Raise Your Glasses, Investors: Your Profits Could Follow

Whisky is emerging as a neat (sorry) alternative investment; 373 percent over 11 years, anyone? Aaron Damiano Sparkes reports…

The whisky sector in 2022 saw the sort of result more traditional investment sectors can only dream of.

It saw double-digit growth. But how does the golden tipple measure up against “less alternative alternatives” such as gold, fine art or crypto?

Rising interest rates, surging inflation, and a lingering cost-of-living crisis have all contributed to volatile global markets. Unsurprising, then, that savvy investors are turning from the stock exchange to seek more unusual targets. Scotch whisky has been remarkably resistant to the economic downtown — and continues to outperform traditional investments, say experts.

The market does appear in rude health. The Global Whisky Market Overview 2023-2028 found that sales are on track to reach £99.48bn by 2028, from £69bn in 2022.

Alternative Investments

This term essentially covers everything that doesn’t fall into traditional categories: stocks, bonds, or cash. By definition, the assets are varied in nature; they can include real estate, commodities, and collectibles — often referred to as “passion investments”. Think art, antiques, vintage cars and motorcycles — and, of course, Scotch.

The reasons people choose to invest in alternative assets are as diverse as the assets themselves. Some are looking to diversify their portfolio; others are seeking to balance traditional investments with tangible commodities. Others still are excited about an emerging sector, and keen to get their foot on the ladder.

“Scotch whisky has been remarkably resistant to the economic downtown — and continues to outperform traditional investments, say experts.”

All investors hope for strong returns, and sometimes, they get them. In 2022, a cask of Ardbeg whisky sold at auction for a tidy £16m — a record. And while cask investment is typically viewed as a long-term asset, knowledge and experience are prerequisites before getting involved.

Investors have a slew of opportunities to shape their portfolios according to budget, timeline, and interests. Regardless of the current economic landscape, some investments are riskier than others. Gold has seen wild fluctuations throughout the year, sometimes almost daily. Cryptocurrencies have been up and down in the past 12 months, leading to a degree of investor caution. Non-fungible tokens (NFTs) have had a dramatic fall since their inception in 2021.

Even the fine art market, traditionally a solid choice for the ultra-wealthy, has witnessed erratic shifts. Damien Hirst, one of the most successful living artists, has seen the price index for his works fall by 60 percent since their peak.
Scotch whisky, meanwhile, has continued an upward trajectory — worldwide. The latest Knight Frank Luxury Investments Index shows that rare bottles of Scotch continued to be the 10-year leader of investments-of-passion — with 373 percent growth since 2012. That’s 91 percent more than fine art over the same period.

The Scotch Whisky Association reported that global exports of Scotch exceeded £6bn for the first time in 2022. That’s 53 bottles exported every second. And while these eye-watering stats refer only to bottles of the spirit, they are historically linked to “the spirit of the cask” from which it came.

This is one of the key advantages of investing in a cask, because the contents continue to age, and the shape and size of a cask, and what it was made from, have a profound effect on the maturing liquid within.
And this is just the beginning, according to the BC20 Whisky Cask Index. Casks have “significantly outperformed all the traditional investment options in recent years”, it says, with the market predicted to grow by 14.95 percent in 2022.

Demographic Changes

Another factor to be considered is the changing demographic of cask investors. The perception that whisky investing is for gentlemen “of a certain age” is outdated. Millennials and Gen Z now make up more than 36 percent of cask buyers — and women comprise 7.14 percent.

This fresh optimism, coupled with the surging popularity of Scotch across international markets, has established cask investment as a top-performing alternative asset. It’s also one that’s expected to become even more desirable in coming years.

By Aaron Damiano Sparkes Founder and Managing Director of Whisky 1901