Earlier this year I wrote about the increasing professionalisation of whisky buyers; whatever their motivation or end goal, there was clearly a digital arms race to beat the competition to the latest bottle. Then, we looked at the modern collectors who will move heaven and earth to secure the latest single cask in their bid to collect whole sets.
I’d originally planned to draft an article on “flippers,” but I’m going to swerve away from that terminology (other than the clickbait title) for the following reason: It is clear from talking about this at length that any individual holds dearly their own definition of the term “flipper.” On each and every occasion, the definition conveniently absolved them of any responsibility, whilst allowing them to complain bitterly about those who fall outside of their personal definition. To talk generally about flippers is like saying all Scotch whisky is the same.
The rest of this article is about the increasing professionalisation of modern re-sellers. The aim is to demonstrate how much effort goes into profiting from whisky’s secondary market, and ultimately to perhaps show why the gold rush is beginning to lose its momentum.
With all these controversial subjects I try to present the information to Malt readers with as much objectivity and neutrality as possible, so as to allow the informed readers to draw their own conclusions. So, it is only fair to start with a bit of a confession: I have sold whisky. In fact, a whisky that I consider a seminal moment in my whisky journey involved a “flip” before I really knew what that was. The whisky in question was the Octomore OBA and it absolutely blew my mind what could be done with peated whisky. I’d bought two when I could barely afford one and appeased my credit card lender by selling on the second and clearing the balance for both bottles. I regularly mourn that second bottle.
Once every couple of years since I have put a few bottles I have acquired into auction without much thought. Usually it resulted in some extra spending money for a family holiday or a bit more whisky capital. Last year, in the early lockdown period of working from home, I got a bit too caught up in bottle chasing. I decided to sell a few recently acquired bottles that, on reflection, I did not need nor want. My experience of registering, posting, processing, and eventually reaching a sale – and the stress of breaking even – was uncomfortable but enlightening. The entire process took me about 10 weeks, whereas I spot bottles going from release to auction in mere days. Take, for example, The Whisky Exchange April Fools Bottle which sold on Wednesday and was in auction on Friday. This experience demonstrated to me things were changing in the secondary sales market. Some people are gaming the system, whilst I was completely out of my depth. I have been trying to find out what’s going on ever since.
Ultimately, I met a couple of fascinating folk. The first chap (we’ll call him Derek) would describe himself as a drinker, collector and connoisseur of whisky who was prepared to explain just how much of an amateur I am in the whole secondary sales game. Naturally, I thought it was fit to share some of that with you, the Malt readers. The second person (let’s call him Rod) was equally interesting but had a totally different relationship with the water of life. Hopefully this reflects some of the variety of people involved in the reselling of whisky.
Before I start with the interviews, it’s also worth pointing out that the short-term reselling of whisky can account for 20% to 25% of any current auction’s content; that’s the scale of the issue here in the UK. Optimists will choose to focus on the fact that those figures indicate 75% to 80% of those auctions are older releases or vintage whisky that buyers would not have the same access to without the auction market. Angus MacRaild talks about the benefits of auctions in his interview with Malt. It’s worth bearing in mind that Whisky Auctioneer also has an annual turnover of about £40m.
Derek has been into whisky for about 7 years; initially he was looking for investments for a cash nest egg and heard something on the radio about whisky investment. At that time Derek found auctions were a great source of whisky well below retail price; tracking down interesting bottles was still quite easy. Before long the nest egg was fully invested, and Derek began reselling to make more money to buy the more investable bottles.
Rod only got into whisky investing during Lockdown 1.0, also looking to invest some spare capital and looking for investments different to traditional bricks and mortar, and more tangible than Bitcoin. Re-selling became a way of financing investment bottles and reducing the liability of the collection.
Malt: Investing was clearly a driver to begin to trade whisky but what motivates you now?
Derek: Investing is still very important to me; I have begun renovating a house that I could have only dreamed of buying 10 years ago. I would like to continue to lay down rare whiskies for the future. But I am now also a serious collector. When I started out, I would try to buy low numbers of releases, especially number 1s when they came out. This turned out to be a shrewd investment, but it was also really emotional to part with numbers 1 – 17 of a release from a closed distillery.
As many of the large distilleries had been around for hundreds of years, the idea of collecting from them felt like the collection would always be incomplete. When Daftmill began releasing whisky I realised that it was a distillery I could really buy into, because Francis Cuthbert was such a nice guy, because it was entirely his project, because it was small and – of course – because it was new. It also really helped that its whisky was very tasty too.
It’s also fair to say that because of my trades, deals and involvement in lots of different clubs, I am well placed to help people out now too. Often, people get in touch about a specific bottle, and I will know the best place to try to get one for them. That’s important as many of my friendships are built on the love of whisky.
Rod: Well, I have kids going to university in the next few years, so putting aside cash to pay for that is a real motivator. The short-term reselling helps with raising funds for that but – in terms of strategy – I always try to get 3 bottles of each release; to sell 2 and those pay for the third which I keep for the long term. I really enjoy the buzz of reselling and love the community of retailers, investors, and re-sellers I have met along the way.
Malt: When you were starting out was there much advice about whisky investment or communities talking about resale value?
Derek: Not at all; some people were giving me great advice on what to buy but nobody was taking about buying and reselling. Basically, while I was learning and researching about whisky there were a few crucial releases that really caught my eye, and I realised there was shorter-term profit to be made. Take the Macallan Folio 1s and Arran White Stag: you could turn these around quickly and use the profits to invest in something more long term.
Rod: Lots of people were happy to give me advice at first, and through those people I found a forum of investors who now keep each other informed and support each other securing bottles. When I joined, there was very few in the forum; now there are over 750 members.
Recently it has become more difficult to secure bottles such as the Glenallachie 30, released recently. I could not find one, but one of my contacts has offered me one at RRP. I now have 10 – 15 contacts who can help me, so I only need 3 to come back to me for any specific bottle. If 7 of those come back it’s more of a problem, as I don’t want to ruin that relationship by turning down something I asked for. Fortunately, when that happens, I can then forward on to others in the collector community who can take them at cost price from me.
Malt: What sort of time and effort did you employ to secure these bottles?
Rod: For me, I work full time so, on and off, it can average out about an hour and a half a day at most. My buying needs to fit in around my day job.
Derek: Well, I’m not the sort of guy to queue up all day to buy a Bladnoch Waterfall bottle, but I respect the guys that put in that sort of time. It’s just not me. What I found I could do was go into the airports with a £30 Easyjet flight to anywhere and buy 10 bottles of the travel retail exclusives and walk straight back out again, drive to the next airport, do the same, then drive directly to auction. People would pay crazy money to get these bottles and I guess they just never thought of doing what I was doing.
My work took me all over the country at the time, so it was only a slight inconvenience to grab bottles as I passed. I had made loads on the Game of Thrones set before anyone else cottoned on there was a quick buck to be made, Macallan Concepts were great this way too. On one occasion I discovered that I could secure 4 bottles of the Macallan Exceptional Series from a shop in Dubai so we flew over to collect them and had a holiday knowing full well one bottle would cover the costs.
Malt: Did you get left with any Game of Throne bottles after the price crash?
Derek: Ha ha ha! Well now you come to mention it… I’ve heard of lots of people stuck with these. I have one complete set, but I’d made plenty from other sets I’m quite happy to sit on this. You actually see the prices creeping up again now. It was a really great collectable release; I know how big the GoT series had been around the world. Fortunately, a few of the bottles are quite drinkable so I can always do that. Imagine those re-sellers who don’t even drink whisky? What will they do with their GoT sets?
Malt: What sort of profits are we talking about here, and do you need to worry about the tax man?
Rod: I could say definitely £1,000 a month but, for me, it’s not really about the money. It’s about covering the cost of the bottles I want to keep. So, I’m not tracking it as profit as such.
I don’t know about how other people do it, but we are managing within our personal tax limit as per our accountant. So, we are confident we are tax efficient but compliant.
Derek: Well, I don’t want to go into specifics as you can imagine, but – given that it’s not my main job – it’s been decent. I cashed in £30,000 worth of whisky recently and probably have two to three times that value in investments still. It’s difficult to quantify when you are also enjoying drinking the profits! Are they even profits then? As for the tax man: actually that’s why I got into whisky. I understand it’s a wasting asset and free of tax.
Malt: Have you seen the market changing recently, and what has been the impact?
Derek: Well yes, actually: the Macallan Folio releases represent the beginning of availability getting squeezed. Initially we saw a “1 bottle per person” rule, and now we have to compete with bots for new releases. I have always worked on a “rule of 3” for any significant release. If you get 1 you keep it as an investment, if you get 2 you keep one and resell the other to cover costs, and best of all is if you get 3. That way you can keep one, resell one to cover costs and the third you can drink. Naturally, as availability has shrunk getting 3 these days is much harder. Social media, bots, WhatsApp groups, forums… the whole internet seems to be chasing the same bottles!
Bots are not my thing, and recently I have eased off chasing the new bottles; the gains are small compared to the hassle.
Malt: So, what is your purchasing technique?
Rod: Well, I don’t have much experience yet with buying from independent bottlers (IBs), so concentrate on official bottles (OBs). But, having said that; I can get all of the Thompson Bros bottles via my retailers; some go to sale, some lose money, but I also keep them because they look nice. I don’t have great experience with IB bottles at resale, so I try not to buy them. I prefer to focus on the OBs. I find securing bottles using the personal relationships established between the retailers and myself is most important. I also sometimes use the new release alert bots in the forum I am in, but often I am just not online at right time. The retailers local to me have specific lists for good clients such as investors and collectors, so usually that’s the best way to get something I’m after.
Spreadsheets are so important to keep a track of all my purchases; where the bottles are held, what’s going to auction, which credit card I have used, and which cards needs to be paid and by when. I do this at the weekend, and my partner helps out with packaging parcels to go to auction.
Derek: Well, wherever possible I try to maintain the rule of three, but above that: it’s all about relationships. You know me, I love to talk. I like to hang about and chat with folk. If you are scouring the internet on release day for something you are already at a disadvantage. You need to work your whole network and understand how you can help people out and they will help you back. I mentioned I collect Daftmill; I’m happy to say that most of the time I’ll have some retailer hold onto a bottle for me. Not because I drop in once a year before a release day and ask for one, but because I am a good customer the rest of the year; I spend time chatting to them, getting to know them, and I buy not just the popular whiskies that everyone wants but the unpopular and unloved bottles, or whole sets.
I know guys who pay people to enter ballots for them because I’ve had to pay £300 to £400 over retail to secure bottles for my collection from those guys directly. Some of those bottles have since dropped in value too. Once you are in these networks, people also offer you things like an Ardbeg single cask for £450. At that price it could go either way; a bit of a gamble, but if you know the market it’s more of a judgement call in the end it sold that one for £1,000. I always buy within my limits and never on credit.
Malt: Clearly buying the right bottles at the right price is critical, but in my experience that’s not the end of the story; can selling be a minefield?
Derek: Well, actually, that’s the hardest bit… or, at least, the bit that requires the most work. From my early experience with auctions I learned that you need to watch them all very closely to see how bottles are doing and pick the perfect moment to sell. With inaugural releases or the latest batches, the quicker you can get to auction the higher price they make. The difference can be £500 a bottle between the first one and the second one.
Rod: I tend to use a single continuous auction and I do find that if I don’t put a reserve, it goes better than with a reserve. You need to get your bottles into auction as quick as possible. It can be frustrating when 2 identical bottles are in an auction and mine goes for £500 less than the other. But I do pick my whisky auctions on the basis of the specific bottles. Continuous auctions such as Whisky Shop are good with the lower-end bottles; the bigger auctions are better for the Ardbeg 25, etc.
You’ve got to look at this like gambling. You can never be sure of how well any bottle will sell. For example, Bowmore 30 was an expensive bottle – of which I bought a couple – but the thing would not shift in the auction. It was not even close to RRP, which is roughly where I set my reserve. It’s tough to figure out how to release the value in these bottles now. You need to manage that. The Adelphi Springbank was so, so difficult to find but it did not make reserve on the auction, so I’m stuck with it. Maybe it will be a good investment long term? It’s frustrating, and I do have sleepless nights if I’m stuck with a bottle. Some of my reseller friends will take it at RRP, as they have different routes to market, direct to a network of contacts.
Malt: When I have seen bottles being added mid-auction, I have always assumed it must be someone within the auction adding them for their personal benefit?
Derek: Well, probably not; it’s the same technique with the shops: getting a good relationship with auction houses is critical. So, you need to know which auction goes live next, and go directly to them. If you are in good standing with an auction house, they will take your bottles 30 minutes before the auction goes live and even after it goes live. Of course, they need to be the right kind of bottles for that. You both win, as the auction house get the highest fees possible and you get the highest hammer price. Obviously, because of the competition between auctions now, they are somewhat complicit in enabling these sales. Even this approach is becoming harder with some auction sites running continuous auctions.
You need to check with the auction house how many of the same bottle are in each auction, and hold off if there are others like it. When I see 25, 30, 40, of the same bottles in an auction, I think the re-sellers have not bothered to do their homework. It’s totally swamped. 84 Arrrrdbegs! You need to know your bottles. Also, if you see a bottle go for a great price one month, don’t shove the same bottle in the next month because chances are the price will take a dip and take some time to recover.
Then, you need to know each auction house. Most promote your item higher in the searches if it has no reserve. Some auctions historically are better for some distilleries than others. But the key is getting in first.
Also, it’s important to be aware: there are lots of shill practices carried out by groups of sellers, to enhance their lots, and rumours abound about high end bottles being cycled through auctions in inflate values.
Malt: How do you feel about the argument that re-selling is ruining whisky for the whisky drinkers?
Rod: I don’t think this reselling in Scotland is really the issue; it is the global market and the growth in the Far East which is driving these sales. So, what we are doing is really not making a difference.
Derek: Well, I have mixed views on that because I am a whisky drinker. Through the connections I have made and places I have been, I have been fortunate to try some exceptional whiskies. I fucking love drinking whisky, so price inflation does hurt me too. In the secondary market the bottles that always do the best are the ones designed for collecting such as the Macallan or special editions. I honestly can’t see the point in re-selling the low-lying fruit of Springbank Cask Strength or similar. I know lots of guys are doing it, but the returns are so marginal you’d need more than 10 bottles of each to make it really worth the trouble. The guys trading at this level are real grafters, picking up lots of the more popular bottles.
Could someone have got one of my “rule of 3” bottles, could it have significantly impacted on their whisky journey, could it have changed their lives? Well, perhaps. And that is also why I am enjoying sharing whisky so much, be it a bottle to a real fan or splitting and sharing bottles.
Malt: So, where do you see the market going?
Rod: I recently came across some information about getting the right bottle which might affect me; because the certain bottles will become less available to the public at retail as hospitality opens again. These rare bottles will be absorbed by hotels and bars so they will not be available for us. So, I do expect less bottles to be available. But that might improve the secondary market price? I might have to try some other techniques too; for example, some people I know found a link to travel retail bottles and reserved them for 2 months so they could collect them directly from the airport.
Derek: Well, it’s really difficult to read it at the moment. The boom last year really helped me when my conventional earnings took a big hit due to lockdown. I shifted quite a bit. But, into this year it seems that there are more people chasing diminishing returns. Take the Springbank Local Barley: last year’s bottle sold for £10 or £20 above retail at auction pretty consistently and this year’s release is going for £300 above retail on occasion, and there is more of it about in the market. Everyone is looking for the next big thing. People are going mad for Thompson Bros releases but there is no money to be made in them; they are just trendy. But who would have thought Bladnoch or Fettercairn would have become targets for reselling? Certainly, everyone is wanting in on the action; for example, I once asked a friend who was not into whisky to enter a ballot for me. The next time I asked, he had already entered for himself. This seems to sum up the game at the moment.
Certainly, I am thinking about how much of my collection I want to shift now, and how much I should keep for the future. I think the big bottles, the rare ones, will continue to be traded and collected as they are almost too expensive to open. But I’m less sure about the lower-level market. I think some people looking for short term gain are going to be disappointed.
I think I got in at just the right time and rode a wave. At the moment it’s a time to enjoy what I have, and enjoy drinking the whisky, and wait to see how things settle down.
Malt: Derek and Rod, thanks very much for your time.
Prior to these interviews Malt submitted a Freedom of Information Request to the Inland Revenue about profits from whisky auctions. HMRC stated that in the UK “It is the individual’s responsibility to declare and pay the correct amount of tax at the right time.”
Exactly the same things that inspire whisky drinkers to love whisky are attracting investors to the secondary market like never before. There is a clamour for bottles and a search for the next big thing. Each big fish is being chased by a bigger fish. It’s clear that resellers relish the chase, and the best ones are well rewarded when they get their product to auction. Personally, I think I’ll keep out of the mainstream and paddle about with the minnows in the backwaters. You are welcome to join me; the water is lovely. As with a few of my recent articles I’m left in need of a drink afterwards. So why not something a bit bonkers?
Signatory Vintage Glen Grant 1964 25-Year-Old Dumpy Sherry Casks #107, 17, 18, 19 – Review
Colour: 30-year-old oloroso sherry.
Nose: Proper sherry, not 3-year-old soon-to-be-vinegar American-oak-seasoning-sherry, but deep rich old sherry; Leather; remarkably fresh and no dusty old bottle effect here; pledge furniture polish on a lint free cloth; vanilla fudge; fruit developing with time, milk chocolate raisins, dehydrated pineapple; candied citrus peel; stem ginger syrup; daffodils
Palate: Oh so rich, oily, fruity fresh sherry; a lovely smooth alcohol warmth; guajillo chilli and dark chocolate; a little petrichor; distant mesquite smoke; ginger steam pudding; marmalade on dark toast; cacoa nibs. Right at the end of the finish H.Upmann Magnum 46 cigar.
Conclusions: Ah! That’s better; this is what whisky is about! This whisky sample was gifted by Lutz who I met through The London Whisky Club. He’s the definition of a true gentleman; a chap I am always delighted to see at any whisky tasting. You can’t get away from environmental influences such as personal connections when tasting whisky, but nevertheless: this is a delight. I’m not putting a serious score on it. I’m just enjoying all 25 mls of it. Good night!
 Private market analysis based on definition of short-term as: “Scotch only, less than 2 years since release, 70cl bottles only”
Lead image courtesy of Graham. Other images from an anonymous source, not one of the two interview subjects.