Pearl Diver – Part 2

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!

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Welcome to this, the second article in our series about the fascinating world of whiskey collecting. In the first article we debated the contentious topic of buying whiskey for the sole purpose of making a profit. We listed the first 3 of 10 suggested golden rules for collectors. These were:

  • Document your collecting journey and whiskey collection diligently
  • Commit early to the important work of research 
  • Think about what you are collecting from the perspective of the marketplace rather than your personal preferences 

In this article we will be revealing 4 more Golden Rules and explore some of possible strategies to think about when embarking on the wonderful journey of whiskey collecting.

But first, what about the mistakes one might make on the journey. Here are a few that we made along the way!

We rushed in too quickly with a scattergun approach to collecting rather than having a clear targeted strategy. 

We bought general release (continuous run) bottles allowing ourselves to be influenced by marketing messages rather than doing the detailed research we should have. 

We bought too many bottles at the incorrect price point i.e. in the low end of the market. Effectively we purchased before we were ready to invest.

We invested in discontinued distilleries and were swayed by the fact they were simply discontinued. 

Probably our biggest mistake was getting carried away at auctions and not setting concrete limits, which resulted in us overpaying for certain bottles.

We tried to learn about every market, every style and every distillery, spreading ourselves too thin and making it hard to do efficient research. 

We did not move to auction and private buying early enough for certain categories of whiskey that we should have and therefore overpaid for certain bottles.

Having learned our lessons (hopefully!) we look at some of the questions we went on to consider.

Buy one bottle or buy twenty?

If you were lucky enough to have €10,000 to spend on a whiskey collection should you buy one bottle for that full amount? Should you buy 20 bottles for €500 each or would you be better off buying 100 bottles for €100 each? There are many interesting angles to this question and it is partly related to truly understanding the reasons why you collect whiskey in the first place. It is also related to the decision on which whiskey market you are dealing in. Some markets are a waste of time to engage in unless you have the budget to spend very high amounts of money on individual bottles.

When you consider the reasons why you collect whiskey, if you collect purely to see increased value then it is easier to argue for spending a large proportion of your budget on a well-researched single bottle. However, for many collectors the pleasure of collecting is in achieving success in the hunting process and the thrill of the actual buying experience. Then there are the great people you meet and get to know along the way. There is obviously 20 times more pleasure to be enjoyed on the journey of buying 20 bottles rather than just buying the one! 

Another way of looking at this question is to ask, “is there a price point sweet spot?”

There are many good reasons not to collect whiskey below a certain price point. Let’s take €100 as a notional price point and look at the negatives. From a simple storage point you are now looking at storing 100 bottles. When selling you need to ship far more bottles and perhaps, more importantly, if you achieve a margin of 30% it is only €30 per bottle with potentially far more selling activity required due to the number of bottles involved.

Buying well above €100 moves you away from the mass market and towards the specialist market. The other great reason to get comfortable buying less bottles at a higher price is that any long-term value is going to be in limited releases from internationally recognised distilleries and the current best primary market bottles in this arena are well above €200. Our advice is to buy at a price point of around €300 plus.

Golden rule #4 Spend many hours online watching auctions with PayPal turned off!

There are many great auction sites that host monthly auctions and it is a research imperative to spend time identifying the whiskey you are interested in, note previous and current auction prices and then track the bidding, but don’t partake! Build up knowledge of the whiskey you are interested in and you will be well placed to take advantage when your whiskey becomes available at the right price. Set a period of time, such as 3 months, that you will commit to research but not buying.

Golden rule #5 Set definite, informed bidding limit.

Been there and done this! It is very easy to pay more than you intend especially if you have not done your research and you and another bidder are driving up the price beyond the current general market price. The thrill of successfully acquiring that rare bottle sours quickly when you realise you’ve paid way above the norm getting it. And the problem is that we can justify anything to ourselves so again the reason for research and documenting everything is it makes us face documented and recorded reality!

Should you focus on one distillery?

A very good strategy is to pick the best, most internationally well-known distillery in a region and become more informed than average about that distillery. Learn everything about their historical bottlings, their current value, their international popularity, their future releases etc. This goes back to the maxims we like, be more informed than other collectors and understand what maximises prices in both a positive and negative economic climate.

Buy their special releases, single cask numbered bottles only and collect all their primary series releases if realistic budget wise. Ignore all other distilleries and distractions buy only the best.

Should you focus on one country, region, one style? 

Like focusing on a single distillery, this is a good strategy especially if you have limited budget or time. The above average knowledge needed to be successful at collecting is much easier if you focus on a specific country, region or style. From a practical perspective if you enjoy travelling to whiskey distilleries and you focus on one region then it’s easier to visit.

Single malt is not an example of what I mean by style. It would be narrower than that. Highland single malt would be a better example. Irish Pot Still is narrow enough to give you specialist knowledge.

On a choice of focusing on a distillery or focusing on a style or region we would always recommend the distillery focused approach. With the risk of repeating ourselves even for those with bigger budgets and more research time we firmly believe a scattergun approach does not work and spreading risk is not relevant for whiskey collecting.

Golden Rule #6 Engage a strategy but don’t marry it!

Constant reassessment of your buying strategy is crucial. You may discover for example, you are using the wrong strategy for your budget or that the market changes and your area or distillery of interest is declining in price. It is important to constantly look to what is developing in the whiskey world. Perhaps a new region is worth focusing on because of the developing opportunity. Perhaps a series of a particular whiskey is extended and where you thought you only need to collect 10 bottles in a series you now realise it’s going to take more money and time than you have to finish it. A decision to sell the first 10 bottles in the collection at the right time in a series is a very good strategy especially after say bottle 13 or 14 in the series is released and late adopters are anxious to backfill their collection.

Look at the Japanese whiskey market for example. 5 years ago, the prices for aged Japanese whiskey were relatively reasonable and slow moving. Many collectors (including ourselves unfortunately!) did not focus on this market. This market has changed completely, the stellar price increases and the pace at which it has happened has been phenomenal, mainly as a result of the reduction of aged releases and the shortage of aged stock. 

From a selling perspective the popular global interest and growing Irish collector community is such that there are now eager buyers right here in Ireland for your collected Japanese bottles.

Golden Rule #7. Be totally focused but watch for change

The key message is whichever strategy you decide the common denominator is that you need to focus fully on your chosen area but not wear blinkers while doing so. One needs to be constantly looking to anticipate where there may be sudden changes giving you opportunity and equally important identifying if you are collecting in a flagging area.

An example of opportunity arose last year due to the fact that the increase in whiskey popularity in the last 5 years and as distilleries need to forecast for minimum 10 to 20 years many distilleries discontinued some of their well-known aged whiskies 18 year old for example. This discontinuance was extremely predictable if you were focused on these distilleries. Much of the older spirit needed to be used in the mix for their younger core brands.

Are discontinued standard bottlings a good investment?

Every so often distilleries will change the livery (and sometimes the liquid) of their standard 10 year old or 12 year old releases. Over a long period, you could collect a series of previous releases.

There is a great sense of nostalgia with these types of collectables and for anyone with a reasonably small budget the bottle price is attractively low. While they will have been produced in huge numbers over a long period, the majority of bottles will have been consumed.

These old versions of standard bottles do increase in value especially if that particular distillery closes or stops producing that particular age release. 

Over a longer period (20 plus years) if you pick really great bottles you could see substantial increases. Keeping these bottles in good condition is important and if you take an example such as Green Spot 10 year old from the 1970s you can see the value that patience and rarity produces. 

Are sourced whiskey releases worth collecting?

Currently on the Irish market there are numerous fledgling distilleries offering their new whiskey to the market and while the marketing message nor the label will speak to the fact that it is sourced spirit, true whiskey collectors are fully aware of this fact. 

The Teeling Whiskey Company for example have already produced over 50 different bottles and some fine whiskey it is too. We are huge fans of many of their single cask releases for example. Their Sherry SC 10820 was a stunningly good whiskey which unfortunately is now extremely scarce. This was priced at €79 when launched 2 years ago. It is now fetching over €170 due to its quality and rarity. The key decision point for longer term collectors is however that none of these releases contain whiskey produced in their Dublin 8 distillery. Does this matter? 

Their now completed Revival series (5 bottles in the series over the last 5 years) have celebrated the opening of the Teeling Whiskey Company. 

They are a focus for many collectors as well as whiskey drinkers as they are good whiskeys, they have won over 170 awards since they were launched, are extremely well presented and they have a great prelaunch marketing story which is very appealing.

Just last month we have saw the release of Teeling Whiskey own Single Pot Still. They had a very successful launch of the first 100 bottles through auction. The remaining bottles have sold extremely quickly with huge national and international interest.

The interesting question is that in 10 to 15 years, when there will have been many more distillery releases of own spirit to come, will collectors view the original sourced whiskey releases differently from the distillery produced whiskey now becoming available? 

Should you collect the first only of a number of limited-edition series, or maybe the difficult to find bottles?

Another great strategy if you buy the first bottle only of a series as soon as its released and then wait. There is a great opportunity to gain value. Many casual collectors will not start collecting until no 2 and 3 are released and then go looking for the first which you will have available for them to buy once they have committed to collecting the full series.

Knowing full well the first one may end up being the one every collector will need once the series becomes popular. 

Setting out to collect only the difficult bottles is another idea. This does not use up your budget collecting numerous “ordinary” bottles. 

Should you collect only whiskey where there are a series of bottles in a series (limited numbers obviously) 

This is very well known and completely obvious method of collecting as many people may not be willing to put in the work to collect all the bottles and will effectively pay you for doing the work. You will then have the opportunity to sell as a set. 

Midleton Dair Ghaelach Grinsells wood release is a great example. It was released (all at once) as a series in late 2016 but bottles 1 and 8 (there were 9 In total) were released in the US and South Africa respectively. Number 8 was then latterly on sale in the US market. You could get 6 of the bottles reasonably easily but 1 and 8 took a little effort.

Buy the full collection early

If you are committed to buying a series of releases buy the full collection as quickly as you can afford or sooner even. The danger of not doing this is that you will struggle to find the last one or two bottles, pay high prices and your collection is yielding far lower margin than it should be.

Many strategy options to contemplate, and In the next article we will pose some more as well as suggesting a few more Golden Rules. Meanwhile happy hunting

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