(Evening Standard, 7 November 1995)
FINE single malt Scotch whisky investment offer, the advertisement says. Send away for information, and you get a glossy brochure and hardsell follow-up phone calls asking when you might be ready to buy. The cost varies from £950 to £6,000 or more for a single cask (250 litre hogshead or 500-litre butt). You are given statistics purporting to show that your whisky might increase in value by up to 26,000 per cent over 30 years, and that you can assuredly expect growth of 18 per cent annually. There are, of course, imminent price rises: you are recommended to make an early purchase. When can they expect your cheque?
The Scotch whisky business is not an excitable one: it is run by canny and often taciturn individuals for whom the long view is second nature. In following the threads which lead back from some of these offers to the original distillers-the pillars of the industry - I have found an extreme jitteriness in many of those I have talked to.
The whisky men are worried. Their concerns are threefold: malt whisky is not necessarily a good investment, particularly for those unfamiliar with the industry; the prices asked mean, as one distillery sales manager put it, that much of this trade is "a scam and a ripoff'; furthermore, in the words of Willie Phillips of The Macallan: "You have no guarantee that these people will be around when you want to sell your cask." Or worse. "My worry," said another distiller who asked not to be named, "is that the cask an investor is buying may not exist."
Potential investors should remember that whisky is in principle unlikely to be such a good investment as fine wine, for the simple reason that fine wine is the product of a single harvest - nature's gift - whereas whisky is the product of an industrial process. Turn the taps on, shovel in the ingredients, and you can have as much whisky as you want.
THE reason why claret from 1982 has increased in value 10 or 15 times since release is that the year has not been duplicated since. In the whisky world, every year duplicates the last one. All investors can hope to do is capitalise on time-lag mismatches between supply and demand
Bear in mind, too, that profitable resale may not be easy. Broadly speaking, the malts offered fall into three categories.
First, and completely above board, there is one topclass malt whose independent owners are happy to offer it for sale in this way (and thus to countenance its eventual resale): Springbank. Since Springbank is among the greatest malts by anybody's reckoning, you are unlikely to lose your money on it though you may not gain fabulously since others are buying into the same malt. The secret to clever commodity investment is not only to buy the best, but to buy that portion of the best which is likely to be in short supply later.
The second category is topclass malts which have come on the market having first been sold for use as blending whisky-names like The Macallan, Bowmore and Highland Park are at present offered for sale in this way, much to the discomfiture and occasional fury of their distillers and trademark owners. As malts like these become established as world brands, their names are likely to become more and more vigorously protected. Indeed, the market leader, Glenfiddich, does not sell its whisky as blending material under that name but as Wardhead (and its sister malt The Balvenie as Burnside) to prevent anybody else ever being able to buy or sell a cask of Glenfiddich. Wardhead also contains a dash of Balvenie and Burnside a dash of Glenfiddich as a further foil. The plain fact is that you may face prosecution if you try bottling and selling a cask full of Macallan or Highland Park under those names in 15 or 18 years' time. "We will prosecute continually," promises Macallan's Phillips.
This is the reason organisations like the Scotch Malt Whisky Society sell their top malts under code numbers and vague regional descriptions. Your best chance under these circumstances would be to sell to such an organisation or to whisky blenders, and you are likely to need the help of experts to do so. You may still, of course, have made a good investment, provided you didn't pay too much to start with.
The third category of malts being offered for sale as investment are, regrettably mediocre or unexciting whiskies. These are unlikely to prove a good investment under most circumstances and especially not-when sold at inflated prices. The only possible exception to this rule is if the distillery is subsequently closed or demolished.
CASKS of malt whisky, in conclusion may offer good investment prospects but potential purchasers should exercise extreme caution before writing out cheques for multiples of thousands of pounds. Many of the prices being asked are way above their current broking price.
It is essential that you research exactly what you are being sold as thoroughly as possible beforehand: it should either be a top-class malt or a defunct malt, and I suggest you check the current broking price by writing to the director of the original distillery or distillery company. Insist that you are given HM Customs and Excise ownership documents and warehouse location as soon as possible after your purchase, and contact the warehouse to confirm that your cask exists and that you are its registered owner. Then sit back and wait for a decade or two, hoping the market for malt whisky grows as extravagantly as some of the investment salesmen predict it will. Oh, and have a go at the National Lottery, too.
In investigating this trade, I posed as a potential customer with money, a love of malt whisky, but only modest knowledge as to the background to the industry. Of the six companies I contacted offering malt in this way, I recommend two. These are La Reserve (0171 589 2020) and Milroy's (0171 437 0893). La Reserve's Mark Reynier has pioneered the sale of malt whisky in cask to the public with Springbank, and Milroy's sells only Springbank. You have a choice of woods (sherry, bourbon or, from La Reserve, rum and occasionally port). Milroy's price is best (£900 for a bourbon hogshead of new-fill and £1,850 for a sherry butt, including 10 years' free storage and insurance, compared with £1,000 and £2,200 from La Reserve, also including 10 years' storage and insurance).
La Reserve has a wider range: it is also offering malt from the currently closed distillery of Rosebank (a 1990 hogshead for £1,700) and the great Highland Park (a 1992 refill sherry butt for £2,400), though you are unlikely ever to be able to resell Highland Park in bottle as such. Both stress that this is, in the words of John Milroy, "a fun investment". Both companies are widely respected by those I talked to in the whisky industry.
The other four companies, concentrating on brochures and telephone sales, are Foursquare Spirit Supplies (0171 625 4324), Marshall Wineries (0181 875 1702), the Gibraltar-based Hamilton Spirit Management (00350 48424) and Westminster Wine Investments (0181 788 8997). Communication with the last of these has been difficult owing to its faulty answer phone, and l have yet to receive particulars from the company.
Foursquare Spirit Supplies sent me an offer of 1989 Fettercairn Glenfarclas, Glen Rothes and Tamdhu in hogsheads and butts, all offered at the same price, despite the fact that, when mature, Glenfarclas is likely to sell for a great deal more than the other three, which are second-rank malts at best. The price is very high: £2,300 per hogshead or £4,350 per butt (including one year's storage and insurance). I would consider a butt of 1989 Fettercairn at £4,350 extremely poor value and a doubfful investment prospect. Foursquare has also recently offered butts of Macallan distilled in 1990 at £6,500 - "a very very high price" according to Macallan's Willie Phillips.
Marshall Wineries, astonishingly, solicits cheques for new-fill hogsheads (£930) and butts (£1,750) without even specifying which malt it is selling. Enquiries reveal it is something called "GrandTully" from The Speyside Distillery. Grand Tully is a name used by Marshall Wineries itself for new-fill purchased from Speyside, a distillery built in 1990. The spirit may eventually prove to be of good quality, but as yet it has no pedigree whatsoever, and as such is an uncertain investment prospect. Marshall Wineries also claims to offer new-fill Bruichladdich, Auchentoshan, Bowmore, Glenturret, Glenfarclas and Burnside (ie Balvenie plus a dash of Glenfiddich) for the same price. If so, all are good value, and much better value than Grand Tully.
However, when I contacted the owner of Auchentoshan and Bowmore, Morrison Bowmore, to find out if it had sold any new-fill malt to Marshall Wineries, the company said that it had not and did not believe any of its fillings customers had. "I seriously doubt" said Morrison Bowmore's Andrew Rankin, "that Marshall Wineries could get their hands on any Bowmore or Auchentoshan new fillings. We will be contacting them to try and buy some ourselves to find out." Similarly, when I contacted William Grant, the distiller of Burnside, the whisky stocks manager said he had never heard of Marshall Wineries: "We haven't sold anything to them. It is possible that one of our customers may have sold on to them, but I think it unlikely." Those sending in cheques for Bowmore, Auchentoshan or Burnside to Marshall Wineries may find they are offered Grand Tully instead. Hamilton Spirit Management, like Marshall Wineries, asks you to send a cheque without specifying which malt is on offer: enquiries reveal it to be new- fill Tobermory from Mull at £1,145 per hogshead and £2,225 per butt (including 12 months' storage and insurance). This is doubtful value, especially since Tobermory (formerly Ledaig) is now made with unpeated malt, reducing its potential appeal as a single island malt. Hamilton also offers hogsheads of Macallan '89 at £3,700, Tullibardine '89 at £3,150, Bowmore '90 at £2,950 and Glen Scotia '91 at £2,950. These again, are all very poor value in financial terms at this moment (and remember that Macallan is only Macallan, from a malt drinker's perspective, if it has been aged in sherry butts, not bourbon hogsheads). Only the fact that Tullibardine and Glen Scotia are no longer in production increases their possible investment appeal.