Cask strength

What Savile Row is to personally tailored suits, Rare Whisky Holdings wants to be to the single malt whisky trade: offering a highly bespoke experience to high-end whisky drinkers, investors and collectors.

The Hong Kong-based firm (with core operations in Scotland) offers an extensive range of over 1,000 casks, arranges one-of-a-kind bottlings, and buys and sells rare Scotch and Japanese whiskies on clients’ behalf. And after starting out with a whisky investment fund in 2014, it recently bought a 49% stake in Scottish auction house Whisky Hammer with a view to growing that platform in China and the rest of Asia – where demand for fine whisky is driving valuations of whiskies aged over 40 years to stratospheric levels.

Rickesh Kishnani, the company’s co-founder, met with WiC in Hong Kong last month.

Here he talks about collecting Macallan, his investment track record, what his clients are buying at the moment, and his ambitions to be the all-in-one vendor of the industry’s most exceptional offerings.

How did your interest in the whisky business develop?

I started out in the wine industry and came back to Ho­­ng Kong in 2009. I’d always loved wine and from there developed more of a taste and appreciation for whisky – at first, as an after-dinner drink.

It wasn’t until I first went to Scotland in 2013 that I really fell in love with the industry and the opportunity – and I’d encourage anyone who has the chance to visit. Going to distilleries in Scotland or Japan is really the best way to get to know whiskies.

So your background was in the wine trade?

I’d always been in the start-up, entrepreneurial world. I was with a tech start-up in New York, but when I came back to Hong Kong I entered the wine industry. It was very competitive, as it is today, and worked on low margins. I was looking for new products and opportunities to get involved with. That’s how we started working on whisky.

The original idea was to source access to rare and old bottles we could bring to Asia and distribute. We found very early in 2013 and 2014 that there was a very big gap in supply and demand for older single malts. There was no issue with supply for the blends or young whisky, but the older single malts – 18 years-old and up – were becoming harder to get access to. So that’s why we set up a private equity fund to invest in old and rare single malt whiskies.

We set up the Platinum Whisky Investment Fund in 2014 and did it as a standard, seven-year private equity investment.

We’re happy that we’ve been able to complete the exit on track despite Covid and many other challenges along the way.

We originally raised $12 million and deployed all of that – mainly buying bottles but also some casks towards the end. We were able to sell everything and are winding down now.

The investment came from high net worth individuals and a few family offices. We are exiting at a valuation of $24 million.

Was it mostly Macallan bottles you bought, given it is the top single malt?

That’s an interesting question because David Robertson – the former master distiller for Macallan – was the chief investment officer for the fund. But we felt by that time in 2014-15 that the prices for bottles of Macallan were already so high that the better opportunities for growth as an investment were in other brands. So we actually had relatively little Macallan. We had quite a bit of Japanese whisky – around 25% of the portfolio – and the rest was a large, large range of the other top 25 Scottish single malts, everything from Bowmore to Talisker to Glenfarclas.

We had some very high-end stuff like the Black Bowmore [to get an idea of its lofty valuation: Sotheby’s sold a rare collection of five separate bottlings of Black Bowmore for $563,000 in Hong Kong in April], an old Macallan and a 50 year-old Dalmore.

We tried to keep the average price of the bottles in the fund to about $500 because we felt that in terms of resale value and exit, we wanted to focus on a broader audience. The top-end whiskies we were able to sell through auctions. But for the others we were able to find newer collectors and demand in Asia.

So your market was twofold: selling higher volumes of hard-to-source but not very old whiskies, as well as smaller volumes of more collectible stuff that was over 40 year-old?

That’s right, and the majority was in the former, what I call the retail side. We also picked up a lot of interesting bottlings from ‘silent stills’ – i.e. distilleries like Rosebank, Port Ellen and Brora that have since closed down. We were buying old bottles that were mostly being distilled in the 1970s. There has subsequently been a resurrection of those brands, and all three I mentioned are reopening the distilleries, such is the demand.

We were lucky to have Edinburgh-based David Robertson working with us. He had been in the industry all his life and knew about the specifics of particular bottlings and what to buy. So we knew exactly what we were bringing into the fund and were able to do all the authentication and quality control.

In some whisky auctions recently, half of the sales are Macallan. The prices are still surging. So do you regret not going more all-in on Macallan for your portfolio?

Hindsight, as they say, is twenty-twenty! Had we known what was going to continue to happen we would have put more into Macallan at that time. However, we really wanted to have a broader strategy to take advantage of the key trend we saw at the time: a broadening of the market in Asia and more interest in whisky and new up-and-coming brands.

You are completely right. I think the statistic is that four out of every 10 bottles at any UK whisky auction is a Macallan. It is clearly the number one dominating brand. But what we are seeing from consumers is drinkers saying I love Macallan and will keep drinking it, but what else do you have and what else can I start getting into. That is going to continue – the broadening of interest into other whisky brands.­­

In the whisky world Macallan is almost like Bordeaux’s Chateau Lafite and Burgundy’s Domaine Romanee-Conti rolled into one. As a brand there is nothing close to it from a collector’s point of view…

That’s a good comparison, given I started in the wine industry. But what I would say is that in terms of wine, people who started out just buying Lafite are now getting into top Italian wines and so forth. That same broadening of the market is happening in both fine wine and high-end single malt whisky. While Macallan will continue its dominance, there are 100 other distilleries in Scotland to get to know over time.

Talking specifically about China, which is a relatively new market for fine whisky, Macallan enjoys far more name recognition there than any other brand, right?

We have several clients in mainland China who have purchased casks of Macallan between 30 and 32 years-old. They bought them on the secondary market with a view to bottling them and bringing them to China, mostly for consumption. They are not looking at this so much from a collecting point of view. It’s really just ‘buy and drink’ because getting your hands on a good quantity of Macallan 30 year-old anywhere in the world isn’t easy right now.

We help them get access to private casks and arrange the bottling. But once these high net worth Chinese have done this, they start to look for something a bit different. We’ve started to see that in our client base. Customers that were heavily focused on sherry cask Macallan have started moving towards more peaty whiskies. For example, we are seeing an uptick in Highland Park, which like Macallan is part of the Edrington Group. It has an association with Macallan, but sits somewhere inbetween in not being as peaty as your Laphroigs and Ardbegs from Islay.

So we are seeing a slight shift in China from people who have already experienced Macallan and want something else. But I agree that the first entry point in Asia for Scotch whisky is Macallan, because it is the biggest brand.

So why wind down the fund and not set up a new one, given past successes?

We are looking at options for a second fund but really what we have moved onto is a focus on casks. The fund was majority made up of bottles. But what we’ve seen in the last two years is much greater demand for casks of whisky.

The opportunity from an investment point of view is very different from bottles. Obviously the cask is still aging, so if you are willing to purchase a cask and hold it for five to seven years, you see an advantage from that increase in age in your return on investment, on top of benefiting from what is happening more broadly in the supply-demand economics for that brand or for single malt whisky in general.

We purchased a company called Glenor a few years ago that has over a thousand casks. These are continuing to age. Plus we have recently invested in a whisky auction business called Whisky Hammer and an e-commerce business called Still Spirit, all based out of Scotland. So our business has moved from funds and private equity investments more towards operating companies.

What is the average age of the whiskies in Glenor’s casks?

We have over a thousand casks so there is a very large range. Our youngest casks are six years-old and our oldest are close to 50. The average is somewhere in the 20s.

Another exciting thing we’ve seen is clients looking to get different cask finishes. So prior to bottling we might switch the whisky into a rum or port cask, for instance, to finish it. It creates a totally unique product for the client, based on their preferences. So it becomes about more than just the brand and the age, with the clients themselves changing the flavour because they own the whole cask. It’s a select opportunity we’re offering for real whisky lovers and creates something one-of-a-kind.

So that is a very bespoke, Savile Row approach…

Yes, that’s right. That’s where we are heading to. Offering a bespoke, unique cask-owning experience.

How many of the 1,000 casks are still available to buy?

We are always buying and selling, so 1,000 casks is the inventory we look to keep at any one time. This year we have purchased around 90 casks and sold a bunch. We’ll purchase younger stuff and lay it down and hold it. We’ll sell some of the casks that are already at milestone age, such as 18 years-old or whatever the client is looking for.

How many of those casks would be from the best-known brands like Macallan and Bowmore?

Around half. The rest is less well- known but still interesting to people who love whisky. It’s very much a bespoke approach of matching a cask to a buyer’s objectives in terms of the age, the brand and so forth, as well as achieving the taste they really want.

The casks are kept at Holyrood Distillery’s warehouse which is near Edinburgh’s airport. That also makes it a little easier for customers to visit their casks and take a sample when they are in the UK for business.

The whole experience of owning a cask shouldn’t just be something that’s on paper. Owners should be able to taste the evolution of their cask and have a new sample each year to taste with us and get our feedback.

Most of the casks are a sherry oak finish, i.e. in the Macallan style. That’s what we’ve found our clients love. We also have access through David Robertson to some of the top sherry bodegas in Spain to source top-quality casks. Having had this business a few years, we can show clients the changes these casks can make to the taste of the whisky after six months or eighteen months, for instance.

Are most of your clients buying to bottle and drink with friends, or for investment?

I’d say it’s about half-half. A large number of clients are not sure themselves. One of the beauties of purchasing a cask is you don’t have to decide on your objectives right now. Most of our clients who are looking at it as an investment want to buy something physical that is totally diversified and alternative from anything else they own in the financial markets, with a price based on very simple supply-demand characteristics. We believe a cask offers that.

We can help the client to sell it at auction – using our online auction business Whisky Hammer – or bottle it to drink or gift to friends. Some choose to drink part of their holding but resell some of the bottles through our e-commerce business Still Spirit too. I think our customers like all the options we offer.

How many bottles are in the typical casks you store for clients? And how much whisky is lost to so-called Angel’s Share?

It depends a lot on the type of cask. But in a 30 year-old you will typically get between 150 and 200 or more bottles. Whereas for a 40 year-old cask it will be about 80 bottles, though I have seen instances of as many as 120. It depends on how the whisky has been stored earlier in its life too.

The auction business is competitive. How do you differentiate what you do versus the likes of Sotheby’s, Christie’s, Bonhams and Ackers?

I don’t think it is as much about differentiation as having the best customer service and doing what we do well. We’re not that worried about what other auction houses are doing. What we offer at Whisky Hammer is a monthly online auction that achieves great results for buyers and sellers. We are not necessarily looking to be the biggest. That is not the goal. It’s really about the quality of each auction and giving consumers the opportunity to see a range of different brands, ages and finishes on a regular basis.

That’s what has built a loyal following for Whisky Hammer, particularly in the US and Europe. We are excited about building that business here in Asia. We’ve seen growth of 60% each year in new Asian buyers at auction, driven by Hong Kong, Taiwan and Singapore. And we’d love to extend that further, particularly to mainland China and Southeast Asia as whisky becomes more popular.

Our auctions are all online, typically run for two weeks each month and involve around 5,000 lots. We really try to focus on offering a good variety each month.

So you are aiming more at the volume end of the auction business than the ultra-premium, super rare end?

We have more than 10,000 members who are registered to use our auction site. I’d say we do a bit of both. We want a good balance. We had some of the Macallan Red Collection in the last few auctions. So we are selling bottles at the £100,000-and-up mark. But the majority of sales are in the range of £300-500 a bottle – i.e. great value, unique whiskies that people can try with their friends.

We’ve also just started doing casks through auction, with the goal of offering more of the casks from our Glenor business.

Our vision is to make it easy for our customers to buy and sell a bottle or a cask, and make that whole online process very simple.

What is unique about us is we are offering clients all sorts of buying, selling, storing and bottling options for their whisky – all in one place.

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