Pearl Diver – Part 3

**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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In our last article we listed four more of our suggested Golden Rules of strategic collecting and highlighted options to consider when faced with buying decisions 

In this, the third and second last article in the series we pose some more questions on collection strategies. We will also look at some lateral approaches to targeted collecting. We also suggest you should ignore the marketing hype surrounding some releases!

We will list another of our Golden rules, and the final two will be revealed in the final article of the series when we look at the issues around selling strategies.

Should you focus on the whiskey of your own country only?

If you live in Ireland and collect only from Irish distilleries, you immediately have a number of advantages. You can sell to private collectors as you can meet buyers face to face. You will have reduced shipping costs. The on-the-ground research is much easier. The knowledge network is much easier to tap into. Irish whiskey has rarely given us such an great opportunity to collect. The pace of change, the range of new distilleries coming online, the international popularity, the image of Irish whiskey worldwide. 

It’s truly a great time for Irish based Irish whiskey collectors.

Capstone collecting

Collecting only the final bottle in collections can be a great strategy. You can get involved in far more collections. The Midleton Pearl is an example of a capstone collectable. Obviously valued in itself as its 30 year old and only 117 bottles were produced. However its additional attraction was that for those with the 30 VR bottles (1984 -2014) it could be seen to be the icing on the cake to have the Pearl as well. 

Some capstone bottles are more obvious. Collecting  bottle 5 from the Teeling Company Revival series is an example and even though it is sourced whiskey the fact that it is the capstone bottle could drive its appreciation.

Timing is everything

Being second is OK but don’t leave it too long!

If you do not have the time or confidence to spot hidden gems of distilleries before they become popular then following an emerging trend is absolutely fine but do not leave it too late. Ardbeg distillery was mothballed in 1981, was restarted in 1989 and took until 1997 to come back to full production after being purchased by Glenmorangie PLC.

Regular release Ardbeg started to feed the market with increasing volume from 2002 on and If you collected Ardbeg bottles from before 1981 or from 1987 to 2000  then you would have seen great gain in price. If, however, you attempted to start collecting these bottles over the last 4/5 years you would now see yourself losing money. The enthusiasm has passed and the particular period bottle prices have settled down. They will have long term appreciation but the initial period of  appreciation has passed. 

Knowing when to get onboard and when to hold back is a skill worth developing.

Nobody ever got fired for buying the best 

Most people know that old adage about IBM “ no-one ever got fired for buying IBM” the same could be said in the whiskey business. If you only collect whiskey from the top 3 or 4 most highly traded and appreciated investor whiskeys you are unlikely to get criticised but there are a number of problems. Number one the entry price point for specialist bottles from the leading traded distilleries is very high. Secondly the investor value is well recognised so It’s harder to find bargains. 

Again looking to the property market for guidance one successful strategy is to buy the worst condition house in the very best area. If you are in the best location and do up a shabby house in that area your property appreciation can be very successful . The same could be said to be true for the whiskey business. 

A good tactic especially if you are on a limited budget is to focus on the outliers from the portfolio of the best traded whiskey distilleries you can see a good return in the medium term, not however in the short term.

“Follow the leader”

Personality Led distilleries, Importance of Change and result of take-overs.

Following famous distillery owners or internationally recognised master distillers can oft be an interesting way of identifying collectable whiskies. Master distillers will retire and brand builders /  business gurus who form and develop distilleries may sell their business to multinational companies.

As mentioned already change presents opportunity and with personality driven whiskies or distilleries there will be changes.  Be that change retirement, company move or sale.

One example from recent years are whisky from Glendronach, Glenglassaugh and BenRiach  . Why ? They did yearly limited releases, they had interesting historical bottlings selling at reasonable prices. They produced recognised great whiskey, they were the right size to suggest change was coming, They were owned by Billy Walker.

If big changes happen whatever came before has the potential to now become suddenly rare.

 In March 2017 these three distilleries were sold to Brown Foreman and change follows. Now this is the interesting part. From the purchased distillery’s perspective It could be a positive or negative change. It could be positive for the distillery and your collected bottles if the purchaser invests money and drives international recognition and territory coverage.

More people will learn about the distillery and want to buy historical bottles. The purchaser may decide to produce volume general release whiskey or feed their own blends and the previous special releases are now not being produced giving rarity to your collected bottles. 

Important to note that multinational ownership does not necessarily mean the distillery is going to go on to produce long term internationally recognised masterpieces. 

Johnny Walker owning Caol Ila has not, in my opinion, benefited the distillery from a brand development perspective as the vast bulk of the liquid produced is simply feeding the blend for an international audience.

It could also be negative if the purchaser does not develop and invest in the brand as happened to some Irish distilleries in the recent past. Ironically this may also mean that your collected bottles are not being produced as regularly, if at all, and again your historical bottlings are more valuable.

Given the historical performance of Billy Walker, should you now buy specialist releases from Glenallachie distillery as Billy Walker has purchased it from Chivas Brothers. There is currently great value in Glenallcahie whiskey and maybe Billy Walker can do it again?

The name association of Hall of Famers such as Jim McEwan, Barry Walsh, Brian Nation and others have with particular bottlings can be interesting focus for collectors. 

An interesting collection was the Black Art Series produced by Jim McEwan when he was with Bruichladdich distillery. This series satisfied many of my collection criteria, they were at the right price point,  they were different, interesting, produced by a distiller with a solid reputation. They were great whiskies and the collection had to come to an end when Jim retired. 

Adam Hannett replaced Jim McEwan in 2015 as head distiller and has continued the Black Art series which proves you cannot get it right every time! The original Jim McEwan collection is still recognised as a distinct collection so it’s a reasonable result! It also offers the opportunity to stop collecting this series at a natural break point and this is important. 

Are casks of whiskey worth buying?

Possibly  but maybe lacking in passion? This is an important criteria I believe! In Ireland over the last number of years there have been a number of opportunities  to become a founding father for many new distilleries and it’s a great support for fledgling companies looking to find platform finance. The price was generally around the €6k price.

You can alternatively purchase, for a mere 230k, a cask of the best whiskey that our largest distillery can produce. They will manage the cask and the required bottling process for you. For whiskey Clubs, which we refer to in this article, a cask purchase at this level may be an interesting option.

You will, in the case of founding father example, be not only giving much needed finance but also buying at a good price and will enjoy the journey with the distillery as an important VIP for the distillery. For those purchasing casks post start up there is enjoyment in visiting your chosen distillery and being made to feel part of the adventure.

There are a number of fundamental considerations. In most cases the casks can be sold back to the distillery on maturity. Associations and clubs may do a bottling run for their members with their cask. Individuals, if they don’t want to  sell the cask back to the distillery, need to consider what they are going to do with 5 to 600 bottles of whiskey? How do they get it bottled.?

The trend for most cask sales is for the distillery to insist that they manage the bottling in order to ensure protection of their brand. This, I think. is a good option for the majority of cask buyers.

The full costs needs to be carefully assessed as well as the risks.

There are many risks associated with cask purchase not least is a risk of distillery failure and complete investment loss.

“When its gone…. It’s gone!”

Should you collect discontinued distilleries?

Yes is the answer but with conditions. When Allman distillery closed its doors in Bandon Co Cork  in 1926  after 100 years of production it was a sad day for Irish whiskey. It had been a huge whiskey producer for the US and UK market as well as the domestic market. It produced over 450,000 gallons a year and had one of the largest malting floors in the British Isles. A rare bottle had an auction guide price for €15,000 in 2016. While the bottle did not make the expected €15,000 it gives a great example of what a discontinued bottling can return for an investor. 

I mentioned earlier that simply collecting general discontinued bottles is not a wise strategy. If the distillery was not well known or respected in the first place time is not going to increase in value simply because of the fact its discontinued. 

There is a nostalgia value within a territory however and also over a very long time period rare bottles may increase even from small local distilleries. 

As most people are aware here in Ireland in 2018 we have approximately 35 distilleries at various stage of planning and production. This is incredible when you consider we had only had 3 ten years ago.

It is, unfortunately unlikely all will survive and therefore releases from certain distilleries may become collectable (in Ireland) simply for the fact that they will be from a discontinued distillery. 

Look for Irish bottles abroad in non-specialist shops and supermarkets

When you are abroad look out for old or even rare bottles of whiskey stuck in the back of an out of the way dusty store.  5 to 10 years ago throughout Ireland there were numerous pubs and hotels selling up and there were great opportunity to buy up old stock. This is no longer the case and it’s harder to find these opportunities. This opportunity still exists in other countries. 

Unusual expressions

Many distilleries In search of a point of difference or to manage dwindling stocks, and/or  to accommodate an ever changing whiskey market. They are bringing out unusual expressions and finishes. With the use of non-age statement whiskeys due to aged stock shortages and / or awareness of marketplace changes, we are seeing more  new and unusual finishes.  

Unusual finishes could certainly be seen to honour the requirement for rarity. Also a series of whiskeys containing, for example, three different bottles with finishes such as one Sherry, one Port and one Bourbon has always attracted collectors.

Is collecting a wide variety of whiskey with unusual finishes a good strategy to build a collection?

Estate collections

The sad fact is that many long term casual collectors can leave a treasure trove of bottles after them when they die and for someone who is looking to collect in bulk this can give an opportunity to fill out their collection. An important point here for the family who have suffered a loss of a loved one is that we strongly advise they seek independent  valuation advice prior to selling. They may not have current correct price as it was their deceased loved one who may have been the whiskey fan. 

To those buying from an estate we hope they pay a fair price and not unwittingly take advantage of people possibly in distress. The whiskey world is a genuine community and its great to see that respected.

Are independent bottles worth collecting?

If you are faced with a choice of independent versus distillery releases then our suggestion is to select the distillery release. Independent bottlers like SMWS, Gordon and MacPhail, Berry Brothers and  Douglas Lang etc produce some fantastic whiskey. As an example I will always buy Gordon MacPhail Caol Ila whisky  instead of Caol Ila distillery editions for drinking pleasure. 

However when it comes to collecting whiskey we believe it is safer to pursue distillery bottles for future value. There are of course exceptions to every rule that’s the exciting thing with identifying great whiskies. 

Grouped releases though separate branding is also interesting, not an independent bottling as such, but different livery than the original distillery. Yearly Diageo Rare Malt Special Releases, for example, have seen excellent returns.  Initiated in 1995 by Scottish Malt Distillers, the forerunner to Diageo,  to market their discontinued distilleries. This ran for 10 years and ceased in 2005. It was added to in 2001 to start representing special releases from Diageo current distilleries. The series has universal popularity and is well worth considering as a collecting option.

Are whiskey clubs a good idea?

Again there is an interesting question at play here for whiskey fans. If you were offered the opportunity (with risks obviously) to make good money in the whiskey market but to have no involvement I would wager that most whiskey fans would say no. Money is not even close to the number one reason for our passion for collecting.

If however a small group of friends are working together in a club, sharing the research and buying, this can be fun and rewarding.   

Like all clubs they can easily end in disagreement and disbandment if the ground rules are not agreed in advance (in writing). Opportunity must exist for individuals to leave if their circumstances change with a formulae agreed in advance for them to cash out. It’s a basic requirement that  the members of the club are all at the same point of perspective from a budget level and view of how long the club should exist for.

Larger series collection such as 30 year bottle runs etc can be afforded easier through this method.

One interesting requirement is that no individual member can personally collect in the distillery or area that the club is chartered for collecting. This is obvious but many clubs forget this point when starting up.

Are outliers worth collecting ?

Being different can feel good and for collectors interested in odd or unusual bottles of whiskey it is good fun to chase down celebratory bottles celebrating special events or collecting very unusually presented bottles.  Many Scottish distilleries such as Glenfarclas and Talisker have, as an example, issued bottles celebrating 175 years and they are interesting whiskies. However if you use highest price as your search criteria for either of these distilleries neither of these celebratory whiskies will appear anywhere close to the top. 

Specialist collectors who are dedicated and hardworking can be very successful in building unique collections.  We suggest specialising in relatable collectables such as whiskey minis or whiskey paraphernalia such as mirrors.

Golden Rule #8 Ignore the marketing hype

In Ireland, as we all know, there is currently fantastic change taking place in the whiskey arena, but there is also some fantastical marketing stories being told. We all need to look behind the hype.

If you decide to invest in bottles which are either sourced whiskey or proprietary whiskey from fledgling distilleries then do your research. This is especially important for sourced whiskey which needs to be considered differently than proprietary whiskey.

Who’s behind the distillery? If its sourced whiskey is there a danger that they will only ever be a marketing company rather than a producer?, Is there international money being spend on promotion? what are their release plans? Have they international sales and distribution arrangements? 

Meet their brand ambassadors and learn all you can about them. Are they brand builders I.e are they are likely to be bought by large international brands owners. Is their product price/quality point acceptable.

This last point is a reasonable important influencer from a future reputation perspective. I specifically use the word ‘acceptable’ here because ‘liking ’ or ‘good’ is a matter of opinion. I have unfortunately experienced a few new releases which are being heavily promoted but their price to quality /age relationship is not logical. This is not going to help the future value of these products. 

This concludes the strategic collection questions for this series and in the next and final part we will consider three more areas. We will talk about fake whiskey, selling strategies and finally we suggest how you should store your whiskey.

We will suggest our final two Golden Rules as well as listing the full ten from the series…

Till then….. Happy Hunting..

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