bottles that will help track backwards should there be question marks later when you are selling your bottles
Golden Rule #9 Decide your selling criteria before it comes time to sell.
Passionate whiskey drinkers may dislike admitting that they have become a collector and now need to treat it seriously. Selling can be a big challenge for many whiskey folk. It can be hard to let go and it can be hard to figure out how and what to sell.
A down side to collecting anything that you are clearly passionate about is that it can be hard to sell. It’s very easy to justify to oneself why not to sell. Is it the best time from a marketplace perspective? Do I really need to sell? I’ll never get to drink this rare whiskey? Maybe it will be worth more next year? I’ll never see this bottle again?
The only unknown factor we should not be able to work out when making a commercial selling decision is will the price rise in the future!. Everything else can be worked out in advance, what margin we accept? Who to sell to? How does this fit with my collecting strategy?
The real reason for not selling may not be logical. It’s simply because we become attached to our collection and it becomes emotionally difficult to sell. This is absolutely fine given the complicated reasons why we collect anything but it’s just as important to understand what drives us. If you are comfortable about the amount of money you spend on what you deem to be a hobby then there is no issue whatsoever.
However many people have found themselves spending serious amount of money in an unpanned manner, getting caught up in the market fever and for them it might be time to take stock(literally!) and sell as wisely as possible.
It’s important to sell off or drink your mistake. If your new found passion for research tells you have bought the wrong bottle at the wrong price or at the wrong time – cash it in or drink it… it’s not going to improve over time.
Track the international whiskey markets and general economic climate.
It is critical to remember that we are dealing in a non-essential commodity and is subject to the whims and vagrancies of international financial trends. Your whiskey collection can be subject to rapid fall off in value and popularity if recessions come along. Having your selling strategy prepared in advance can help greatly in this situation.
Whiskey sales forecasting for 15 – 20 years in advance is not easy
There is an obvious lag between when whiskey is produced and when it is sold. In most distilleries this lag is between 7 and 18 years. in the last 5 to 7 years in many markets, where whiskey sales have increased above predictions, this lag has resulted in severe shortage in aged stock. This means that distilleries have to devise strategies to cope with the shortages.. We have also seen many great bottles disappear from our shelves, Jameson 18 was absent for almost 2 years. Powers 12 is no longer with us and many aged scotch single malts have also vanished. Its no coincidence that many 10 to 15 year old whiskey sold over the last 5 years have had far older whiskey in the bottle as distilleries dug into older, more valuable, stock to keep their product on the shelf
This was never likely to continue, unfortunately, and most distilleries have upped their production over the last 5 years and now have stock ready to be sold at 5 years old. The problem is that marketing and brand strategists do not like putting labels with 5 years on the label so that means that Non Age Statement (NAS) is a better option.
Why is all this relevant to collectors ? its general background to a certain level but it could also hint towards future trends. It could inform you as to when to sell your aged stock? When you should start considering (if at all) NAS whiskey as future collectables. Then there is the negative point to consider as there will obviously be a glut of middle aged whiskey in 10 years if the market takes a downturn.
If NAS overcomes the sometimes negative reaction that it receives from the more traditional whiskey community the distilleries can use younger stock as a matter of course. It’s much cheaper to sell 7 year old whiskey than 17 year old.
Younger drinkers may be more excited about the various creative finishes that distilleries have introduced to distract from the fact that the spirit is only 5 to 7 years old. Do the creative marketing messages, imaginative names / themes and exciting finish varieties appeal to a more modern whiskey drinking public? The secondary market obviously promotes this trend as well as their only stamp of creativity and their only claim to having any involvement is cask selection.
In 15 years will these be the main collectable whiskies?
This is only brief consideration of a couple of the many variables involved with whiskey forecasting but it is really interesting and I believe worth spending time exploring.
What general factors drive appreciation.
Throughout these articles I am suggested different ideas and options some of which are contradictory and some may be flat wrong!. Collecting whiskey is not a science and those of us who have a passion for whiskey are delighted that it’s not. The current worldwide massive demand and appreciation for Irish whiskey and indeed whiskey in general may not last. Dips will come. Values will fall. Through all this is there a formulae that can safeguard future appreciation?
I believe a combination of all or at least a few, of the following could be worth considering:-
Rarity – Not enough in itself but when combined with some of the following factors certainly guides a collection formulae
Reputation for greatness – Regardless of reality if the global market believes it – then that’s enough
International awareness – Universal (worldwide) awareness of the distillery the bottle comes from.
No longer available (from a discontinued large reputable distillery),
Specialist (not general release) product of world leading distillery,
Scarcity (both of the particular bottle but also the reputation of the style of whiskey).
Hindsight is easy Wisdom
Interpreting future trends from historical facts can be difficult and we need to be careful we do not assume it’s easy to predict what will be collectable whiskey 15 years hence.
Picture the scene – its 1984 you are walking into a whisky store in the UK and see that Bowmore have just brought out Bowmore Black and its £100. It’s a 30 year old whisky and they had previously brought out a 29 year old last year (in 1993).
Had you bought it and not drunk it would now be worth at least £9000. Now, here is where the hindsight wisdom comes in. In that same store you would have seen other distilleries offering 30 year old whiskies and their value may also have increased but nowhere near the level of the Bowmore Black. Some experts tell us it was obvious and we should have known. This is not the case and hindsight assumed wisdom is as dangerous as hindsight regret!
Set a selling margin.
This will help your selling strategy and control the emotional part of selling. The level of margin will depend on your view of required return and make sure to account for all ancillary costs such as auction costs, shipping cost. It also goes back to our golden rule #3 – Document diligently.
Golden rule #10 Pay attention as to how you store your collection?
We recently met a dedicated collector who has amassed a sizeable collection over many years which they kept in their attic with the bottles stored on their sides. They had done irreparable damage to many of their bottles due to damp, temperature variance in the attic and, of course having the bottles on their sides. Much of the damage was not to the liquid itself but to the labels on the bottles and the cases/ boxes the whiskey was stored in. Cork integrity was compromised due to long term contact with the liquid.
The good news regarding whiskey storage is that unlike wine, whiskey is a stable liquid and has zero bottle fermentation so with a little care and knowledge long term storage is not complicated.
Store your whiskey upright, in the dark (closed cupbord) ideally in a room with heating switched off and where the temperature variance is minimised (ideally between minimum 9 degrees and 16 degrees. Sunlight is the number one enemy of long term storage and the only really definite Golden Rule of whiskey storage is zero sunlight even if the whiskey is within a box the fading that occurs to the box due to sunlight can seriously reduce the value of your whiskey. For the liquid itself sunlight can damage the contents surprisingly quickly.
We recommend using Parafilm (or similar product) to seal the tops of all bottles especially screw tops of really old bottles it sticks only to itself and will not damage even the delicate tax seals you get for example on bottles from countries such as Italy. Screw tops have one eight of a turn left when they leave the distillery itself and many people are tempted to take up the slack in order to ensure full seal. This is not a good idea it I ineffective and it’s too easy to tighten too much and break the ring seal.
We recommend placing every bottle with a cork on its side for a day every 12 months to restore cork moisture. This is many times unnecessary but better to be safe than sorry. In addition for really old bottles especially if it appears it may have been stored badly prior to you purchasing it check the colour of the bottom of the cork prior to purchase. If it is black or blackish it may have been stored on its side.
Check your bottle neck for beads of moisture on the glass between the top of the liquid and the bottom of your Cork. If there is moisture beads it can indicate a seal problem again solid layering of parafilm will help the situation.
If you are unsure of the quality of the seal make a small mark, with a non-permanent marker, on the neck level to track if you have a seal issue on your bottle. If you do you may need to make a decision to drink it and enjoy it as serious buyers will be turned off by low neck levels.
With tie on labels affix a reference label detailing the key data from your spreadsheet to reference for stock control.
Most important… Make sure you know which are your drinking whiskies and which are your collectables. Arriving home from the pub late at night with a group of your friends it’s not uncommon to discover next morning that you have opened the most expensive bottle and you have drunk a treasured collectable. In itself not a problem as long as you enjoy it!
So….. That’s it.. we have come to the end of this series and hopefully there were at least one or two ideas or rules you found useful. I certainly have enjoyed putting it together and welcome any feedback or contact through the editor or directly to my blog.
I wish you best of luck on the wonderful journey that is whiskey collecting and will leave you with a recap of the 10 Golden rules.
#1 Collect for the Market place
#2 Research and learn about you particular area of Whiskey Focus
#3 Document diligently everything about your collection and it’s current value
#4 Spend many hours online watching auctions with PayPal turned off!
#5 Set definite, informed bidding limits for yourself
#6 Engage a strategy but dont marry it!
#7 Be totally focused but watch and account for change
#8 Ignore the marketing hype
#9 Decide your selling criteria before it comes time to sell
#10 Pay attention as to how you store your collection
OH there is one more extra and probably the most important Golden Rule
#11 Make sure you enjoy the whiskey journey and the really great whiskey friends and associates you will meet along the way.