Distilling a great return - if you can bear not to drink it

Published on 15/12/2001 00:00

ASTONISHING auction prices for fine Scotch malt whisky means that such special bottles deserve a place in an investment portfolio as much as in the drinks cupboard. This autumn a single bottle sold for £15,000 - a new world record in the saleroom - which may cause many to change their Christmas wish list.

Malt Scotch has a distinctive style, derived from using malted barley and yeast in a pot still distillation. The single malt sector has seen "spectacular growth over the period 1975-1990, rising from sales of 2.1 million litres of alcohol in 1975 to a record 10.6 million in 1990," says Alan Gray, analyst at stockbrokers ING Barings Charterhouse Securities. This takes its share of Scotch whisky from 0.7 per cent to 3.8 per cent.

Today, 84 distilleries are working and producers are responding to international demand by releasing mature single malts, rather than simply using them in blends. The pioneers were Elgin merchants Gordon and MacPhail, who purchased young malt Scotch and released limited bottlings. They still possess one of the finest lists which includes examples from distillers long since closed .

Greater awareness of single malts and the opening of visitor centres have contributed to the increasing demand. Advertising by such leaders as Glenfiddich, Glenmorangie and The Macallan has boosted sales.

One of the innovative ways to invest is to buy your own cask. Bruichladdich on the island of Islay re-opened in May after being closed for eight years by Whyte & Mackay.

Under new owners, the opportunity to choose the type of barrel and level of peatiness is given to investors. For a refill Bourbon barrel of 200 litres, the cost is 775 rising to 895 for a former rum barrel. A fresh Sherry hogshead of 250 litres costs 1,100 and a Port one 1,200, while a re-filled Sherry butt of 500 litres cost 2,100.

Prices exclude excise duty and VAT which do not become liable until the Scotch is released from a Customs-approved bonded warehouse. No rental fees are paid for 10 years after which an annual charge - currently 20 per hogshead - is liable. Remember that evaporation of around 2 per cent should be allowed for, poetically called "the angels’ share". Insurance at the whisky’s replacement value is also included.

Bruichladdich won the coveted Distillery of the Year award for 2001 at the WhiskyFest in New York in October and so could well be a spirit to watch.

Without doubt, the star scotch at auction is The Macallan, a Speyside malt with real character, based outside the village of Craigellachie. Today it is owned 75 per cent by Highland Distillers and the balance by Suntory. Japanese interest in Scotch distilleries is quite prominent with Nikka Whisky Distilling owning Ben Nevis in Fort William and Takara & Okura controlling Tomatin in the north Highlands.

The Macallan still uses the low yielding barley variety of Golden Promise and Sherry casks for maturation. Since Sherry is now bottled in Spain, the distillery has to source the wood and have the coopers make the casks over there, ensuring it is first aged with sherry.

Such attention to detail by master distiller David Robertson and whisky maker Bob Dalgarno have seen demand for The Macallan rocket . Their latest creation is to replicate an 1861 bottling, which was found in Italy. More than 16,000 casks were nosed to select as close to the original delicate character of the original.

Only 2,900 cases of six bottles have been released of the replica 1861, available at 99.99 per bottle (01340 871471). Five years ago, The Macallan released an 1874 replica at 65 which made 240 two years later at Christie’s.

The key to a successful inventory is to buy strictly limited releases made at noted distilleries where the Scotch malt shows good age. The Macallan 50-year-old - restricted to 500 bottles - is one . By the bottle it was 50 in 1983, 1,250 in 1986, 2,750 in 1995 and achieved 9,350 in 1999, although part of the value of the latter may have been the number of the bottle, which was 007.

Robert McTear’s, the Glasgow auction house, holds regular Scotch sales, with the next planned for 17 April. Last week a Gordon & MacPhail bottling of 1950 vintage The Macallan made 280, up from 110 in five years for this noted 25-year-old. The 60-year-old is enormously in demand. With the label designed by Peter Blake, one realised 6,375 in 1991 and with the Valerrio Adami label 9,000 in 1999. In September, McTear’s achieved 15,000.

Last year the Guinness World Record was made when an English businessman based in Turkey, Norman Shelley, paid more than 231,400 for 76 bottles of The Macallan drawn from their archive collection. He plans to drink those distilled post-war and keep the earlier malts as an investment.

Not all malt is as expensive. A label for Private Eye readers with a range of differently aged malts shows how appreciation is evident for a small release. A total of 5,000 numbered bottles of The Macallan were sold at 35 each in 1996 and made 170 two years later and today 300.

A limited edition of 99 bottles of Bowmore 35-year-old distilled in 1964 at 42.1 per cent vol alcohol achieved 1,900 last week. The same length of maturity from a 1966 distillation at the same site, even at the higher strength of 43.7 per cent, made just 190 for two bottles. The crucial difference was the limited edition .

Unusual years can also attract investor interest. The 1941 distillate of Highland Park, the deliciously fragrant Orkney malt, made 380 at auction in 1994, rising to 700 two years ago. The bottling by Berry Bros & Rudd of the 1902 Highland Park sold last year for 2,700.

There are several specialist retailers in addition to the auctioneers. Consider the "Connoisseurs Choice" of both Ledaig and Port Ellen (available from Cockburns) and the splendid selections at Valvona & Crolla (such as Glenmorangie 1984 60 per cent at 55) and Royal Mile Whiskies, both in Edinburgh. Finally, consider the alternative woods now available - such as Chenin Blanc for Glen Moray and ale casks for William Grant’s Reserve.

Contacts: Bruichladdich 0141 842 3000, Cockburns 0131 346 1113, Gordon & MacPhail 01343 540 111, La Reserve 020 7589 2020, Robert McTear 0141 221 4456, Royal Mile Whisky’s 0131 225 3383, Valvona & Crolla 0131 556 6066.