Pearl Diver – part 2 of 3

Pearl Diver -  part two of three The Insights of an Enthusiastic Whiskey Collector Welcome to this, the second article in this series about the fascinating world of whiskey collecting. In the first article, we debated the contentious topic of buying whiskey for the sole purpose of making a profit. We listed the first 3 of 10 suggested golden rules for collectors. These were documented your collecting journey and whiskey collection diligently, commit early to the important work of research and finally think about what you are collecting from the perspective of the marketplace rather than your personal preferences. In this article, we will be listing 4 more Golden rules and explore some of the possible strategies to think about when embarking on the wonderful voyage of whiskey collecting.   But first, what about the mistakes one might make on the journey. Here are a few that we made along the way!   We rushed in too quickly with a scattergun approach to collecting rather than having a clear targeted strategy. We bought general release (continuous run) bottles allowing ourselves to be influenced by marketing messages rather than doing the detailed research we should have. We bought too many bottles at the incorrect price point i.e. in the low end of the market. Effectively we purchased before we were ready to invest. We invested in discontinued distilleries and were swayed by the fact they were simply discontinued. Probably our biggest mistake was getting carried away at auctions and not setting concrete limits, which resulted in us overpaying for certain bottles. We tried to learn about every market, every style and every distillery, spreading ourselves too thin and making it hard to do efficient research. We did not move to auction and private buying early enough for certain categories of whiskey that we should have and therefore overpaid for certain bottles.   Having learned our lessons (hopefully!) we look at some of the questions we went on to consider. Buy one bottle or buy 20? If you were lucky enough to have €10,000 to spend on a whiskey collection should you buy one bottle for that full amount? Should you buy 20 bottles for €500 each or would you be better to buy 100 bottles for €100 each? There are many interesting angles to this question and its partly related to truly understanding the reasons why you collect whiskey in the first place. It is also related to the decision on which whiskey market you are dealing in. Some markets are a waste of time to engage in unless you have the budget to spend very high amounts of money on individual bottles. When you consider the reasons why you collect whiskey, if you collect purely to see increase value then it is easier to argue for spending a large proportion of your budget on a well-researched single bottle. However, for many collectors, the pleasure of collecting is in achieving success in the hunting process and the thrill of the actual buying experience. Then there are the great people you meet and get to know along the way. There is obviously 20 times more pleasure to be enjoyed on the journey of buying 20 bottles rather than just buying the one! Another way of looking at this question is to ask.     ‘is there a price point sweet spot?’     There are many good reasons not to collect whiskey below a certain price point. Let’s take €100 euro as a notional price point and look at the negatives. From a simple storage point, you are now looking at storing 100 bottles. When selling you have to ship or transport far more bottles and perhaps, more importantly, if you achieve a margin of 30% it is only €30 per bottle with potentially far more selling activity required due to the number of bottles involved. Buying well above €100 moves you away from the mass market and towards the specialist market. The other great reason to get comfortable buying fewer bottles at a higher price is that any long-term value is going to be limited releases from internationally recognised distilleries and current best primary market bottles in this arena are well above €200. Our advice is to buy well at a price point of around €300 plus.     Golden Rule #4   Spend many hours online watching auctions with PayPal turned off!   There are many great auction sites that host monthly auctions and it is a research imperative to spend time identifying the whiskey you are interested in, note previous and current auction prices and then track the bidding but don’t partake! Build up knowledge of the whiskey you are interested in and you will be well placed to take advantage when your whiskey comes available at the right price. Set a period of time such as 3 months that you will commit to research but not buying.   Golden Rule #5   Set definite, informed bidding limit.   Been there and done this! It is very easy to pay more than you intend especially if you have not done your research and you and another bidder are driving up the price beyond the current general market price. The thrill of successfully acquiring that rare bottle sours quickly when you realise you’ve paid way above the norm getting it. And the problem is that we can justify anything to ourselves so again the reason for research and documenting everything is it makes us face documented and recorded reality! Should you focus on one distillery? A very good strategy is to pick the best the most internationally well-known distillery in a region and become more informed than average about that distillery. Learn everything about their historical bottlings, their current value, their international popularity, their future releases etc. This goes back to the maxims we like, be more informed than other collectors and understand what maximises prices in both a positive and negative economic climate. Buy their special releases, single cask numbered bottles only and collect all their primary series releases if realistic budget-wise. Ignore all other distilleries and distractions, buy only the best.   Should you focus on one country, one region, one style? Like focusing on a single distillery, this is a good strategy especially if you have limited budget or time. The above-average knowledge needed to be successful at collecting is much easier if you focus on a specific area, style or region. From a practical perspective if you enjoy travelling to whiskey distilleries and you focus on one region then it’s easier to visit. Single malt is not an example of what I mean by style. It would be narrower than that, Highland single malt would be a better example. Irish Pot Still is narrow enough to give you specialist knowledge. On a choice of focusing on a distillery or focusing on style, region etc we would always recommend the distillery focused approach. With the risk of repeating ourselves even for those with bigger budgets and more research time we firmly believe a scattergun approach does not work and spreading risk is not relevant for whiskey collecting.     Golden Rule #6   Engage a strategy but don’t marry it!   Constant reassessment of your buying strategy is crucial as you may discover, for example, you are in the wrong strategy for your budget or the market changes and your area or distillery of interest is declining in price. It is important to constantly look at what’s developing in the whiskey world. Perhaps a new region is worth focusing on because of the developing opportunity. A series of a particular whiskey is extended and where you thought you only need to collect 10 bottles in a series you now realise it’s going to take more money and time than you have to finish it. A decision to sell the first 10 bottles in the collection at the right time in a series is a very good strategy especially after say bottle 13 or 14 in the series is released and late adopters are anxious to backfill their collection. Look at the Japanese whiskey market for example. Five years ago, the prices for aged Japanese whiskey were relatively reasonable and slow-moving. Many collectors (including ourselves, unfortunately!) did not focus on this market. This market has changed completely, the stellar price increases and the pace at which it has happened has been phenomenal, resulting from also the reduction of aged releases and the shortage of aged stock. From a selling perspective, the popular global interest and growing Irish collector community is such that there are now eager buyers right here in Ireland for your collected Japanese bottles.   - "Another way of looking at this question is to ask ‘is there a price point sweet spot?’ -     Golden Rule #7   Be totally focused but watch for change   The key message is whichever strategy you decide the common denominator for all strategies is that you need to focus fully on your chosen area but not wear blinkers while doing so. One needs to be constantly looking to anticipate where there may be sudden changes giving you the opportunity and equally important identifying if you are collecting in a flagging area. An example of opportunity arose last year due to the fact that the increase in whiskey popularity in the last 5 years and as distilleries need to forecast for a minimum 10 to 20 years many distilleries discontinued some of their well-known aged whiskies, 18-year-old for example. This discontinuance was extremely predictable if you were focused on these distilleries. Much of the older spirit needed to be used in the mix for their younger core brands. Are discontinued standard bottlings a good investment? Every so often distilleries will change the livery (and sometimes the liquid) of their standard 10-year-old or 12-year-old releases. Over a long period, you could collec