Alternative investments. Whiskey
ARTinvestment.RU   03 апреля 2020

AI examines the differences, advantages and disadvantages of investing in whiskey market

18 March 2020, in the period of active transportation auction houses and their auction due to the coronavirus, unbeknownst to many in London held an auction of rare spirits, organized by Sotheby's. The auction, which is almost half of the participants came personally raised $4.4 million, with the majority of lots were sold within or above estimate. The most expensive lot in has become a bottle of 52 Year Old Karuizawa Cask # 5627 Zodiac Rat 1960: for $435 million (the average estimate of $260 million) it was acquired by a private collector from Asia, setting a record price for a Japanese whiskey. The results of Sotheby's confirmed once again: the crisis has almost no influence on the alcohol market, and buyers are willing to bargain for it, even with the threat to personal safety.

In recent years, whiskey has become one of the most popular segments of alternative investments. According to index, Knight Frank 100 Rare Whisky, rare whisky has increased in price over the last 10 years by 564 % and outpaced the growth rate of sports cars ( 194 %), coins ( 175 %) and rapidly developing class of collector bags ( 105 %). Another analyst report, Rare Whisky 101 for the year 2018 shows that the whiskey Apex 1000 index increased by 30 %, and the total value of the sold collectible bottles for the last year increased by 62 %. In addition, in 2018 the average price for a bottle of whisky at auction increased from £299 to £377, and the number of sold bottles worth more than £10 million, compared to a 2017-м increased from 91 to 265 pieces. In the last two auction season there were four absolute world record price bottles of whiskey: the most expensive of them, The Macallan Fine & Rare 60-Year-Old 1926, Sotheby's sold for $1.8 million in London in October 2019.

what are the main features of investing in the whiskey market, as well as differences from investments in objects of art?

1. The essence of the asset

In contrast to art objects, alcohol — is a non-current asset, and the last in the chain the buyer purchases the bottle for a record amount for drinking with friends or business partners. Some market analysts whiskey believe that the price of whiskey rose quickly from-за demand from China, local buyers often purchase expensive whiskey as a gift for business partners.

2. The methodology of calculation of indices

Analysts of the alcohol market, in contrast to the art market (Sotheby's Mei & Moses Index, Artprice Index), the account of repeat sales of individual bottles not being — accordingly, such factors as the compound annual growth rate (CAGR) and return on (ROI), the investor will have to rely only in manual mode, exploring the market itself. The main market index whiskey — Knight Frank Rare Whisky 100 — offers a growth market overall, based on the average cost of a bottle of one class over time.

3. Investment

Here the whiskey bypasses the art: a number of areas within the segment in which it is proposed to invest in the market of strong alcohol, a little more diverse:

• Barrel
On the art market of galleries do not provide the ability to invest in the career development of the artist, but whiskey is not the case. Some manufacturers will allow you to purchase one or more barrelsbefore the start of the distillation process. The package also included the cost of storage and increase cost of production. Barrel aged for 10 years, and its value is re-evaluated at the end of the period for payment of dividends. There are also companies-посредники dealing with the placement of your assets directly from the manufacturer, —например, Whiskey Invest Direct.

• Action
the Investor may become a shareholder in public companies — whiskey producers. For example, Diageo, which controls more than 30% of the global market of Scotch tape and produces over 35 million barrels per year (brands Singleton, Oban, Talisker, Lagavulin, Cardhu and Dalwhinnie). Shares with the Ticker symbol DEO traded on the new-Йоркской stock exchange, at the end of 2019 showed a yield of 2.9 % and 02.04.2020 have a market capitalization of $76 billion we will Remind that among public companies art-рынка to purchase shares of Artnet, Artprice, MCH Group (Art Basel) and about ten other.

• Investment funds
Along with the art-фондами offering investing in portfolios of artwork, there are whiskey-фонды. Hong Kong Platinum Whiskey — one of these options. The portfolio is usually diversified between the different varieties and countries-производителями whiskey, and maintenance costs are limited to the correct storage mode. In the event of financial insolvency by the end of the operating cycle of the Fund, the latter sometimes guarantees the return of direct investment assets, ie bottles of whiskey.

• Whiskey from the manufacturer
One of the simplest strategies — acquisition of new bottles from well-known manufacturers: the risk is divided between the investor (the storage mode) and the brand (sustainability position in the market). In statistics, with the investment scope at retail prices often purchased the collectible whisky Macallan, Glenlivet, Highland Park, Ardbeg, Dalmore, Glenfiddich, Balvenie and Lagavulin, as well as lesser-produced tapes, such as Mortlach, St. Magdalene and Glenfarclas. The difference between the retail price of the average bottle 8-летнего Scotch whiskey, bought in 2010 and sold at auction in 2019-м, shows compound annual growth rate at the level of 15.4 % per year. Subject to compliance with the storage, inflation and fees auction houses return on investment in this case would have amounted to an average of 7.9 % per annum. Concrete example: Macallan 1979 Gran Reserva, 18, with original retail price of £50 in 1997 at auction in 2016 was sold for £1.2 thousand Today the retail price of this bottle already is £5.5 thousand

• Auction hunting
Flipping (eng. flipping, flipping) — common name of the behavior of buyers of collectibles who spend most of time in market research and studies of auction catalogs. Their main goal is finding and buying the limited editions of whiskey at auction for resale. In 2019 auction houses of great Britain was sold almost 108 thousand bottles of rare whiskey, which is 29 % higher than in 2018, their total value increased by 63% to £41 million, the Average price for a collector's bottle of whisky increased by 21% to £362.

4. Risks

• Forgery
As in the art market, in a situation with a whisky buyer may face fakes. With a single reservation: to confirm the authenticity of the whiskey bottleyou need to uncork — in other words, to deny further turnover. While the discovered forgeries among the paintings, unfortunately, are rotatable on the market further. After examinations conducted in the year 2019, 21 rare old bottle of whisky with a total value of £635 was recognized a fake. Unfortunately, the number of fakes is increasing in the whiskey market in times of crisis — at high prices and high demand.

• Storage
to Securely store valuable varieties of whiskey pretty hard. As in the case of art objects, the investor will need a safe place with the special climatic conditions (dark, cool and stable temperature). In addition, given the small size of a bottle of whisky may be stolen or lost and also damaged in the event of a fire or natural disaster. Considering all factors, it is difficult to obtain and insurance policy for the whiskey.

• the loss of the manufacturer
When investing at the stage of distillation there is a risk that your barrels will be stolen, lost or destroyed in a fire during exposure by the manufacturer. Although the most common exposure secured by insurance policies, the insurance amount is set without taking into account the rising cost of whiskey in the process of maturation, that is, covers only the direct losses of the producer without regard of lost profits. Unsecured in this case is the investor. By the way, when in 2010, Glenmorangie has damaged 50% of their barrels, it simultaneously negatively impact and the market of finished products.

• the bankruptcy of the company
the Company-производитель in products where the investor invests, leaving the market: in rare cases, this would increase the cost of existing bottles (from-за restricted revolving Fund and proposals), often — to the fall in the value of finished products (whisky lovers do not like losers). According to statistics, long-running LIKERO-водочные plants are better protected from bankruptcy than put on the market "newcomers" with big-budget marketing campaign.

report of the Rare Whisky 2017 shows that more than 80% of collectors investment are not the main reason for the purchase of aged whiskey — is very similar to the art market. At the same time it speaks about perspectivity of investments in the field: the owner of a rare bottle more chances to meet the emotional buyer (the "last in the chain of sales"), are ready to buy a whiskey with a speculative mark-up. Of other advantages: for entering the market is not necessary to start with large investments, affordable investment with high rate of growth in every price range whiskey, and well-known brands produce affordable bottles in retail stores. This strong alcohol is different from the art market — Basquiat does not lie on the shelves at affordable prices, even in limited quantities. But his work, printed on mugs and mouse pads, — is already Souvenirs, the cost of which is not growing.

the Main quality you must possess investor in whisky — ability to wait at a corked bottle without the temptation to open up or at least sell it early.

Denys Belkevych, AI