Could Cask Whisky Lift Investors' Spirits?

Historically, many luxury goods and collectible assets were neglected by investors because they were perceived to be susceptible to fashion trends. Nonetheless, investors need an eye-opening look at a market that has demonstrated remarkable resilience and longevity even in the most challenging economic conditions: the age-old demand for single malt whisky.

Whisky as an asset

This soft commodity has been one of the best-performing assets for over a decade. According to wine and whisky specialist UKV International AG, the market is gaining even more attention from traditional investors who can see the benefits of using whisky as an alternative financial instrument.

The Scotch Whisky Association (SWA) reports that exports of scotch whisky have reached a new high. The industry has experienced a substantial 12.8% surge in export value during 2022, resulting in a total value of £7.8 billion. The SWA highlights that scotch whisky remains the largest food and drink export of the UK, with the United States being the top market for Scotch whisky in terms of value. In addition, there has been substantial growth in exports to Asia, particularly to China, Japan, and India, which has seen significant demand due to recent trade agreements. The SWA anticipates this growth trend will continue and urges the UK government to support the industry in its export objectives.

Olivier Wurtz, CEO of UKV, and Alex James, a leading Market Strategist at UKV International AG, offer their insights on why whisky and cask sales are increasing with seasoned private investors.

Catching the attention of high-net-worth investors

According to Wurtz, the sales figures for 2022 have shown an impressive spike of over 30% compared to the previous year's figures, indicating that more high-net-worth individuals are seeking refuge in the market. This surge suggests that the industry may see another increase of over 40% in 2023, potentially setting another record year.

"We see the long-term view of the market as extremely strong as new post-Brexit trade deals with some of the largest whisky consumers. For instance, India can only increase demand on existing stocks of Scotland's older single malts. I believe this is still the beginning of a bull market rally for scotch," says James.

The UKV marketing strategist says there's a change in attitude among private investors due to the potential recession in the near future. "Everyone knows how well whisky performs in times of uncertainty. The market is driven around supply and demand, and there has always been and always will be a demand for scotch whisky," explains James. "Consumers will always consume in times of turmoil, in times of celebration, and in times of commiseration. Scotch whisky can be an obvious flight safety should other more mainstream markets on the horizon fail us. It tends to be unaffected by evolution, revolution, recession, or war," adds James.

How whisky appreciates in value

James draws comparisons between whisky and real estate, 'Whisky is similar to property to some extent, as buying cask whisky is like buying property outright but without the hassle of tenants. As the property increases in value over time, whisky adopts the same fate as it matures and improves. We buy whisky, allow it to age and mature and when it is ready for bottling we sell it.' He went on to say 'Although both are tangible assets, whisky is more flexibly scalable. Whisky can be purchased for less than a typical deposit on a buy-to-let property within the UK and has a better outlook considering current interest rates., The good thing is portfolios can be built or released in phases and values are not tied to the local economy. The real edge though, and why whisky wins hands down over property every time in my opinion is profits on whisky are tax-free, so do not incur capital gains when sold.

UKV, a leading wine and spirits brokerage, offers storage and insurance services for the casks of its clients. Depending on the age and type of whisky, the annual cost of cask storage and insurance can range between £100 and £200. UKV's cask whisky stocks are kept in a secure, bonded environment in Scotland and are fully insured against loss or damage. The size and value of the cask determine the cost of storage and insurance. For an average barrel worth £20,000–25,000, storage and insurance with an HMRC-approved storage provider typically cost around £100 per annum.

Investing in cask whisky offers a unique opportunity to diversify investment portfolios, with the potential for high returns and the added benefit of tax-free profits. As a tangible asset, cask whisky offers investors a reliable alternative to more traditional investment vehicles. With UKV's storage and insurance services, investors can rest assured that their investment is protected and secure.

Storage is the name of the game

As part of their commitment to clients and the whisky industry, UKV is collaborating with their duty representative, Elite Wine, and Whisky, and their storage division, Elite Whisky Storage, to establish a new bonded facility in Edinburgh within the year. The facility will provide UKV with its HMRC-regulated storage for cask whisky and give greater control over stock tracking.

"The development of this facility is a huge commitment and very exciting for everyone connected to UKV and indicates how fruitful the future looks for those involved in the whisky sector. The prospect of being able to consolidate storage facilities, provide greater control over stock tracking, and allow for client access should they wish to visit the facility will be an absolute game changer," said Wurtz.

The longer whisky is aged in a cask, the more refined its flavor and, consequently, its price. The price differences between 15-, 20-, and 30-year-old single malt whisky of the same brand illustrate this point. Whisky is the world's most popular alcoholic beverage and a highly coveted commodity. Older whisky stocks are in high demand and deplete rapidly after bottling, particularly as some of the world's largest consumer markets eliminate or reduce import tariffs and duties on whisky.

The whisky and wine markets have proven their resilience in past economic downturns. Adverse conditions tend to stimulate growth in these markets. Therefore, learning more and considering investing in this thriving industry is wise.

To learn more about wine or whisky investing visit www.ukv-international.com