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Master of Malt Blog

Author: Nicholas Morgan

Whisky investment déjà vu

A number of warnings about whisky investment firms have appeared in the press, and on this blog, in the past year. But, as Dr. Nick Morgan explains, dodgy schemes promising…

A number of warnings about whisky investment firms have appeared in the press, and on this blog, in the past year. But, as Dr. Nick Morgan explains, dodgy schemes promising big returns are nothing new. And many of them ended in tears. Here is whisky investment déjà vu.

These are the sorts of things that clog up social media feeds of the whisky curious: “15 – 30% capital growth per annum”; “in four years your matured whisky may double in value”; “malt whisky investment shows an average profit of 50% at maturity.” Outlandish claims from firms that sprout up from nowhere like new leaves on a springtime tree, and they might well be from 2020, but these particular claims date from the late 1960s and early 1970s, when investors, principally in the United Kingdom and the United States were lured into whisky investment schemes by promises of returns beyond the dreams of avarice.

The last whisky boom

Between 1950 and 1970 production of malt whisky had increased over fourfold in Scotland, (and grain whisky more than fivefold), as distillers struggled both to replenish inventories depleted during the second world war, and satisfy an apparently unquenchable thirst for blended Scotch all over the world. However, stocks of maturing whisky ate away at the capital of both producers and brokers, many of whom began to look to cash-rich post-war economies as a way of financing their inventories. Potential buyers were lured into schemes unaware of what they were buying, often ill-informed about the volatility of prices for grain whiskies on the open market, or of the fluctuations in the pricing of malts as demand from blenders shifted.

Along with advertisements from numerous investment companies (‘Brigadoon Scotch Investors’ being, perhaps, the most appropriately named) articles appeared in American newspapers with headlines such as “Aye, the clans smile on such investments” commending the “opportunities for investors of more limited means to participate with a simplified type of transaction”, selling parcels of Scotch for as little as $1000. In reality, what these companies (some of whom did, and some of whom didn’t have access to stocks of maturing Scotch through partners in the UK) were selling were not casks of whisky, but rather warehouse receipts, giving title to either real or imagined inventory. These practices soon attracted the attention of both State authorities as well as the Securities and Exchange Commission (SEC), which took the view that these warehouse receipts represented unlicensed investment contracts under American legislation, and were thus in breach of the law.

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Whisky investment déjà vu

It soon became apparent from a series of investigations by the SEC that this technical breach of regulations was not the only thing wrong with these get-rich schemes.  

Michael Lundy & Associates, and its partner company Scotch Whisky Limited, were among the first to be investigated, partly because Lundy was also being pursued for the sale of fraudulent property investments in Florida, which along with his sale of warehouse receipts would see him eventually jailed for six years. Lundy was also found to have misled whisky investors by claiming that aged whisky would automatically increase in value (rather than being priced according to the law of supply and demand), by making it appear that the investment was insured against all risks by Lloyds of London, and that it would be straightforward for investors to take physical possession of the casks for which they held receipts should they want to.

A self-styled publicity-seeking maverick

Also feeling the long arm of the SEC in London was war hero, former wine merchant, and whisky entrepreneur John Haffenden. A self-styled publicity-seeking maverick he charmed drinks and business writers (but less so the PR agencies whose bills he struggled to pay) with his very public contempt for the authorities, be they the American courts, the whisky establishment of the Distillers Company, or the Scotch Whisky Association (“bootleggers who’ve turned respectable”). “Thanks to disastrous public relations,” he wrote in one of his regular acerbic newsletters, “the Distillers Company which has in the past wielded almost feudal power over the rest of the trade in Scotland, is losing its grip”. 

Haffenden’s business was whisky broking and blending. He declared his ‘Highland Silk’ blend to be a “rare blend’ of half malt and half grains, matured for at least four years, with at least twenty percent Glenlivet’s”, “S.M.O.O.T.H”, and “popular with both sexes”. In a gushing interview with Haffenden for the Illustrated London News in 1970, Peta Fordham wrote “writers have a soft spot for any David who successfully challenges the Goliaths in a world in which the individual finds it increasingly difficult to survive”.  

Blend your own whisky

This particular David caught the imagination of the press in both the UK and the USA with a series of quirky headline-capturing innovations. His ‘Master Blenders kit’, launched in 1969, was a do-it-yourself blending pack containing four single malts and one-grain whisky. “A three-year-old child standing on his head could use it to produce a whisky better than most proprietary brands” observed Haffenden in an interview with an American newspaper; “you can blend whisky in five minutes,” he told another. 

Haffenden claimed that hundreds of thousands of the kits had been sold all over the world. Harrods, he said, described it as their “best selling thing for years”. A much-trumpeted launch event for 400 MPs in the ‘long bar’ of the House of Commons ended in an acrimonious fiasco, but unbowed Haffenden nominated himself for a Queen’s Award for Exports on the basis of the alleged success of his kits. Two other eye-catching projects were ‘Haffy’s whisky sour’, the first in a promised range of pre-mixed Scotch cocktails, and ‘the Nightender’, an automatic dispensing machine, that promised hotel guests all-night drinking “at bar prices”.

Haffenden claimed to have pioneered the selling of casks as investments in the United States in the early 1950s and had been active in the UK since at least 1965.  He suggested in advertising that the value of cask investments could triple over three or four years, advertising his firm’s services in the United Kingdom as “the leading whisky brokers”, claiming maturing stocks of between eight and twelve million gallons, and offering potential punters a free illustrated booklet on ‘Scotch Whisky Investment’. In the USA he partnered with the Rimar Corporation, which promised returns of between 20% and 25% to investors “disgusted with the stock market.”

Ivan Straker - Glenlivet

Ivan Straker (left) from Glenlivet Distillers warned about outlandish whisky investment promises (credit: Douglas Moir)

High-pressure sales techniques

Like Lundy, the Rimar representatives deployed high-pressure sales techniques which wilfully misrepresented the nature of the investment (investors were never told what whiskies they were buying), the likely returns, the risks involved, the nature of the insurance that was on offer, and the difficulties associated with transferring casks from Scotland to the USA. The whisky was sold to investors with a mark-up of between 36 and 70 percent on its market value, partly to fund the hefty commissions paid to salesmen. Haffenden Rimar was banned from trading in the United States in 1973. A long list of other traders who followed in its wake were also banned, including some names still familiar in the Scotch whisky industry today,

Until this point the British financial press had been woefully uncritical of such schemes: “a minimum investment of £500 could be troubled or trebled in three or four years’ time if the whisky cult spreads to new countries abroad” said The Sunday Times enthusiastically in 1965.  Sentiments began to change with leading figures in the industry such as the Glenlivet Distiller’s Ivan Straker speaking out against them “‘the poor investor is being hoodwinked by glowing literature”) and even the normally beige Scotch Whisky Association expressing reservations. The FBI, Interpol, and fraud squads in Glasgow and from Scotland Yard were on the case.

Haffenden disingenuously recast himself as the saviour of the poor investors led astray by ‘cowboys’, but his various business interests were crumbling and in 1974 his brokerage company received a winding-up order. A subsequent business, Haffenden International Marketing, was short-lived and equally unsuccessful.

Keith St John Foster

Enter at this point Keith St John Foster, a former Daily Telegraph junior financial journalist, with a business promising to deliver greater transparency to hapless investors, and “introduce some order into an essentially chaotic market”.  Brokers, said St John Foster, “benefit from the virtual conspiracy of silence within the legitimate trade to feather their own nests at the expense of the private investor”. With “considerable trade backing” and thus access to insider information St John Foster’s company claimed a unique position “to place funds in stocks of high return and high security”. The American press reported that his firm would “in time evolve into a major commodity market”.

Fate determined otherwise. The new company faced legal challenges to its advertising and by the end of 1975 was heavily in the red, with St John Foster being declared bankrupt in 1977. In the same year St John Foster, then described as a ‘commodity broker’, was accused (and acquitted) of being involved with four other men in the murder of a drug dealer on the Isle of Wight. Then only months later he was convicted of the attempted murder of his estranged wife and jailed for eight years. He later reinvented himself as Aphelion, an international ‘parfumeur’ who apparently made custom scents for Princess Diana and Ivana Trump among others. Such is the tangled webs of the lives and careers of whisky investment experts.

Old casks at Glen Garioch

Old casks at Glen Garioch

Glen Garioch, Glenrothes

Arthur G Schuffman’s whisky expertise was somewhat questionable when he set up Perthshire Scotch Whisky in New York in 1973 and began selling warehouse receipts for casks of White Abbey blended Scotch whisky to investors, guaranteeing fantastical returns of over 55% after a two-year maturation period. The six-year-old whisky was sold to investors for $6.80 a gallon, although investigators subsequently put its worth at $1.50 to $2 a gallon.   

In a textbook boiler room operation, Schuffman and his partners targeted “unsophisticated investors” with glossy mailshots which were followed up by high-pressure telephone calls, making “numerous misrepresentations about the value of Scotch whisky as an investment”. Perthshire Scotch Whisky would, it was promised, either buy the whisky back or assist them in selling it to third parties. “Like a masterpiece of art”, claimed the company’s advertisements, “White Abbey appreciates in value as it ages”. Neither Schuffman nor his partners waited to see if their claims were true. After luring twenty-seven or more investors to part with over $60,000, they closed down their smart Park Avenue South office, leaving no forwarding address. As it turned out, jail was their eventual destination.

We’ve been here before

There is no doubt that with the right advice there is money to be made from speculating in cask purchases; there always have been. There can be a great deal of pleasure in simply buying a reasonably priced cask from a new distillery, either as an individual or with a group of friends, for bottling and enjoying at some later date. But those tempted by the seductive promises of many whisky investment firms today, keen to “find out why investors are going crazy over whisky” might do well to reflect on the experiences of the late 1960s and 1970s when incalculable losses were experienced by investors in both the United States, the United Kingdom, and elsewhere as a result of illegal and fraudulent practices. 

Then as now, tempted by glossy brochures, seductive (and mostly misleading) promises of huge returns, investors placed trust in companies whose resources and expertise in whisky was minimal, whilst their salesmanship was weaponised. The deluge of new firms over the past three to five years with little or no proven background in Scotch whisky, desperately trying to steal a share of the profits of the whisky investment bubble, exactly mirrors the experiences of the past. And we know how that ended.

Perhaps then we should consider not the catchy and almost hysterical advertising claims of the 1970s, but rather the news headlines that followed in their wake such as: “Con man sentenced in liquor swindle”; “amateur suckers for Scotch whisky investments”; and “Scotch whisky racket bad news.” It has to be hoped it’s not a lesson too late for the learning.’

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Lifting the lid on bulk Scotch whisky sales to Japan

Today, we’re delighted to have a new writer for Master of Malt, industry veteran Dr Nick Morgan. Here he brings us a tale of greed, deception, and short-sighted business decisions,…

Today, we’re delighted to have a new writer for Master of Malt, industry veteran Dr Nick Morgan. Here he brings us a tale of greed, deception, and short-sighted business decisions, as he lifts the lid on the long and murky relationship between the Scotch and Japanese whisky industries.

Diligent readers may recall that in February the Japan Spirits & Liqueurs Makers Association acknowledged that there had been a longstanding practice of mixing Japanese spirits with distillates from other countries, which were then sold under the description of ‘Japanese whisky’.  

This was in a preamble to proposals for a new voluntary code (effective from 1 April 2021) to be followed by Japanese distillers and blenders which is intended to prevent this from happening in the future.  Disingenuously, and with not a word of contrition, the preamble explained that these practices were part of “the tradition, history, and culture of Japanese whisky-making” which “had enriched the Japanese drinking culture” and “were supported by many people around the world”.  The Association, it continued, “took pride in that fact and are grateful for the efforts of our predecessors”.

The Nightcap

Dave Broom was not happy

The dog that did not bark

Whilst one might have expected such an announcement to have been met with outrage, it was instead greeted either with a muted response by commentators, and a deafening silence from the Scotch whisky industry. Only Dave Broom (in the past a prominent cheerleader for all things Japanese) wrote frankly about the questions this statement raised, the consequences that this admission would have for the reputation of the Japanese whisky category, and the breach of trust it represented with those consumers (and for that matter writers) around the world who had helped to build it.  Otherwise, the dog did not bark. 

Can you imagine a similar announcement, from say the Scotch Whisky Association, confessing to decades of consumer deception by some of its members? Would it have been greeted with such equanimity?

Perhaps what is most shocking is that so many stakeholders, industry commentators, and even consumer groups were already aware of this practice of blending Japanese whiskies with those of other countries, and selling them under a misleading description. In many respects, it was hiding in plain sight.  

In recent years some CEOs of large Scotch businesses, enraged by the amount of love that whisky commentators and consumers have chosen to shower on Japanese whiskies at the expense of Scotch, pulled out their hair in frustration because no one would publicly call out Japanese producers for this practice. It was almost, you might think, as if there was a conspiracy of silence, with the foremost conspirators being the Scotch whisky companies.  Why? Because some had been happily selling bulk malt whisky to Japan since the 1960s. 

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Nikka’s Yoichi distillery

So how did we arrive at this situation?

First, some history. As the Japanese economy began to recover after the Second World war, leading Japanese distillers (Suntory and Nikka dominated the category, with Suntory having a market share in excess of 70%) had ambitions to build both domestic and global reputations for their brands as rivals to Scotch both in terms of craftsmanship and quality. But despite significant increases in whisky production in the early 1960s and again in the early 1970s, inventory and spirit quality lagged behind ambition. Japan’s whisky distilling tradition rested on Masataka Taketsuru’s much romanticised adventures in Scotland in the early twentieth century. As we shall see, some of his contemporaries in Scotland came to think of these as akin to industrial espionage. 

Meanwhile, Scotch whisky, considered to be the epitome of quality, was held in such high regard domestically and globally. However, the two whisky industries could not have been more different. In Scotland, a history of independent distilleries selling mostly new-make whisky either directly to blending houses or to brokers and speculators had created a commodity market where mature whiskies were bought and sold freely. Blenders might even trade or exchange casks with competitors. As a result, it was common practice for blenders to make use of a wide variety of the available makes in their blends. 

In Japan, on the other hand, production was concentrated in the hands of a small number of companies, and the tradition of using other distiller’s whisky was unknown. Over time this forced the large Japanese distillers to develop the skills to produce a variety of spirit characters and qualities from their stills. It also made the major Japanese brand-owners look outside Japan for whisky that would help meet their volume requirements, and more importantly their desire to match, or surpass, the reputation that Scotch whisky had for quality. And what better place to go in the first instance than Scotland?

What better place to buy whisky than Scotland?

In 1961, Japanese distillers were selling an estimated 2 million cases in the domestic market.  By 1975, this had increased to 25 million cases. In the early 1960s, bulk malt whisky from Scotland was being imported into Japan, largely through brokerage firms, in the tens of thousands of gallons. By 1975 it stood at over five million gallons, and by 1978 over six million. 

For tax purposes, Japanese whiskies were divided into three grades: Special Grade, First Grade, and Second Grade, a categorisation that remained in place until 1988.  These grades were also de facto designators of quality. Some writers have reassuringly yet inexplicably suggested that bulk Scotch malt whisky was being used principally to improve the quality of the cheaper First and Second Grade brands. These were typically blends of Japanese malt whisky, neutral grain spirit, and sometimes other flavourings.  

On the contrary, as Scotch whisky executives reported in the late ‘60s and ‘70s (and British newspapers and commentators also wrote), Scottish malt whisky was being used to bolster the quality of the Special Grade brands (like Suntory Old, ‘with a smoothness akin to fine Scotch’), which in the early 1960s had been available in only very limited quantities. The objective was to enhance the reputation of domestic whiskies with consumers and put them on an equal footing with Scotch.

Between 1963 and 1975 the per capita consumption of whisky in Japan had more than tripled. It was the Special Grade of domestic whiskies that were growing most rapidly, as the cheaper grades declined. The leading brands were Suntory Old and Nikka Super, and Suntory Royal and Nikka Kingsland, the last two priced between standard and deluxe blended Scotches such as Johnnie Walker Red Label and Black Label. By 1975 Special Grade accounted for almost 60% of Japanese whisky sales, and a graph showing its rapid growth in the early 1970s would almost correlate to one showing the equally dramatic rise in imports of bulk malt whisky from Scotland. 

‘You can’t tell the difference between Suntory Old and Scotch’

At the same time companies such as Suntory were promoting their brands with huge advertising budgets, with messaging to persuade consumers that Suntory brands were as good as, if not better, than Scotch whisky.  As one observer commented, the advertising message was “you can’t tell the difference between Suntory Old and Scotch”. By 1975, Suntory claimed that Suntory Old, which like Suntory Royal was thought to contain 20% Scotch malt whisky, was the largest selling brand of whisky in the world (8.5 million cases). The label read: ‘a blend of rare, selected whiskies, distilled and bottled by Suntory Ltd … Product of Japan’. Sean Connery drank it as James Bond in 1967’s You Only Live Twice and would go on to appear in advertisements for the brand in the 1990s.

Suntory Old, “with a smoothness akin to fine Scotch” was launched in the United States in 1962, at a time when the company had very limited inventory to support such a bold move. Suntory whiskies were being sold in European Duty Free in 1972.  In 1976, advertising agency Chiat Day launched a striking campaign for Suntory Royal in the United States with the strapline “From the bonnie, bonnie, banks of the Yamazaki” (“if Suntory Royal happens to taste like Scotch we wouldn’t be surprised”). “Just as Suntory Royal is similar to Scotch, but better” said an advert in the Los Angeles Times the following year. 

In 1977, Suntory opened a restaurant in London to showcase its brands alongside Japanese cuisine, “within a stones-throw” noted the Aberdeen Press and Journal, of the head offices of Johnnie Walker, Cutty Sark and Justerini & Brooks. Suntory Old was listed in luxury outlets such as Harrods. Whilst total exports remained small the global intent was very clear.

Helping the competition 

Scottish distillers, often with overseas owners or investors, had begun to get directly involved in the supply of these bulk malts, rather than leaving the business to brokers. Seagram entered into an alliance with Kirin, announcing in 1973 the launch of a new blend, Robert Brown.  The whisky, said the press release, would consist of malt whisky from Scotland imported from Chivas Bros. and local Japanese whisky which would eventually be produced at the new distillery planned by Kirin at Gotemba in the Shizuoka Prefecture. 

The industry, however, was divided on the issue. Some, like the giant Distillers Company, remained aloof from this business, despite being regularly courted by Suntory. DCL’s Robin Cater warned that bulk exports used to improve the quality of Japanese blends were in effect helping to create the reputation of a category that would soon compete with Scotch, while Adam Bergius of William Teacher’s described bulk exports as “short-sighted and against the long-term interests of the Scotch whisky industry”. 

Trades unions formed a pressure group, the Scotch Whisky Combine Committee in 1977. Its purpose was to lobby both the industry and the Scotch Whisky Association, and government, complaining of the long-term threat both to jobs, and the reputation of the category, that the export of both bulk malts and blends represented. The Scottish National Party supported the campaign. 

Reports were commissioned and reports were written, warning of the long-term damage that would result from the “self-interested and short-term policy” that some companies had adopted to the sale of bulk malt whisky, particularly to Japan. At the heart of this was a concern that the increasingly multi-national ownership of whisky companies in Scotland (and elsewhere) could lead to the commoditisation of Scotch and the development of a globalised trade in whisky generics, with a commensurate loss of distinctiveness for Scotch, and for that matter other types of whisky too. 

Masataka Taketsuru and Rita Cowan

Tartan-tinted spectacles 

The warnings went unheeded, allowing Japanese distillers to develop a very specific “tradition” and “culture” of Japanese whisky-making. It “enriched the Japanese drinking culture” at the expense of Scotch. In addition, it led to whisky consumers and collectors all over the world, in a category where provenance is everything, being sold products that were not, as one might say, exactly as described.

Of course, this part of the story wasn’t told when Japanese whiskies were taken to the world in the late 1980s. Producers persisted with a carefully-curated narrative, told through tartan tinted spectacles, of an auld alliance between the two distilling nations based on Masataka Taketsuru’s visits to Scotland, an alliance symbolically solemnized by his marriage to Scot Rita Cowan, sometimes described as “the mother of Japanese whisky”. The tale that is told is of long-standing respect shared with Scottish distillers for authenticity, craftsmanship, and traditional methods of production. 

Industrial espionage 

For the record, that’s not quite how the chaps at the DCL saw it. They had been outraged when the purpose of Taketsuru’s visits became clear following the release by Suntory of a ‘Scotch Whisky’ with an English language label in 1929, invoking both government and the law to try and prevent its distribution and sale. As late as 1982, they were still debating whether uninvited Japanese visitors should be allowed into their distilleries, so stung were they by the events of the past. Indeed, it’s quite possible that the extreme culture of secrecy that surrounded distillation in the DCL for so many years was one of the unintended consequences of Taketsuru’s time in Scotland.

Retailers, writers, and commentators were sucked in by the romance story and the ‘zenness’ of it all, and of course by the outstanding quality of many of the whiskies produced (whatever their origin). In a collective attack of cognitive dissonance, they couldn’t, or wouldn’t, see beyond it. Scotch producers, as the fortunes of their bottled products waxed and waned in the late 20th and early 21st centuries, came to rely on bulk malt sales as a way of maintaining revenue and managing excess inventory. As the global popularity of Japanese whisky increased, so did the sales of bulk malt Scotch.

Increasingly through either direct acquisition or developing shareholdings, Japanese companies have increased their presence in the Scotch whisky business, and their access to stocks. So complicit has the Scotch whisky industry been in the development of the deceptive practices finally acknowledged this year by their Japanese counterparts, that it’s hardly surprising that they have remained so tight-lipped on the subject. 

At the same time, Japanese interests in the world of Scotch (and for that matter American) whisky has increased its influence over writers and commentators. So the muted response to February’s announcement is hardly surprising. Say the wrong thing about Japanese whisky these days, and it could cost you a free trip to Islay. Or Speyside. Or Kentucky.  Let alone to the bonnie bonnie banks of the Yamazaki.


Nick Morgan’s career as a historian and writer was rudely interrupted by a thirty-year, award-winning spell in the Scotch whisky business. Beginning as archivist for United Distillers, he body-swerved his way into marketing, and managed the largest portfolio of single malt whiskies in the world for over ten years. Laterly he was a spokesman on Scotch whisky related issues, famously described as ‘Diageo’s human shield’. He has now returned to the relative sanity of the past, and recently published A Long Stride, the official history of Johnnie Walker. His new book, Everything you need to know about whisky (but are too afraid to ask) is published in August 2021.

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