Uisce Beatha (water of life in Gaelic) or whisky is sought after as the tipple of choice the world over mainly due to its complexity. But whisky as an investment?

Rare and collectable whiskies have provided intoxicating returns in the past decade or so. The whisky investment/collectable market works on the same principle as other alternative investments such as wine and art. Values are driven by demand and supply.

Globally, the whisky industry is going through a phase of high demand growth and short supply to feed this demand.

Flashback The Scotch whisky industry was in the throes of a major recession in the 1980s and 1990s. Many distilleries, some of them iconic, were closed down and capacities were reduced due to plummeting demand.

Consumers were switching to what they perceived as healthier options — white spirits, wine and beer. All this changed in the late 1990s though. Members of the Scotch Whisky Association started promoting single malts as a product category, and we all know how much of a success that has been.

The share of single malts in whisky produced has grown from less than 1 per cent in the 1990s to 10-11 per cent today. In addition, there has been a resurgence in the appreciation and consumption of whisky the world over, driven largely by the higher disposable incomes in the growing economies of Asia and Latin America.

Today, the stocks of the distilleries that were shut down in the 1980s and 1990s are depleting rapidly and their prices are on the rise.

Collector interest is growing as evidenced by the increasing number of bottles sold through auctions.

And distilleries are opening in Scotland and the world over to feed the soaring demand for high quality whisky. In fact, in some areas of Scotland, new distilleries have opened after a century!

Which one? Not all whisky is collectable. Normally, the collectable bottles come from stock that saw a finite number of bottles released.

So your favourite 18-year-old Glenlivet from the airport duty-free store is not collectable. But a single cask (whisky from one cask) or a limited release from a good distillery with good quality bottling is collectable.

Another category of great collectable whisky originates from distilleries that have been shut down.

Examples of these are the Macallan Royal Marriage, the Oban Managers Dram 200{+t}{+h} Anniversary or just about any Rare and Old Macallan. The most investment-worthy whiskies today hail from Scotland though there are a few examples of some Japanese and other distilleries showing stellar returns.

How much appreciation? Every cask of whisky remaining can theoretically be a unique bottling; so the number of different unique bottles of whisky that you can have is quite staggering.

Substantial in the last decade, would be the easy answer. Prices of whisky have risen significantly in the last decade or so. Robust demand and diminishing supplies have largely contributed to this.

For example, if you had bought a bottle of Karuizawa 1971 for £99 in late 2008, you could be selling it for a cool £1,900 today.

Or, if you had bought a bottle of Port Ellen 1st Release in mid-2009 for £280 , that is changing hands at £2,000 today. These are just a few examples that illustrate how investing in the right bottles of whisky has paid off.

According to Andy Simpson of The Whisky Highland, one of the foremost whisky investment and valuation experts, the top 1,000 best performing bottles of Scotch whisky have appreciated 176 per cent from the end of 2010 till the end of 2013.

And that’s the top 1,000 unique bottlings, a fairly wide variety. Whisky Highland data also show that the number of single malt Scotch bottles sold at auctions has grown from around 5,400 in 2010 to over 20,000 in 2013, a clear sign of rising collector interest.

If you are interested in collecting whisky, it helps if you appreciate it. Needless to say, any investment meant for financial gain has its share of risks.

If you decide to invest in whisky, stick to high quality bottles; at least, you will have some great whisky to savour in the unlikely event of a crash.

Stick to quality

If collecting whisky is something you are interested in, here are a few other important aspects that you should be aware of.

Provenance: The importance of getting the right bottle from the right source cannot be over emphasised. Make sure you know how the bottle has journeyed to you and collect as much supporting information on the bottle. Stick to reputed auction houses, brokers or vendors, as fakes abound.

Condition of the bottle: Make sure the bottle is in good condition with the label and box intact. It should have a good fill level into the neck of the bottle and the seal should be intact.

Lower fill levels in older bottles (bottled decades back) are acceptable. The condition of the bottle has a bearing on the price.

Storage and insurance: Ideally, store in temperature-controlled locations. Though whisky does not have to be stored cold like wine, temperature variation increases evaporation.

Make sure your collection is fully insured. There are many reputed commercial storages that can store your whisky.

Right bottle, right price: In an appreciating market, mediocre whisky can go up in price too. And there are many unscrupulous dealers trying to make a quick buck.

Do your research thoroughly and stick with high quality whiskies; they are less likely to devalue if there is a downturn.

The writer is a whisky collector

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