The whisk(e)y blogs are rife with chatter right now over the idea of investing in a whisk(e)y collection. Two articles have been written, representing both sides of an argument that might see the current trend as a bubble, or possibly an opportunity to cash in. John Hansell's blog also has a ton of conversation going in the comments field about this issue. There are numerous well-written opinions and it seems that people generally have a lot to say about drinking or not drinking your booze. Is it really possible to invest heavily in whisk(e)y and make a financial return on that investment? According to some people it is. However, I don't plan on personally investing. Not for any moral reasons about the enjoyment of whisk(e)y or some evangelical belief in the soul of a single malt, but because I don't know where the future of whisk(e)y consumerism lies. I don't believe we're in a bubble, meaning I don't think the whisk(e)y market is going to crash any time soon. However, like pop music or fashion, whisk(e)y is trendy. I don't mean whisk(e)y itself, but rather the specific whiskies that people are actively searching for.
I've seen a few articles that advocate the purchasing of rare and limited edition bottles for an investment portfolio and that's a wise, if not overly obvious, piece of advice. However, rarity alone is not enough. As Dominic Roskow states in his take on the subject - the whisky has to actually taste good. People have to want to drink it before it becomes valuable or else there's no actual reason to buy it. In other words, if you want to become a whisk(e)y investor then you have to buy whiskies that people are going to want to drink five to ten years down the road. There will always be wealthy people who have no problem paying a premium for the best possible drinks. The question is - will you be sitting on what they want when that time comes?
While the pro-investment side of the issue believes that profit comes with smart selections, the anti-investment side thinks the time to get in has already passed and that a bubble is forming. There is another factor, however, that is being ignored here and it must be addressed: pop culture. I want to use SKU's analogy of baseball cards as an example (as he posted on Hansell's blog earlier). When I was a kid in the 80's we bought baseball cards thinking we were going to get rich in the future by leaving them in our parent's basement for a few decades, waiting for their value to appreciate. What we realized, however, was that every other kid was doing the exact same thing. All of a sudden, there was a glut of "rare" baseball cards from the 80's and our dreams of living off Topps, Donruss and Upper Deck were crushed. SKU believes that current whisk(e)y collectors are following the same pattern, putting away "collectable" bottles that won't be very collectable ten years from now if everyone still has them. Pop culture, however, can throw that logic for a loop if the right elements fall into place.
In 2001, Barry Bonds hit 73 home runs for the San Francisco Giants and everything linked to him went up in value - including a box of 1986 Barry Bonds rookie cards I had sitting at my parents house. All of a sudden, the bulk of dead weight sitting in my old bedroom had tremendous value. After communicating with a few collectors online, I was a few hundred dollars richer. Boom. Pop culture pays me for having the right product at the right time. The American whiskey demand right now is no different. Pre-prohibition cocktails are all the rage, people are drinking rye like never before, distilleries can't make enough, and suddenly there's a demand for more quality Bourbon. People start gathering at parties and they're drinking Maker's Mark instead of Dewars, a few names get thrown around, "Pappy Van What?" All of a sudden there's no more Van Winkle whiskey to be found. Make no mistake about this - the demand for George T. Stagg and other rare Buffalo Trace Bourbons is not about some new awakening of the American palate. It's also not the result of rarity or collectability. People want Pappy Van Winkle because they've heard it's the best, they want to drink it, they can't find it, and that makes them want it more. That's called popular culture and it's what makes people obsess over Justin Bieber, the iPhone, and any other phenomenon that drives people into a frenzy.
So, yes, if you bought a case of Old Fitzgerald in the 1970's and you're sitting on it now - you're going to make some serious profit. That's the original Van Winkle whiskey and that's what people want right now. However, Old Fitzgerald was dirt cheap back then and no one EVER thought it would be collectable. The same goes for old Michter's Distillery juice. People look at the profit being made by selling a bottle of Hirsch 16 year Bourbon at $600-$1000 right now and think - there's a sound investment. At least it was a sound investment. My point is, however, that no one saw this coming. No one said, "One day these distilleries are going to close, Bourbon will suddenly become popular among a new drinking culture of Americans, and this will lead to an educated base of enthusiasts that will eventually recognize the superiority of long, forgotten classics," and then filled their basements with cheap bottles of grocery store Bourbon. The Van Winkles have become the darlings of pop culture, desired by a rabid base of drinkers who are excited about drinking the absolute "it" whiskey of the moment. However, will Pappy Van Winkle 20 still be as highly celebrated ten years from now or will people be over the hype? I would ask yourself that question before spending a small fortune on an investment. Sure, it's Stitzel-Weller whiskey and it's incredibly rare, but that was also the case three years ago and no one cared. They may stop caring again.
As far as single malts go, that's a more difficult question. People are fascinated with mothballed distilleries like Port Ellen and Brora because they're supposed to be great and they're gone forever. The idea of drinking a lost whisky seems to captivate people - me included. No one gave two shits about the Port Ellen 9th Edition last year. Now it doesn't even make it to the States. However, is that going to be enough down the road? What's going to convince people to shell out serious dough for a bottle of whisky in 2020? Will it be old bottles of Cooley Irish Single Malts? Maybe Japanese whisky takes off and becomes the next must-have bottle for your house party. Who knows? The investor believes that if a whisky is rare now, it will therefore becoming even rarer as time goes on and increase in value. As long as someone still wants it, that is. In my opinion, pop culture will determine whether that is the case. If you're a whisk(e)y investor, I'd research fashion rather than futures.