A Comprehensive Guide to Whisky Valuation
For an investor in Scotch whisky, knowing the factors behind the current and potential value of the whisky you own is a vital part of understanding your investment.
As with many physical commodities, the most important factors are the cost of production and the demand for the final product. In the case of Scotch whisky, there is a third factor – the cost of maturation. The years and craft involved with turning the clear spirit produced at a distillery into the rich golden drink that has captivated consumers across the world are a critical factor in determining how desirable a whisky is.
How Is Whisky Valued?
The elements of whisky valuation are broadly split into three categories: production, maturation, and desirability. There is some overlap between these – for example, a good quality of maturation will likely make for a more desirable whisky – but in essence, all of the factors involved in how to value whisky fall into one of these camps.
Production
Scotch whisky has a very simple recipe – grain (typically barley), water, and yeast. The cost of ingredients is relatively low, and the valuation of the whisky here largely stems from the method of distillation. Grain whiskies use ultra-efficient column stills to produce large volumes at very low cost – perfect for bulk use in the blending industry. Meanwhile, malt distilleries use the more traditional method of pot stills. Each still has a slightly different shape, leading to a range of flavour unique to that distillery.
For blenders and independent bottlers, this is the most important factor in the value of the whisky. Distilleries like Blair Athol, Tamdhu, & Bunnahabhain may not carry the same recognition as Macallan or Glenfiddich, but to a blender, the strong and reliable flavour of the spirit they produce makes them very valuable.
Maturation
The factor that sets Scotch whisky apart from most other spirits around the world is when it comes to value maturation. By law, Scotch spends at least the first three years of its life aging in oak casks, and the oldest whiskies can stay there for over 50 years.
The flavours imparted by the wood make Scotch whisky the drink it is, and the more time spent in the cask, the more the flavours develop. Older whiskies are inherently more valuable, both for this reason and because whisky evaporates over time in the cask. This loss of liquid, known as the angels’ share, concentrates the taste of the remaining spirit and makes for a smoother whisky. A few years can make a world of difference – for example, a bottle of Chivas Regal 12yo sells for around £30, while the 18yo goes for approximately £75. Move on up to their 25yo release, and it will cost you over £300.
Importance of the Type of Cask Used
The type of cask used is also important. Typically, Scotch whisky is matured in bourbon casks made of American white oak, ranging from £70 for reused casks up to £250 for the freshest wood. These are used in single malts such as Glenfiddich, and make up the majority of most premium blends, for example, Johnnie Walker.
Some distilleries prefer the thicker, richer flavours imparted by European red oak, usually ex-sherry casks. While these are more expensive – up to £1,000 for a 450-litre cask – distilleries such as Macallan and Dalmore consider it a worthwhile investment, and these casks typically lead to a higher valuation.
Desirability
For the WhiskyInvestDirect platform, the most important factors are the two above. WhiskyInvestDirect deals mainly in larger-scale whisky stored in cask, providing low costs to investors and reliable demand from the blending industry for a medium to long-term investment. However, another avenue of investment, offering more risk but a potential for high returns, is in individual bottles of limited edition Scotch whisky.
In this case, the desirability of the brand or distillery itself becomes much more important. Distilleries like Macallan, Glenfiddich and Yamazaki have carefully built the reputation of their brand over time, and buyers are willing to pay a premium for limited edition bottles of their favourite brand. Key factors in the value of these releases include the age of the bottling, the number of bottles produced, and if there is any special significance behind the limited edition.
What Makes Certain Distilleries More Valuable Than Others?
What makes an individual distillery more valuable than another is difficult to say. Fans of Macallan and Talisker may swear that the premium value of their whisky is due to its superior flavour, but a more cynical observer might argue that clever product placement in the James Bond franchise and others has helped as well. Whatever the reason, it is a fact that names like Glenlivet are more widely recognized than Glenlossie, and buyers are willing to pay extra for the brand.
How Do Auction Houses Determine The Value Of Whisky?
How Can You Value Your Whisky?
WhiskyInvestDirect provides whisky valuations for all the whisky you own on our platform, using pricing and trading data from the wider whisky industry alongside recent activity on our Live Order Board. However, these valuations are only a guide, and it is important and useful to know how to value whisky yourself.
As we have discussed above, factors such as the distillery, the age, and the cask play an important part in your whisky’s valuation, but perhaps the best way to value your whisky is to look at actual sale prices of similar lines. On our Bulk Trade Bids and Trade Purchase & Withdrawals pages, we list over 400 cases where buyers from the Scotch whisky industry have bought back whisky from our clients, and the prices at which they did so. Comparing these is a great way to estimate how much the industry will pay for your whisky in the future.