The Boom in Rare Whisky and What It Says About the Collectibles Market

Tuesday - December 19 2023, 09:46 UTC - 11 months ago

Whisky prices have skyrocketed in the last decade, due in part to investors entering the market and an increasing focus on the perceived authenticity of craft products. Single-malt bottles and barrels from Scottish, Irish, and Japanese distilleries have all seen a surge in popularity. The whisky market will continue to be an interesting field to watch in the future.

When a rare bottle of Scotch whisky sold for US$2.7 million in November 2023, I was stunned, but I wasn’t surprised.

The whiskey market has been booming for some time.

Bourbon brands like Pappy Van Winkle from Buffalo Trace distillery are selling for astronomical prices in the secondary market. Japanese whiskies, which have become popular over the past decade, now fetch prices up to 50 times higher what they did a decade ago.

And in July 2022, a single Ardbeg whisky barrel, aged since 1975, with enough liquid for about 500 bottles, sold at auction for around $19 million. In 1997, the entire Ardbeg distillery had been purchased by Glenmorangie Distillery for roughly $11 million.

How could a single cask of Scotch whisky sell for nearly twice the value of an entire distillery purchased just over two decades earlier? .

I’ve been studying specialty markets for a decade, and I see at least two stories to unpack.

One is economic, where items in low supply, like rare bottles or barrels, sell for high prices. And prices in the whiskey market have been rising rapidly over the last two decades, fueled in part by investors. Some investors see luxury collectibles, such as high-end whiskey bottles or casks, as an alternative to other assets like stocks and bonds. (There are, however, signs that the luxury market is softening due to oversupply.) .

But a second, overlooked – and arguably more interesting – explanation is social. It revolves around the increasing focus on the purported authenticity of craft products – especially ones like Scotch whisky, which trade on their heritage as much as their flavor.

A ‘brown spirit’ boom .

The history of whiskey is one of booms and busts.

Whiskey has been produced in Scotland and Ireland since at least the late 1400s. The spirit spread to the rest of Europe in the mid-to-late 1700s. The late 1800s and early 1900s were boom years, especially for Irish whiskey. The period also witnessed innovations such as aging the spirit in oak barrels, which enhances its flavor. (Scotch, Japanese, Canadian and Indian whisky is spelled without the "e," and Irish and American whiskey is spelled with the "e." Whiskey is the general category label.) .

In the U.S., Prohibition moved distilling underground until it made a midcentury comeback. Famously, the advent of "white spirits" like vodka and gin pushed down prices of "brown spirits" like whiskey starting in the 1970s. This led to what Scotch distillers call the "whisky loch," or "lake" – the accumulation of large stores of matured whisky and the resulting shuttering of many whisky producers.

But whiskey has made a comeback since 2000. Prices of some bottles, including highly prized single-malt whiskies produced at a single distillery, have risen by almost 600% over the last decade. American bourbon has also seen a spike in interest – and prices – since at least 2016.

Long perceived as an inferior knockoff of Scotch whisky, Japanese whiskies have also experienced price surges. The House of Suntory, the oldest Japanese distiller, recently announced its own substantial price increases in the primary market, in some cases by as much as 100%. And India, lagging behind the rest of the market in terms of global presence, has turned distilling into an export business in recent years – though the country’s range of spirits is still quite limited.