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While the first telephone calls were being made between London and New York it was business as usual at Macallan in 1926. At this small family-run distillery, by the River Spey in north-east Scotland, they were making spirit, filling casks and selling them on to blenders and bottlers, who ran the Scotch whisky trade, as they had done for years. Like every other malt distillery in Scotland, Macallan was essentially anonymous. Its role in life was simply to produce one of the principal raw ingredients for blended Scotch.

However, cask number 263, somehow, slipped through the net that year. Instead of being sold on to disappear into a blend and be drunk a few years later, it lay undisturbed until 1986. After all that time slumbering in an oak barrel, most of the contents had evaporated leaving just enough to fill forty bottles. The whisky had turned a dark walnut brown and had acquired the aroma of dried fruit, resin and spice. It had also gained somewhat in value.

On 17 April 2002, one of these unlabelled bottles of whisky, ‘The Macallan 60 Years Old’, was sold at auction, by McTear’s in Glasgow, for £20,150 – setting a new world record for the most expensive bottle of Scotch whisky. It was bought by an anonymous collector, and the price tag included having a designer create a special bespoke label for the bottle. Suddenly, the market for collecting rare malt whiskies had come of age.

There had been the odd sign of interest in more esoteric malts for some time, but it was a tiny niche market that was mainly supplied by specialist, independent bottlers like Gordon and MacPhail of Elgin. It was another world to the main business of the whisky industry, that of pumping out vast quantities of blended Scotch. For most of the 20th century, blends dominated completely. In fact, as the poet Philip Larkin famously said of sex – single malts were really an invention of the sixties. It was then that Glenfiddich pioneered today’s market for malt whisky, which today accounts for 6 per cent of all the Scotch sold in the world.

The premium malt whisky category has developed in much the same way as fine wine. Be it a château in Bordeaux or a distillery on Speyside, both come from a single source and are produced in strictly finite quantities. At the very top-end, amongst the rarest and most collectable malts, it was only natural they would one day follow first-growth clarets and burgundies into the auction house.

Whisky consultant Martin Green has been involved with these auctions for 20 years, first with Christie’s and now at McTear’s – the acknowledged specialists in the field. “The first significant price paid,” he recalls, “was in 1983, when a bottle of ‘The Macallan 50 ¥ears Old’ went for £1,100. In 1989 we had the first dedicated whisky auction and by 1994 they were taking place twice a year.”

David Cox, director of fine and rare whiskies at Macallan, believes the collector’s market began to develop ten years ago. “If you go back to the early nineties when a number of major economies came out of recession, that coincided with the extraordinary growth in malt sales in markets like America, France and Germany. Brands like Macallan, Springbank and Bowmore started to release older vintages and dip their toe in the water to see what interest there might be.”

Macallan is blessed with an unrivalled range of rare bottlings, going right back to the 19th century. Whether this was due to poor stock rotation in the past who knows, but the company is certainly reaping the rewards now. Over the last three years, Macallan has been the single malt with the most lots at auction and has consistently shown the highest price, accounting for about 22 per cent of the total value. What lies behind this success is the brand’s reputation. “This is no different from great wines like Château Mouton Rothschild,” says Cox. “Like them, we have a reputation for great quality and consistency over time.”

Once it was realised how much interest there was, Macallan’s ageing inventory was dragged under the spotlight and assessed in minute detail by a team of experts led by the company’s Master Distiller, David Robertson. To maintain integrity only a few, carefully selected casks were bottled. Of all the stages in making whisky, the time spent in wood is reckoned to have the greatest impact on flavour. Every stave of every cask is different under the microscope, in terms of how grainy and porous it is and these differences are multiplied by the age of the barrel and what it originally contained – these variations are normally ironed out by vatting the barrels to produce a consistent product. With single cask whiskies, however, individuality is all.

Having released the occasional gem for sale at auction, Macallan decided to market what it believes is the widest and rarest collection of single malts ever assembled. Launched last year, the ‘Fine and Rare’ range contains 140 bottles with a combined value of just under £1 million. In addition, there are five 19th century bottles taken from the company’s own private cellars at the distillery – the oldest being ‘The Macallan 1856’ with a reserve price of £10,000.

“With the ‘Fine and Rare’ range we’ve been very careful to make certain that people know how many bottles were originally made available,” says Cox. “I think transparency is very important – getting the ratio between supply and price is absolutely critical.” This openness, together with Macallan’s proven track record, has made it a favourite among those who collect whiskies for a hobby or as an investment.

“I think collecting should be viewed as speculation, but treated as a long-term investment,” says Martin Green. “The people who stand to make most money are those who hold on to stock for ten years or more.” The Macallan 60 year-old, which sold for £20,150 in April 2002, has probably seen a four-fold increase in value during the last decade, though that is an extreme example. Other whiskies that have performed well include Bowmore Black Bottle, an extremely dark whisky that was distilled in 1964 and bottled in 1993. 6,000 bottles were released and sold for under £75 each. Today, they fetch anywhere between £1,000 and £1,500.

Though the size of the collectors’ market is hard to quantify, there is evidence it is growing. At the McTear’s whisky sale this spring, over 700 lots were sold during a 9-hour auction, with prices ranging from £12, for a set of miniatures, to over £10,000. “People are collecting as a hobby,” says Martin Green, “and it’s the kind of hobby that doesn’t really depend on the depth of your pocket. There is something for everyone. We are finding with every sale there are new buyer, from various countries. Certainly since 11 September 2001 it has become apparent that the Americans have stopped buying, opening up the market to others, and prices have stayed fairly stable.”

Collectors come in all shapes and sizes. Some are whisky fanatics, who know all there is to know about the subject, others don’t even like whisky. Some are purely interested in the investment potential of owning a few bottles of very expensive Scotch. It is a tangible asset, whose value is likely to increase as the number of bottles in circulation declines. At Macallan, David Cox believes that not all their rare whiskies end up displayed in glass cabinets or locked in bank vaults. “In the Far East, we think the majority of the vintages we sell are actually drunk.”

On the heels of Macallan’s success, others in the industry have been keen to join in. In every warehouse in Scotland, with maturing stocks of malt whisky, inventories are being re-appraised to see if some ancient cask has been overlooked. Cox admits: “There has been a proliferation of offerings which is pretty confusing, certainly for novices. As with any market there is a danger that some will jump on the bandwagon, but without the credentials they will fall by the wayside. With the famous names, so long as we continue to be true to what we believe in and are seen to be transparent in what we offer (in terms of the number of bottles and the price ask), I think the market will continue to grow. I think it has to.”  

For further information contact: Tom Bruce-Gardyne, 28 Newbattle Terrace, Edinburgh, EH10 4RT or tel: 0131 446 0390.

(This article was originally published in Director of Finance 2004 edition)