BLOG: Should you be drinking or investing your whiskey?
Investing in cask whiskey has been around for centuries, but only to a select few in society. In creating Whiskey & Wealth Club, our goal was to open up this opportunity to private investors wishing to have their own share of the Scotch or Irish whiskey markets.
Diversifying with alternative investments
Globally, interest in cask whiskey investment is surging with a 200% increase in Google searches for the term last year alone. This was in the context of an especially tumultuous year for traditional financial markets, leading people towards alternative investments. Research carried out by Whiskey & Wealth Club found that 89% of investors would turn to alternatives to spread risk, with 64% seeking the reassurance of something asset-backed.
Unsurprisingly, investors favoured longer established options – art topped choices at 31%, followed closely by antiques (28%), and wine (24%), according to the Whiskey & Wealth Club Cask Whiskey Buyer Report.
Irish whiskey and Scotch casks featured low on their buying choices, recording just 12% and 19% respectively. However, once investors were given a short statement describing how cask whiskey works, over half (55%) said they’d be interested in investing in whiskey.
How does cask whiskey investment work?
Due to the whiskey ageing process, it takes distilleries from three to 10 years before they can sell it. In fact, new make spirit in Ireland and Scotland cannot legally be named whiskey until it has matured in a cask for at least three years.
Additionally, it can take five to eight years before whiskey really becomes palatable – with many world-renowned whiskeys being matured for more than 10 years. Whiskey & Wealth Club will therefore buy a portion of a distillery’s new make spirit each year, allowing them to cover running costs whilst their stock matures for their own brands.
As a result of our buying power, we can offer casks to investors at ultra-wholesale rates. Investors can later sell back to distilleries, brands, or independent bottlers. Collectors or alternative investors may also pay a premium to bypass years of maturation.
Four things to look out for with your investment
As with any investment, everyone is encouraged to do their due diligence. This starts with the value of a cask which is largely dependent on four key factors – age, quality, brand and rarity.
Age: the longer a whiskey matures, the better it is likely to taste, which in turn increases its value.
Quality: while not a guarantee of return-on-investment, it is an essential foundation. Commercially produced whiskeys, that are mixed into low-quality blends, are never going to hit great heights in terms of resale.
Brand: a cask from a company that nurtures its brand will always be more desirable than unknown or mass-produced whiskey.
Rarity: a strong predictor of potential value. Even high-quality, well-aged whiskey from a good brand will not provide significant returns if there is a lot of it. In the whiskey world, limited supply leads to significant demand. Which brings us to the year 2020. Due to Covid-19, whiskey production nosedived. New-make spirit produced last year will therefore be rarer, and of higher value.
The future of cask whiskey
The Irish market, which recorded a 300% increase over the past decade, is set to continue its renaissance. At the same time, the global whiskey market is growing at an estimated annual rate of 5.51%. As more brands enter the market, they will require mature stock.
This is where investors come in. They can sell their mature casks to new brands to meet the global surge in popularity of Irish whiskey. In the next 10 years alone, it is expected that more than 100 new brands will enter the market.
The Scotch market also provides a strong secondary market for investors. It is the single most traded spirit on the planet, with the value of the high-quality Scotch single malt market set to grow from £394 million in 2018 to £439 million in 2022.
It’s an exciting time for cask whiskey investment. You can choose to drink or invest your whiskey but, with abundant opportunities and a burgeoning market, you may wish to do both.
William Fielding is co-founder of Whiskey & Wealth Club.