A must read for Y12 (and any Y13 retakers) - I will be discussing on Sunday/Monday
Bottoms up!
Whisky lovers are draining the world’s supply of old single malt Scotch.
Thirst for
the liquor is booming around the world — from the U.S. to developing countries
like China — pushing prices of older vintages through the roof, attracting
savvy investors hoping to cash in and forcing distilleries to scramble to meet
demand.
“The shortage
of old and rare single malt … has already started, and it’s going to get
worse,” said Rickesh Kishnani, who launched the world’s first whisky investment
fund.
The problem
is that age-labeled single malt Scotch has always been, by design, a limited
commodity. Distillers produce a set amount in a given year with pretty much
zero visibility about what demand will be like when the bottles start hitting
venerable ages.
The industry
woke up to the current boom too late. In the late 1980s, many distilleries were
going out of business, and just a decade ago, Scotch exports were stagnating.
More capacity
is being added now, but the bad news for whisky drinkers is the shortage could
last another 10 to 15 years, experts say.
Asia finds
its love for Scotch
Enthusiasm
for single malt Scotch — whisky made from the product of a single distillery
rather than a blend — continues to surge. In the U.S., annual sales nearly
tripled between 2002 and 2015, according to the Distilled Spirits Council of
the United States.
Global single
malt exports jumped 159% between 2004 and 2014, according to the Scotch Whisky
Association. Asia now accounts for one-fifth of all Scotch exports, buying up a
quarter of a billion bottles a year.
“In China,
everybody is talking about it,” said Stephen Notman of the Whisky Corporation,
a whisky investment firm. “Nobody thought in a million years that there would
be a market there for 30-, 40-year-old whisky.”
The world’s
most expensive Scotch was sold in Hong Kong: a large crystal decanter holding
Macallan “M” whisky went for a whopping $628,205 at a Sotheby’s auction in
2014.
Pumping out more whisky
To combat the
single malt drought, some distillers are ramping up production.
“We are
currently working at full capacity — seven days a week, 24 hours a day,” said
Charlie Whitfield, a brand manager for Macallan. “We just need to be patient
and allow those casks to work their magic.”
By early
2018, Macallan, one of the world’s most popular Scotch brands, will have a
second distillery online. But it won’t be releasing bottles immediately — by
law, all Scotch whisky must be aged for a minimum of three years.
In recent years, brands including Macallan, Highland Park and Oban have also started rushing out bottles whose labels don’t mention the whisky’s age.
It’s yet
another way to help offset the strain on supply, as it gives Macallan the
ability to release the best whiskies at its disposal rather than waiting years
to put out more, Whitfield said.
Getting rich off the single malt drought
Meanwhile,
prices are skyrocketing for older whiskies. For example,
a Black Bowmore whisky aged for 30 years before its 1994 release initially went
on sale for $110 a bottle. But it now easily goes at auction for $7,000, said
Notman.
The
Investment Grade Scotch Whisky Index, which tracks auction prices, climbed 14%
last year, beating other traditional assets. Gold tumbled more than 10% over
the same period, while the S&P 500 was little changed.
Kishnani’s
whisky fund in Hong Kong, an ever-growing collection of 7,500 bottles, has
increased 26% in value since it started in 2014. The fund also includes older
Japanese whiskies, which are similarly spiking in value. “Silent stills,”
whiskies from closed-down distilleries, like Karuizawa, are doing exceptionally
well, as stocks are even more limited.
With more
supply on the way, prices will eventually peak in the years to come, said David
Wainwright, who owns a wine and spirits advisory firm.
But for now,
“there’s still plenty of mileage left out there,” he said. “Single malt Scotch
prices definitely still have further to go.”
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