There’s never been a better time to invest in whiskey than right now. In fact, whiskey has officially become a better investment than cars, watches, and art. Seriously. But whiskey isn’t something you can call up a broker and just trade .. yet. It’s a lot more complicated than that. We’re here to help.
To help parse some of the grey areas of whiskey investing and how we got here, we reached out to two bona fide whiskey investing experts, Justin Thomspon and Caroline Paulus. Thompson is the co-founder and co-owner of Justins’ House of Bourbon in Louisville and Lexington, Kentucky — one of the only legal shops where you can buy investment-level, ultra-rare, and tightly-allocated bottles of whiskey. Thompson has been working in rare and collectible whiskey investing for over a decade now. Paulus works at Justins’ as their in-house Whiskey Historian, making her a leading expert on vintage and rare whiskey in general.
Both Thompson and Paulus were kind enough to jump on a call and talk about how bourbon became such a massive win for investors while also touching on how to get into the game, which bottles to look out for, and which mistakes they see people make when buying investment bottles. It’s a deep dive that’ll give you real-world tips about investing in whiskey in 2023 — yes, we name-check bottles to buy. And if this whets your appetite, make sure to hit up Justins’ House of Bourbon the next time you’re in Kentucky or online to start your own investment journey in bourbon.
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First, can you take us back and touch on how all of this got started?
Justin Thompson: I don’t think you can ignore what’s happened in the wine and Scotch market. There’s been a secondary market for the best or what’s perceived as the best wine for centuries. And then there’s been a pretty healthy auction and secondary market for scotch. Now, bourbon has marketed itself with a value compared to scotch, and a more versatile ingredient compared to scotch. So it was always going to get to the point where American whiskey was going to have that moment. That’s why I don’t believe it’s much of a bubble as some people think it is because of the sustainability of what we’ve seen in the wine and the Scotch market for decades.
But there was tremendous growth in bourbon. This is what makes these things valuable, the supply and demand of them. Bourbon folks really started to invest in the trendsetting markets, New York, San Francisco, LA, Chicago, and it started taking hold there during the cocktail renaissance. And that snowballed to folks seeking out bottles on their own.
Then you can’t discount what the Pappy Van Winkle brand did and how it was marketed with a shoestring of a budget — if you even want to call that a budget — that they had. But it got recognition domestically and internationally for just being exceptional products and kind of broke down a lot of barriers or stereotypes that some folks had about the bourbon market in relation to it being a true super-premium spirit area.
Which bottle was the first to really break through?
Justin: The bottle that I believe started this whole secondary craze for bourbon was the Pappy 23 Decanter back in 2009. I remember seeing that on the shelf and it was $400 and I was like, “Man, there it is.” Long story short, we probably would’ve bought it and gotten into it the second we got in the car. But at that point, the guy I was with said, “Man, do you think this is as good as buying 10 Pappy 15s?” You could have got a Pappy 15 for 50 bucks-ish back then. And I was like, “Probably not, man.” So I think I bought a 15, and he bought a Lot B {Pappy 12 year}.
Then I think about two months later I saw those Pappy Decanters selling on Craigslist. I was like, “Man, these things are selling on Craigslist for like 1,500 bucks. Can you believe that?” And here we are today where they’ll sell for close to $30,000.
It happened in a short span of time, I guess. But when the growth of bourbon started to take off, they finally figured out how to crack the coolness code in the trendsetting markets. Still, I think it was just the right time for bourbon.
So there was a shift from average to superior in the thinking from the producers, really, that pushed premium products as well?
Justin: To their credit, they started marketing and showcasing some of their best barrels and blends to the consumers and having the belief in that if you put out a superior product to those consumers, you would start to gain more of a following. So instead of the workhorse working man’s brand that they started as, they started doing these special releases to showcase what their base product could do under double the aging or double the barreling or whatever they had. So that’s kind of how I believe in the last 15 years, how we’ve gotten where we’re at today. I don’t know, Caroline, anything to add to that?
Okay, that’s how it all started. How did it grow so fast though?
Justin: There was this phenomenon that I don’t think the scotch or the wine industry experienced in the same way back in the day. Social media definitely enabled the secondary market to grow for bourbon in a unique way.
There are people that had no interest in bourbon until they heard their buddy bought a bottle for $50 and then sold it in the parking lot that night of the Walmart for $500. So that’s a pretty good deal. Anybody can have a $50 bill in their pocket to make $500. But not everybody’s got $500 in their pocket to make $550. So there was a period that brought a lot of new enthusiasts, if you will, to the table. And that is a strong force that no one can resist that’s an arbitrage where that almost would be almost criminal on Wall Street … almost.
So finally, the retailers caught up to it and do some work to stem that from happening now. The brand’s thinking, on the other hand, is still status quo so to speak. You know, a lot of these brands are still run by teams that’ve seen the ups and downs of bourbon over decades and aren’t as willing to change. So all of this, I do think, helps the status of certain brands.
We’ve seen this exact pattern in other collectibles. Nike has definitely seen a boost in sales by having these shoe boutiques open up all over in New York City or London that are selling secondary Jordans and Air Force Ones and whatever. There was an article in the Wall Street Journal recently talking about how Nike was going to cut down on the bots people use that have gamed their system to acquire more shoes. But then at the same time, it’s a weird paradigm because they rely on those people to lift the awareness of the brand. And that same thing is happening in bourbon.
So let’s shift a little and talk about actually getting bottles. You have one of the best-known legal avenues to buy allocated and vintage bottles. How do you look at what price goes on which bottle? How much does “MSRP” come into play since today there are bottles that are released at $500 or $1,000 without the secondary markup?
Caroline Paulus: We’ve got two sides of the store here. On one side you’ll find all the MSRP bottles, some limited releases that we’ll get from smaller brands, some just normal Maker’s Mark or what have you. And then the other side of our shop, which is definitely the more collectible side, those are going to be the bottles that we have to pay above retail to bring in. So that just varies. It is interesting to see some of the newer brands putting out those $500 MSRP releases. Some get snapped up and some sit a little bit longer.
Which ones have been successful at that price point?
Caroline: Some brands have shot for the moon in terms of pricing. But some of those do go pretty quickly like the Rabbit Hole Raceking and the Chicken Cock Chanticleer. Barrell Craft Spirits has those silver label expressions and they’ve been very popular.
Which brands/bottles have you seen maintain value, decline, or increase?
Justin: Colonel E.H. Taylor bottles have been very resilient, especially the limited releases. The first one is the 18-year Marriage expression and the Warehouse C Tornado Surviving, those skyrocketed. They’ve come back down a little bit but they’re still higher than what they were previously to the COVID. So we have another period of uncertain economic times ahead of us. I’m sure others will come down a little bit.
Doesn’t that make it a good time to buy?
Justin: Some people will panic sell and uninformed investors always seem to unload at the wrong time. So I think you’ll see more whiskey for a short period — the next two to three months — come available and I think it’s a great time to buy. I think this is the time when the sharp investors will be looking at not only stocks but these types of items. So, yeah man, I think it’s a great time to have your eyes open looking for whiskey to buy.
If you just look at what these types of bottles have done over the last 15 years, it’s an incredible growth chart that I don’t think the stock market can even hold a candle up to it. And I think there are still going to be opportunities. We talk about supply demand, some of this demand is getting out there. There are other companies coming online with their own stuff and special stuff and that’s part of it, but we’re still on the tip of the iceberg of really getting the supply of whiskey out there.
There’s not enough to go around now is the feel of it.
Justin: I don’t ever see these rare bottles ever being oversupplied. Your Batch 23s, your Buffalo Trace Antique Collections, your special Michter’s releases, Formosa releases. I just don’t think anyone’s prepared to release hundreds or thousands of cases of these rare whiskeys consistently anytime soon.
How does somebody get into this (without having to sell bottles in a Walmart parking lot)?
Justin: I think there are just three opportunities for folks to obviously be a part of the investment side of it. Either it’s kind of part of your DNA if you’re a part-time stock trader and manage a portion of your portfolio with whiskey; or you educate yourself with it and you look for arbitrage and you put a lot of time into it and you look for those opportunities, whether it’s on secondary or releases from the store; or you trust someone to curate a collection for you and you pay a premium. But in that case, you’re not so worried about getting out of that in six months because you’re going to hold it for what I would say should be at least two years or longer. Or it’s a blend of these things and you trust your palate.
How does your palate come into play?
Justin: There are so many times I’ve heard folks say, “Well, I’ve never heard of that.” And I’m like, “Well yeah, but it’s really good and I’m going to tell you once the word gets out, then it’s going to be harder to find and the price is probably going to drive up to whatever the market says it is.” So actually do participate in the fun part of tasting the stuff.
If you have a hobby where you like trying different whiskeys and experimenting and you trust your palette, you just believe it, “Hey this is really good.” It might be something that’s either Kentucky only or only in one particular market or a newer brand that’s getting ready to branch out or it’s a release that maybe not everybody knows about and you just trust your palette and know what tastes good. You should probably buy those bottles and save a couple of them for down the road.
Sometimes when you taste things, you know instantly. Look at what happened with Smooth Ambler. A lot of people didn’t understand that MGP of Indiana can make beautiful whiskey and it took years before those 10 and 12-year-old bottles to sell. They were begging people to buy them for $50 after the Pappy craze popped off. And you couldn’t find Pappu 12 or Weller 12 on the shelf anymore. But you could find Smooth Ambler 12-year-old.
I hear people say it, man. “Oh, that’s MGP. I’m not going to buy that.” And people didn’t know until all of a sudden all those bottles are going for $500 or $1,000 and all of a sudden those same people that look down on it, they’re out there looking for. And that was this great whiskey that the people I knew — who knew good whiskey when they tasted it — bought by the cases and still had them.
Bulliet had a similar thing happen recently too, with their single barrels?
Justin: Yeah man, those Bulleit single barrels that came out a couple of years ago. You’re talking about 10 to 12-year-old Kentucky Bourbon at 104 proof that you could get for $59.99. But a lot of people just skipped them because it said “Bulleit” on it and Bulleit doesn’t have a reputation for being something that’s super allocated. You can’t make a quick dime or a long dime on them so people just kind of faded them. And the people who bought them were just people who just like really good whiskey.
Those were delicious. Let’s wrap up by looking at the mistakes you see people gravitate toward when they walk into a place like Justins’ looking for good whiskey to buy.
Caroline: I wouldn’t feel good letting somebody make a mistake. But I think that the mistake that I do see people make is looking for that “perfect bottle” all around — where it’s a steal and it’s something they love and it’s something that they think they’re going to make money on. But you kind of have to separate all of that in your head. If you’re looking at it as an investment, as a long-term thing, you’re going to want something that’s going to hold the value, something vintage. If you’re looking for that steal that tastes great, you have to move to that barrel pick from the side that Justin was just talking about. We sold hundreds of those Bulleit bottles. Those people would call us back asking for more and, well, it’s gone. So I think the only mistake that I would say would be trying to get everything all in one bottle. I think you have to diversify a little bit.
Justin: I think really big because I always say whatever makes people happy, then they’re doing the right thing. Because some people want these to show off. Some people want something nobody else really has. They’re, “Okay, Pappy Van Winkle, great, but I’m over that. What else is out there that’s even harder to find or even more expensive or has more complexity in the taste?”
But I’ll say the only time there’s a mistake is when they ask, “Hey, what would you buy?” And we will put that thinking cap on and we have a sense of what their budget is and we’ll say, “Hey, you want this one hard-to-find bottle, which is great, but this other bottle over here is just as good.” In fact, it’s a little bit older or a little more complex or it’s not as well known. And whether it’s the same price or maybe even cheaper, they still have a hard time not going with their “Old Faithful.” They have a hard time diversifying or letting go of that one thing now. But the thing is, I can’t say it’s a mistake because it’s making them happy. That’s the thing. That’s their go-to thing.
What do you tell people to trust when making that whiskey investment?
Justin: The most beneficial thing I think when making an investment is trusting your palate or having someone you can trust to curate for you. And it’s fun to have the stuff that everybody has, but sometimes you got to take a risk. And I think that goes if you’re investing in stocks or any other traditional investments too to get the big return. Sometimes you got to buy it before the masses know about it. And sometimes that’s risky. Sometimes that’ll pay off big. And if it doesn’t, well then hopefully you’ve still got a great bottle of whiskey that’s interesting to drink.