Cask whisky investment plays by its own rules
◆ Market woes and prime ministers will come and go but the value of casks will keep on climbing, writes Benjamin Lancaster
This time last year, inflation was sitting stubbornly at 10.5 per cent. Investors across the board were hesitant after being royally Kwartenged, many asking, why invest now? While most assets were facing turmoil; whisky was playing by a different set of rules.
Cask whisky, unlike traditional publicly traded assets and commodities, is less susceptive to market woes and geopolitics. Whisky derives most of its value from ageing, so while Liz Truss was delivering a mini budget for the ages, whisky casks were busy appreciating in value. In fact, cask value grew by 1.7 per cent in 2022, when compared to the previous year.
Whisky, the substance, has broad international appeal driving its value upwards. While this demand ultimately represents the bottle market, for many bottles are the gateway into casks. Exposure is the biggest driver for passion investments, and exposure doesn’t get much better than a good bottle of Laphroaig.
While global demand and a CAGR (compound annual growth rate) of 6.34 per cent is great to see, the industry must be realistic about the infrastructure around whisky. Legally, Scotch must be held in Scotland bound to a WOWGR licensed warehouse. With exponential demand from emerging markets in India, China and Southeast Asia, the industry must be careful to balance its demand with supply, without compromising on quality or the environment.
Another fundamental driver of global demand is the uptake from millennials. Many young investors want portfolios to reflect their passions – whisky provides an in-road here.
Whisky is an exceptional investment for investors across the globe. Value is added through its ageing process, and accessibility to casks through brokers has never been greater,
While whisky can hedge inflation through its supply constrictions, it is important whisky is used as a diversifier within a wider portfolio to help mitigate risk. Whisky is still a liquid – one that can spill and catch fire – and while it is incredible to own a piece of history, it is also a substance that must be looked after and carefully managed by logistics experts. The true risk of whisky casks is far from ordinary – like its unique upside potential, it plays by its own rules.
Whisky casks can be a perfect investment for those looking to sit back; watch the world turn, multiple prime ministers go in and out of power, geopolitics play out in front of their very eyes; and still come back to upside a decade later.
Investing in whisky first and foremost should be enjoyable. Choose a broker that has been in the industry for multiple economic cycles with proof of handling market exits.
You need a broker investing in logistics experts and warehouse capacity as the whereabouts and safety of your cask is paramount. Ask the broker to put you in contact with the Head of Logistics and ensure you will be given an ownership certificate before purchasing the cask.
Whisky investment is a unique and lucrative opportunity that has many upsides. Being clear about the risk of casks is vital for the industry’s longevity. Helping investors from all walks of life to make a choice that is best for them is also in the best interest of the broker, and the survival of this special and beautiful liquid that binds us all.