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Friday, November 27, 2020

Whisky - A Better Investment than Gold or Crypto?

Whisky - A Better Investment than Gold or Crypto?20

2020 best year to invest in whisky



 Could 2021 be the Best Year Yet to Invest in Whisky?

Never in our lifetime have we seen so much uncertainty surrounding the investment market. Yes, successful investments aren’t as predictable as they have been in the past, but that doesn’t mean it’s time to halt, it’s simply time to adapt. Scotch whisky has already proved to be a lucrative investment since it became one of the most desirable luxury asset classes in 2019 according to the Knight Frank Luxury Investment Index and turbulent times have ceased to knock it from its pedestal. But what if we told you, 2020 could be the best year yet to make that investment?

Whisky Produced in 2020 Promises High Profits

The value of whisky isn’t directly affected by the ever-fluctuating stock market which is one of the reasons why investors have been turning from gold to whisky investments during Covid-19. Whisky is an asset class that will always be valuable due to supply and demand. The first lockdown in March 2020 caused distilleries across the world to close which is something that hasn’t happened in the past. According to the Scotch Whisky Association at that time, “87% of production sites are either operating at reduced capacity or have closed entirely”. While this was devastating for the economy and distillery owners alike, this event in history could be music to investor’s ears in 15 to 20 years.

What Factors Determine the Value of Whisky?

Not all whisky is created equal. That’s why some whiskys will be valued in the hundreds and some bottles sell at auctions for thousands or even millions. A bottle of The Macallan Fine and Rare 60-Year-Old 1926 recently made the headlines when it sold at auction for a record 1.9 million. So, what exactly is it that sets some whiskys apart from the rest? Is it the brand, the age or the quantity? Or all three?

As we can see from The Macallan sale, the brand does make some whiskys more highly sought-after than others. Age is another significant factor that determines the price that a batch of whisky will sell for. Whisky casks are not sealed tight, so over time, whisky evaporates which means there will be less to bottle the older it gets. Naturally, this means that there is a smaller quantity available when compared with less mature whisky batches, which means they are worth more. Pair this with global demand for Scotch Whisky being at an all time high and an impressive asset value growth standing at 564%, it is no surprise prices for whisky created in 2020 are predicted to sky rocket. The second factor is scarcity. The smaller the quantity, the more covetable it will be to a collector or an investor. With whisky production almost coming to a halt at the beginning of 2020, this can only mean the whisky produced during this year will be highly coveted.

2020 Whisky is Set to Be an Illustrious Batch  

There isn’t a whole load of positive things that we can take out of 2020, but rare whisky will be one of them. As mentioned previously, lower production units create rarity which drives desirability, and in turn generates exceptionally valuable whisky. As Covid-19 impacted over three quarters of the whisky production sites, the amount of whisky produced will be the lowest in history and the only whisky created during truly unprecedented times. This provides investors with a unique and potentially lucrative investment opportunity.

Invest in a Part of Whisky History

2020 will be remembered for a plethora of reasons, for a time when the world stood still and we were forced to adapt in all areas of our lifestyle, not just investing. This year marks a unique year in the world of whisky production. We predict it will also increase the price that collectors will be prepared to pay for whisky produced in this year further down the line. After all, you are not just purchasing a cask of whisky in 2020, you are purchasing a piece of whisky history. One thing is for sure, this year is unlike any other and will forever be known as the year that broke the mould.

Will 2021 be the year you try your hand at whisky cask investment?



Forget Bitcoin, It’s Time to Invest in Whisky Casks

The nature of investments is that you are taking a risk in order to receive a reward, but 2020 has brought a lot more risk and uncertainty because of the chaos the Covid-19 pandemic has wrought upon the global financial markets. Investors who made the wrong calls at the wrong times have lost big, while many others have fled to safer ground with investments in traditionally stable markets.

Gold has been one of the most popular safe investments, rising to an all-time high in August of $2,072 per ounce, though it has since waned to $1,885. Bitcoin meanwhile has also had a great year, jumping above $17,000 to a three-year high in November, having been down as low as $4,000 as the pandemic first took hold globally in March.

Covid-19 seems to have convinced investors to take another look at cryptocurrencies after recent uncertainties in those markets, and Ethereum, Litecoin and XRP have all seen their value soar. “The virus crisis is propagating the reassessment of bitcoin,” said Nikolaos Panigirtzoglou, an analyst at JPMorgan. “There is a reassessment about its value here as an alternative currency; as an alternative to gold.”

But there are other alternatives to gold out there. Bitcoin may be finding its way into the mainstream and its scarcity (capped as it is at 21m) is what has helped it keep its value during this pandemic, but it remains a mystery to many investors. Much more familiar is investing in something tangible, which is why alternative investments are becoming so popular this year.

The Rise of Whisky Cask Investments

Investments in whisky have been growing for many years. Earlier in the year, rare whisky topped the Knight Frank luxury investments index, having risen by 564% in value over the last decade, putting it well ahead of classic cars, which rose in value by 194% in the same time, while fine art rose by 141% and wine by 120%.

Meanwhile, whisky casks have become ever more popular as investments this year, despite the impact of Covid-19. According to Adrian Mason, Managing Director of Whisky Investment Partners, “we’ve seen huge demand globally from clients looking for safe investment options this year, due to the uncertainty that the pandemic has caused. Lockdowns across Scotland causing significant reductions in output has made 2020 casks even rarer for the future. There has never been a better time to get involved in this established market.”

The BC20 Whisky Cask Index has claimed that if you had invested $100,000 in whisky casks in July 2018, they would have been worth almost $160,000 by the end of June 2020, an impressive rise that puts whisky casks ahead of both gold and Bitcoin for growth. Meanwhile, returns from investment have outstripped Bitcoin, gold and also the S&P 500.

The report showed that of all the distilleries you can buy casks from, Laphroaig comes out on top with an average of 19.88% projected annual capital growth, followed by Bunnahabhain and Staoisha. However, even bottom-of-the-table Ardmore showed a growth of 5.13% per year, with none of them projected to make losses for investors. So it’s no wonder cask investments are seen as a safer investment than most other options.

Investing in Casks of Whisky

Cask whisky investment has become ever more popular since the 2008 global financial crisis, before which investment normally took the form of building up collections of rare individual bottles. That crisis led investors to look for safe options, just as this current pandemic and economic slowdown is doing right now, which is why cask whisky is rising in popularity once again.

Investing in casks means either buying newly-produced spirits directly from distilleries and letting them mature, or getting pre-aged casks from other investors and brokers. It’s a way of ensuring the value will go up because your whisky is maturing all the time, while each cask is also unique. Your casks are stored for you in fully-insured government bonded warehouses meaning they’re safe and secure while they mature.

You can invest in whisky casks through physical auctions at houses like Bonhams, where there are four dedicated whisky auction dates each year. You can also try online auctions, which have the added benefit of usually being cheaper because fees can be as little as 10% of the value of the casks, when they can be up to 25% at a physical auction.



Scotch Whisky Growth Goes Global

When Scotch whisky was being made by monks in abbeys in 15th Century Scotland, they couldn’t have begun to imagine that one day it would be a drink that’s enjoyed all around the world. It would have seemed even less likely over the following centuries when monasteries were dissolved and whisky production had to continue underground, before coming into its own in the 19th Century by which time over 4 million gallons were being produced each year.

Today there are around 128 distilleries in Scotland, which is the highest concentration of whisky production in any country in the world. Not only that, but it’s also a hugely popular drink on a global scale, sold and enjoyed in almost any country you could think of. And the good news for distilleries and distributors alike is that its popularity keeps on growing.

Global Growth in Exports

The recent export figures for 2019 from HM Revenue and Customs, released by The Scotch Whisky Association show that there’s been worldwide growth of 4.4%. Scotch whisky is currently worth £4.91 billion a year as an industry, and saw growth in 106 global markets, with Asia and Africa showing value increases of 9.8% and 11.3% respectively.

Scotch whisky is the world’s most internationally-traded spirit, with 42 bottles shipped every single second, so it’s no wonder that it represents around 75% of Scotland’s food and drink exports. Markets like Brazil, India and South Africa are all showing signs of growth in 2020 despite the impact Covid-19 has had on trade in general.

The figures show particularly good news for the Scottish Single Malts market, which grew by over 14% from 2016 to 2017 while exports are predicted to have grown by 11.4% from 2018 to 2022. Meanwhile there was also a jump in the number of 70cl bottles exported last year, up 2.4% to 1.31bn.

The largest areas showing growth in Scotch whisky exports in 2019 were:

  • USA: £ 1,069m (up 2.8%)
  • Taiwan: £205m (up 22%)
  • Germany: £184m (up 5.6%)
  • Spain: £180m (up 4.8%)
  • India: £166m (up 19.7%)
  • Japan: £147m (up 16.1%)
  • Latvia: £142m (up 8.1%)

Is Scotch Whisky Covid and Tariff Proof?

Investments in Scotch whisky have continued to grow in 2020 despite the turbulence in global markets in general, but does that mean that it’s Covid-proof? The global pandemic has certainly had an impact on the market. For one thing, earlier in the year when the country went into lockdown for the first time, that affected distilleries’ ability to work.

Many then pivoted to using their ingredients to produce hand sanitiser for essential services, using denatured alcohol. Some provided denatured alcohol for other firms to produce sanitiser, while others did the whole process themselves, playing an important role in protecting their communities in a time of real trouble.

Once production got back to normal levels, uncertainties around trade and global and local restrictions brought in around the world saw a 30% drop in exports for Scotch whisky in the first half of 2020. This is understandable in the circumstances, but still represents the first real bump in the road for a market much more used to growth.

As Covid-19 restrictions gradually ease and trading conditions return to normal, we can expect to see numbers picking up again for the second half of the year. The overall sales figures are likely to be lower than 2019, but this is a situation that will be reflected in all other asset classes as the pandemic will have impacted all exports.

Of more concern is the tariff brought in by the USA in October 2019 on the import of single malt Scotch whisky and Scotch whisky liqueurs. The immediate impact of that could be seen in the results for the final quarter of 2019, which saw a 25% drop and is expected to impact particularly on smaller distilleries who only produce single malt Scotch and rely on the US market for exports. However, with notable growth in various other global markets, that reliance could become less important in time.

Another cloud on the horizon is the uncertainty about the impact of Brexit, which will see trading conditions change in ways as yet unclear from the start of 2021. However, Scotch whisky investment has largely remained resilient so far through the chaos of 2020, continuing to grow in value up by 564% in the last 10 years according to Knight Frank’s Wealth Report, despite Covid-19, so there are still plenty of reasons for optimism, whatever challenges the pandemic, tariffs and Brexit may yet create in the export markets.

After all, if Scotch whisky could flourish despite the best efforts of King Henry VIII in the 16th Century, these challenges are not likely to hold up its continued global growth in the 21st Century.


Why Whisky is a Better Investment Than Gold for 2020

In times of trouble, investors usually turn to something that seems like a safe haven. Life in a global pandemic is difficult enough after all, without gambling away your money on an investment that goes sour because of Covid-19 restrictions or the general economic turmoil they have caused.

Historically, gold has been the safe bet, a physical asset that holds onto its value no matter what is going on around it.

But there is another investment option that has been on the up and up amidst the chaos of this year. Whisky has proven to be a reliable investment during the turbulence of Covid-19, which is no surprise given how well it has performed over the last 10 years.

Presenting a return of 40% over a 12-month period, whisky investments have soared whilst gold investments offer a mere 12%. So is it time to switch from gold to whisky?

The Rise of Whisky as an Investment

To measure how well whisky performs as an investment it’s helpful to have something to compare it to, and the Knight Frank Luxury Investment Index demonstrates exactly that. The value of investments into classic cars, for example, rose in value by 194% over the last ten years. Fine art rose by 141% and gold by 175%.

However, whisky investments rose by 564%. When it comes to gold, whisky still comes out on top, according to the Rare Whisky 101 report, which showed that over the past five years the value has risen 182%, compared to a rise of just 28.2% for gold, while both oil (15.9%) and the FTSE 100 (14.9%) also both trail whisky.

The BC20 Whisky Cask Index has shown that if you had invested $100,000 in whisky casks in July 2018, they would have been worth nearly $160,000 by the end of June 2020.

Meanwhile, the 1,000 most sought-after Scotch whisky bottles in the Rare Whisky Apex 1000 Index have increased in value by almost seven times since 2010. That’s quite the return on investment and is exactly what whisky has to offer.

With global Scotch whisky exports growing in value by 4.4% in 2019 to be worth £4.91 billion, there’s plenty of reasons for optimism around whisky investments right now.

Whisky as a Safe Haven in 2020

So how has Covid-19 impacted whisky prices? Unlike gold prices which plummeted in early March 2020, the early signs were certainly very positive. While the world went into lockdown and meltdown in March and April, investors were still buying up whisky.

So what is behind this rise in people buying whisky as an investment?

The 2020 Cask Whisky Buyer Report shows that 40% of investors are looking for alternative investments in 2020 because they want to spread and minimise the risk, which is hardly surprising as 30% say that they fear that they’ll make a loss because of the impact of Covid.

But why is whisky proving to be a safe bet during a global pandemic?

Why Whisky is a Safe Investment

Whisky’s appeal in times like these is that it’s a physical product that will retain its value without being overly impacted by changes in the financial markets. When it comes to the classic whiskies from the most sought-after distilleries, there’s only a finite amount available because it was made decades ago.

Indeed, each cask has its own specific flavours, which only adds to the appeal and value and investing in whisky means needing to have done your research into these brands, their production methods, etc.

However, this is much easier and more straightforward than the kind of insider knowledge you can need for other types of investments, making whisky a more accessible investment. And if something does go wrong and the monetary value does drop significantly, at least you still have the whisky.

So if you’re looking for a safe investment that will grow despite the continuing impacts of Covid-19 over the next months and years, the smart move is whisky, which has been setting new records and shows no signs of slowing down anytime soon.


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