Newsletter December 2015
Horst Luening

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Thank you for having subscribed to our Whisky.com Newsletter with the registration in our growing whisky community. Today you receive the second issue with a detailed look at the Scotch whisky collectors scene.

Kind Regards,
Horst Luening

Horst Luening 
The Connoisseur as Hunter-Gatherer
Whisky Collection
Whisky as a Collector's Item
Bowmore Mizunara

About 40 years ago I was given my first special bottle of whisky. It was a bottle of Teacher's Highland Cream in the unusual size of half a gallon. After the contents had been consumed rather quickly with friends (accompanied by headache and nausea), I couldn't throw away the bottle. First it stood in my bar for decoration, but when the whiskies became more high-grade it eventually had to go. However, it still had a third life as a candlestick. Later it had gone. I suppose I threw it away during one of my frequent moves.

Whisky bottles and their contents have always been collector's items, especially nowadays. More than a decade ago I witnessed an interesting conversation in the shop of a distillery in the US. The seller asked the customer whether he should empty the bottle and send the empty bottle to the customer via mail. I was completely confused. It seemed like a stamp collector who had just bought a mint stamp and immediately ran to the postal office to have it stamped. Where's the indulgence in that?

However, the resolution to this riddle was logical after all. In the US, the shipping of alcoholic beverages is forbidden by law (with a few exceptions). As a remnant of prohibition this law has been kept until today. Do they want to protect distributors and local retailers, or is there still a real reason behind it? Who can tell for sure? That's why until recently the US whiskey industry specialized in nice-looking decanters that always contained the same whiskey. Collectors bought and sold their empty bottles on the internet and could buy the appropriate content – if desired at all – at local liquor stores.

In Europe it has always been different. Collectors rarely buy whisky for the glass bottle or decanter, with the rare exception of clay jugs and ceramic decanters. That's why scotch producers bottled their whiskies in the so-called standard liquor bottle until roughly the turn of the millennium. The difference lay in the content, but also in the label, the cap and after World War II increasingly in designed additional packaging.

With the advent of the internet these different whiskies became more widely available, and a distinct whisky collector scene emerged. The best indication for the interest in collecting are more than 3,000 maintained whisky collections with ten and more bottles in the virtual whisky database on whisky.com

There are three basic types of whisky collectors. The first I want to call the hardcore whisky collectors. They specialise in certain fields of their own choice. They might for example collect one bottle of each distillery, all bottles of one distillery, all bottles of one vintage etc. There are almost as many collecting strategies as there are collectors. The hardcore collectors have a uniquely strong bond with their bottles. They would never resell or even open a bottle. I even know of hardcore collectors who have never enjoyed a sip of whisky.

The second archetype I want to call the savouring collectors. They enjoy savouring whisky and therefore always buy more bottles than they could empty. Savouring collectors often have a lot of opened bottles. At the same time they have a lot of unopened bottles, which all want to be tasted. While the hardcore collectors enhance ther collection straight on, the savouring collectors live in a constant conflict over which bottle may/should/must be opened next.

The third type is the value collectors, who are at great odds with the savouring collectors. The value collectors buy and sell whisky with the single intention of achieving an increase in value over time. They typically also savour whisky and thereby increase their knowledge about the content of the bottles. But just like the doves in the Grimm brothers' Cinderella ("...the good must be put in the dish, the bad you may eat if you wish.") the value collectors usually only savour the 'bad' whiskies, i.e. the whiskies that don't increase in value.

There's an interesting area of conflict between these three types of collectors, which regularly leads to fierce name-calling in forums and chatrooms. The savouring collectors and value collectors often blame the hardcore collectors for creating an artificial shortage and therefore higher prices with their collecting mania. For the savouring collectors this means that they can't afford a whisky due to its high issue price. Like many others they can't savour the taste of a special bottling. The value collectors are a bit better off, since their capital stocks allow them to buy the bottle. Yet they’re still angry that the price is already very high upon market launch, which means there are lower chances for an extraordinary increase of value over the next years.

A short example: From 50$ to 300$ you make 250$, or five times the purchasing price. However, when the bottle already costs 100$, you only make 200$. This doesn't look bad, but it's only twice the original price. This is a massive disadvantage for value collectors, who can only invest their money in fewer individual bottles for higher individual amounts.

But there's other collector combinations who together get mad at the third type. Savouring collectors and value collectors both frown upon value collectors. Their existence alone leads to a price increase of the bottles the supply of which was already short to begin with.

This common aversion against value collectors abruptly changes for hardcore collectors if they can get their hands on one of these bottles. All of the sudden the shortage caused by the value collectors makes this bottle a rare gem in their own collections. The hardcore collectors often don't care about the price. They’re much more interested in the increased sentimental value of their own bottles. Moreover, the value collectors can become something of a helper in times of need. If a special bottling is sold out with all retailers, it can often be purchased from one of the value collectors for a significant additional charge. After all, that's what the value collectors wait for. It's the purpose of their existence.

With globalisation also the sales ratio of blended whisky and malt whisky has changed in Scotland. While ten to fifteen years ago only 3% to 5% of the total whisky production was bottled as malt whisky, today it's between 10% and 15%. It's impossible to find exact numbers, since the Scotch Whisky Association (SWA) only publishes export numbers and not all producers are members of the SWA. Since the demand for malt whisky has tripled, the distilleries have also expanded the range of special bottlings. Wherever there is a market, the producers react.

In 1994/1995 it was a secure investment for value collectors to buy a bottle of Black Bowmore. The number of special bottlings of the distillery was limited, and the relatively generous limitation of bottle numbers kept the price at moderate 75$. At peak times those bottles were bought for 3,000$ by hardcore collectors. At that time the savouring collectors had already dropped out. They didn't rejoin the hunt until the prices fell again to 1,500$ in the wake of the financial crisis of 2008.

Today a never-ending stream of new bottlings is gushing from the distilleries onto the connoisseurs and collectors. But which bottlings should one collect?

Let’s have a look at Bowmore. In recent years alone, Black Rock, Devil's Cask I-III, Gold Reef, Small Batch, 100 Degrees Proof, White Sands, Springtide and Mizunara were launched on the market. The list is as long as it is incomplete.

Just like with other distilleries you have to ask the questions which bottling will survive for how long? Which bottling will be in the standard range of the distillery and be produced continually? And which bottlings have the potential to become collector's items in the first place? A knowing person can immediately spot the two candidates in the list above: The Springtide and the Mizunara. If you look at the prices of these two bottlings (200$/850$) it becomes clear that another player has entered the collector's market:

The producers themselves. They can estimate which bottles might become collector's items and can even control it by limiting the number of bottles, so they can enforce high prices already in advance. This affects the value collectors the most, since they have to share their margin with the producers, which already limits the speculation with whisky. But the hardcore collectors are affected, too. Instead of buying one special bottling they have to deal with numerous small batch bottlings. While you could be almost sure to get one of these rare bottlings in the past, it has become much more difficult with all the small batch releases. You now have arguably one tenth of a chance to keep your collection complete.

It gets even worse when distilleries like Ardbeg or Macallan only release their collector's bottlings on certain markets. Macallan pioneered and Ardbeg followed suit by releasing single cask bottlings for single countries. This meant for example that tens of thousands of collectors worldwide were faced with a few hundred Ardbeg Germany bottles. That's why I believe that the number of hardcore collectors of these distilleries has significantly decreased in recent years. After all, collecting must be fun! But if collectors can't reach their goals and must realise this fact anew with each new release, even the most ardent football fans (figuratively speaking) become unfaithful to their ever-losing team and instead celebrate the winners.

 
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