Investing in rare whisky bottles
Whisky as a consumer good is well known to many and therefore very popular: The global Whisky Market was estimated at USD 61.7 Billion in 2019 and is expected to reach USD 95.9 Billion by 2026.
Whisky investments are classified into 2 groups: bottles and casks.
There are many reasons why investors should consider rare bottles of whisky as one of the best alternative investment opportunities. Rare whisky has been by far the top performer among luxury goods for some time. Its value has risen over 500% in the last decade and is not directly tied to stock market conditions. So while stocks could experience significant price corrections, whisky would steadily increase in value over time.
The Golden Liquid: Drink It or Bank It?
Collectible Whiskies are those that are expected to increase in value. This can include limited editions or "extinct“ (closed) distilleries, such as Brora and Port Ellen. Some collections fetch tens of millions at auctions. Rare Whisky has been by far the top performer among luxury goods. Whisky is not directly linked to conditions present on the stock market. It would still be expected to increase in value in bear market caused by recession or inflation. There is an increasing demand for Rare Whisky, especially in affluent Asian economies such as China. According to Mark Littler, the internet offers databases like Knight Frank Luxury Investment Index, Rare Whisky 101, Whisky Stats, Whisky Hunter, and Spirits Invest, providing historic data and analysis on whisky investments. Returns on bottle investments can range from 3.5% to 40% annually.
In terms of market outlook, it is important to note that not everything read on social media is true. Those spreading doom and gloom about the market could potentially be growth investors following the trend and buying modern releases at inflated prices. However, this type of investment carries risks as prices have fluctuated significantly in the past. On the other hand, value investors seek whiskies that may be undervalued and offer long-term appreciation. A market correction could bring healthy adjustments and opportunities for true value investors. It is essential to approach the market analytically and avoid impulsively follow trends.
Why invest in rare whisky bottles?
There are many reasons why investors should consider rare bottles of whisky as one of the best alternative investment opportunities. Rare whisky has been by far the top performer among luxury goods for some time.
Key factors for investing in rare whisky bottles:
Reputation: We only invest in whisky of the highest quality that is perceived as such by the trade and the public. It is advisable to buy aged whisky from well-known and established distilleries, or at least from those with promising growth prospects in the coming years.
Supply and demand: The value of whisky, like much else, is subject to the fundamental law of supply and demand. In the world of investing, this means that it is strategically important to look for bottles for which there will continue to be high demand in the future and for which supply will remain limited. The price paid for a fine bottle of whisky can be quite high, regardless of availability. However, it looks even more exclusive when only a few bottles are still available worldwide.
Special Release: Special releases offer the greatest assurance that your whisky is unique. Examples could include bottlings of a new product or limited editions associated with specific events. This creates a guarantee that there will be no replenishment for future bottlings, adding to the "sentimental value" that many whisky lovers are happy to pay for.
Paying for the brand is part of consumption and applies equally to whisky. Awards and reputation of the distilleries in question are the decisive selection criteria for us. Buying a bottle of whisky that has won well-known awards can further increase the investment potential.
⚠️ What are the risk factors to consider?
Damaged bottle: The handling and storage of the whisky bottles are crucial in maintaining their fundamental value. However, in case of unforeseen events such as human errors, a fire, or natural disasters, the bottles can be damaged or destroyed.
Counterfeit bottle: Due to the popularity and exclusivity of premium whisky bottles, counterfeit pieces are not uncommon on the market. As the popularity of the category increases, the issue will become even more paramount.
Market conditions: Following a set of due diligence and market research, investment-grade assets are identifiable. Nevertheless, paying the right price for the asset is a challenge and therefore poses a risk of acquiring the asset at a price premium.
Investment case: As with physical assets, fees and taxes apply. The higher the value of the asset, the higher these costs are. Hence, when purchasing, the potential income should exceed such costs for the investment to be valid.