18 NOVEMBER 1972, Page 32

Investing in scotch

Before the whisky we drink reaches the bottle, glass or oesophagus, it has already provided a source of investment that is difficult to surpass. Those who have in the past invested in bulk whisky, lying in Bond for several years, have had little reason to complain about the return of capital received.

As with any other investment, it is difficult to predict future performance from past track record, but in recent years a holding of three to four years has gained in the region of 17i per cent net per annum, and there have been occasions when these returns have risen as high as 30 per cent per annum.

There are two sound reasons for putting capital into maturing whiskies. Firstly, a whisky will command a higher price the longer it is left to mature. An investor can put his money into whisky knowing that the 'longer he leaves his investment alone, the greater the return he can expect. The second reason is derived from the current situation in the distilling industry.

Exports have risen by 10 per cent per annum over the last twenty years, and this remarkable record could well be surpassed in the present decade. Exports have risen in value from £16.2 million in 1948 to £227 million in 1971. The home market shows no signs of falling off, and the shortage of good-grade malts three makes an investment for approximately three years attractive.

Grain whisky is more speculative than malt and very large returns were obtainable until there was a severe credit restriction by the British Government in 1967/8. Many investors who' had taken loans from the banks etc were forced, to sell to pay back the loans prematurely; this placed vast amounts of .grain whisky on the market, and the prices fell. It was the largest drop of the century. Those who were able to ride the storm, were not only able to recoup their 'losses, but able to make a good profit by autumn 1969. The prices remained high until this spring when there was a bunching of purchases of bottled whisky by wholesalers and merchants in anticipation of the dock strikes in the UK and US, plus a big jump in prices prior to the May price increases in the UK. As a result sales have fallen off in the last few months but this is only a temporary phase, as 1973 should see the growth trend reasserted. This would be a very opportune moment to invest in grain whiskies before prices rise. At the present time many grain whiskies of several years maturity are available at the cost of new grain whisky. This state of affairs will not last long.

The investor in whisky must be in a position to leave his investment for three years. To sell short, when the market may be slack, creates a risk — there are ups and downs in the Scotch whisky market as with any other — but in comparison with stocks and shares, an investment in whisky has the attraction of high returns together with stability and security of the commodity in high demand, with a history of good profits for the investor.