Monthly Market Watch – November 2014

Vast Supply Stresses the Market.

My closing remark from last months update was “I remain cautiously optimistic for November but not quite as bullish as earlier in the year”. That rang very true throughout the month and while I still remain cautiously optimistic, with record breaking volumes, November passed as a month of further polarisation and stability/low growth at best.

Early in 2014 our forecast for the number of bottles sold at auction in the UK was 29,500. November saw that figure breached as 3,715 bottles took the total to 29,845 year to date (full sealed bottles of Single Malt Scotch excluding bundled lots). As a year on year comparison, there were 2,023 bottles sold at auction in the UK during November 2013 – November 2014 showed volume growth of 84%. With a further 3,500 bottles expected to be sold in December, the closing year-end figure will look more like 33,500; some 66% above 2013’s 20,211.

This remarkable continued growth and vast supply is having an impact on many values. Some of the recent volume-based limited releases are experiencing an accelerated ‘New Release Curve’ where the first few bottles sell for unsustainable amounts followed by an almost cliff-like drop. Ardbeg Kildalton Project peaked at £285 in August and now sits at around £160.

The composite index November changes ranked in order of increase/decrease are –

1 – RWVintage50 – Vintage 50 Index +0.75%

2 – RWB Index – Brora Index +0.52%

3 – RWIcon100 – Icon 100 Index +0.03%

4 – RWRMS Index – Rare Malts Selection Index -0.61

5 – RWK Index – Karuizawa -1.54%

6 – RWM25 Index– Macallan 25 -1.70%

7 – RWM18 Index – Macallan 18 -5.15%

8 – RWPE Index– Port Ellen -12.42%

While three of the eight composite indices showed growth, none were exceptional. The significant fall in the RWPE Port Ellen Index was primarily due to the first release coming back from a £2,100 October peak and settling back down to £1,300 (equalling Septembers value). Early signs in December show this down-spike should be reversed, at least to some degree.

The benchmark RWIcon100 Index remained flat at +0.03%. Twenty six bottles lost value in the month (28 in October), fifty bottles remained the same (43 in October) and twenty four bottles increased (29 in October).

The three worst performing bottles in the RWIcon100 Index were –

#3 – Port Ellen Rare Malts Selection 20 yr old (-39.29%)

#2 – Highland Park Eunsons Legacy (-40.00%)

#1 – Talisker 20 year old 1^st release (-40.51%)

The top three performers were –

#3 – Ardbeg Provenance 1^st release (+57.59%)

#2 – Lagavulin OB 30 year old (+93.75%)

#1 – Balvenie Rose 2^nd Release (+220.51%)

Following Karuizawa’s ‘project Everest’ like growth over the last 6 months it was unsurprising to see some sort of pause for breath. That said, it is encouraging that prices remained broadly in line with previous highs.

Both Macallan indices are expected to soften further through December and, for the moment at least, we look to be at the top of values for the 25 year old Anniversary Malts. The 18 year olds have already seen a significant correction (Q1 this year) before rapidly regaining value so it appears Macallan 18’s are set for a bit of a lumpy ride.

The Apex Indices (the best performing 1,000, 250 and 100 bottles) remained flat through November with the Apex1000 down -0.19%, the Apex250 up 0.46% and the Apex100 down -1.27%.

The Negative Indices, without exception, reached new lows. The Negative 1000 index breached 60 points for the first time, settling at 59.48, some 2.75% lower than October.

As referenced in last months update, Bruichladdich values stepped back even further, cementing what appears to be a significant re-trace. From a holistic distillery perspective (including all OB’s and IB’s), Bruichladdich values declined by a staggering 13.44%. The following index shows the performance of a collection of sought after OB rarities (including PC5, Octomore 01.1, all Legacy bottles, the 1970 and 1973 vintages plus others).

November saw the index open at 196.74 and close at 180.73 – down 8.14%. At its peak in June this year the index reached 215.20 – From peak to trough that represents a loss of 16.02%.

There’s clearly a leaning towards oversupply at the moment which is affecting certain high volume brands; however, we are seeing further significant differences in hammer price depending on where a bottle is physically sold. The main low-points (eg the Port Ellen 1^st Release selling for £1,300) are being achieved at traditional auction houses rather than on-line. Lower prices and typically higher sellers fees asks the question (again) of the long term viability of traditional auctioneers selling whisky.

With less than one month to go until we close the book on 2014 it appears an element of instability has crept into the market.

December will be a crucial month…