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Background

Over the past decade, whisky has become one of the best performing asset classes as prices and demand continue to climb. However, despite the huge increase in interest from new investors, the whisky market’s reputation for running on relationship-based acquisitions can make it somewhat difficult to enter. Whisky brokers such as VCL Vintners help clients at all stages of their investment journey invest in a range of whisky options, from sought-after individual bottles to entire casks. Metacask bridges the gap as a marketplace between the supply side and the technological advantages that NFT and blockchain can bring to a wider audience than ever before.

The Scotch whisky market is both huge and growing rapidly. Exports of Scotch whisky add approximately £5 billion to the UK economy each year and account for around 25% of all UK food and drinks exports. Foreign markets have a huge appetite for fine whisky and more than 90% of Scotch is sold abroad.

Overall, the luxury whisky investment market is experiencing a huge boom with an enormous demand for genuinely rare and unique whisky. Market demand is at an all-time high and, since it shows no signs of slowing and the supply of fine whisky is finite, the potential for long-term growth is extraordinarily high.

The sheer market power of whisky is reflected in the 2019 annual Wealth Report from Knight Frank. Rare whisky dominated the collectables market, with a meteoric 40% rise in value in the space of 12 months.

For those looking to take advantage of the investment opportunities associated with whisky, Metacask allows investors to leverage the experience of whisky brokers such as VCL Vintners and their relationships with Scottish distilleries, cask merchants and bottling agents.

Performance

Whisky assets have become a common talking point for investment experts and financial publications in recent years, and with good reason. Increased overseas demand has resulted in an explosive rise in prices at a pace that shows no signs of slowing at all. Worldwide, there are around 500,000,000 whisky consumers and that number is growing at pace. The establishment of fine whisky as both a status symbol and collectable in the huge Asian markets has driven the market’s current development and looks to be a primary driver in the blistering growth expected over the next decade.

Distillation of whisky has been part of British culture since it first appeared on the 1494 Exchequer Rolls. The traditional domestic market for whisky was constrained by the small population of the UK and the even smaller percentage who could afford the finest single malts. Today, Scotch single malt has evolved into a truly global spirit.

Demand for fine whisky is also continuing to increase. Compared to 2018, the value of whisky exports in 2019 rose by 4.4% to a record £208 million. During the same period, bottle exports rose 2.4% to £1.31 billion. Sold to over 180 markets worldwide, Scotch whisky now represents around 25% of total UK food and drink exports. Even within counties with a strong distilling culture whisky remains a dominant force, outselling Tequila in Mexico and Cognac in France. 

The largest export destination for Scotch whisky remains the USA, importing an annual value of  £1,069 million. However, the demand for fine whisky in emerging markets is growing rapidly. By volume, the second-largest export destination for Scotch whisky is India, which imported 131 million bottles in 2019, a 16.1% increase on 2018. This increase is despite a 150% customs duty levied by the state, highlighting the sheer level of demand from Indian consumers. With the ISWAI (International Spirits and Wine Association of India) predicting that customs duty will be reduced to a more reasonable level in the near future, the market for whisky in India is expected to continue to rapidly expand.

These statistics make it clear that the demand for single malt scotch is both vast and growing. With supply levels being rapidly outpaced by demand and new markets opening to greater volumes of exports, prices are clearly headed in the right direction.

Exports

As with all industries, the Covid-19 pandemic has had a profound impact on the Scotch single malt market. As a supply-chain dependent industry, the widespread import/export disruptions caused by the pandemic caused whisky producers to grind to halt for much of 2020.

Conversely, during this time 20% of customers increased the amount they were drinking and this was reflected in a huge increase in retail sales. With current stock levels diminishing rapidly, this unique supply/demand dynamic has further slanted an already lucrative towards profitable cask investment. The whisky market’s rapid growth has also drawn in new investors, looking for a safe haven away from the turbulent stock market and the low returns of bank-based products.

Both distillery parent companies and financial institutions expect that the whisky industry is destined for significant growth over the coming decade and this is reflected in the amount of capital the industry is investing in production. 

Billions of pounds are being invested by conglomerate parent organisations in both greater production and whisky tourism. Around 2-million people toured distilleries in 2018 and the increasing importance of tourism is indicated by Diageo’s £150m investment in the Johnnie Walker global visitor experience.

Mike Kempton-Smith, associate director in asset-based loans at Barclays Corporate Banking in Scotland summed up the potential growth of the industry by stating “With exports continuing to grow in 2019 by 4.4 per cent, ever closer to the milestone £5bn figure, global demand continues to develop, with growth in 106 markets last year”.

In light of increased demand and reduced capacity, we are confident that cask investment will become an increasingly commonplace feature within successful commodity-based investment portfolios.

Luxury Index

Over the past ten years, whisky’s growth has massively outpaced the former stars of the commodities market. While coins (190%) and classic cars (193%) performed respectably, whisky’s unprecedented 586% rise in value completely changed the commodity investment paradigm.

The Wealth Report 2019 highlighted the unprecedented 40% increase in the whisky market’s value during 2018, despite it being the first year that whisky featured in the Knight Frank Luxury Investment Index. Whisky’s dominance of the commodities market was further reaffirmed in 2018 with the $1.45 million sale of a bottle of 1926 Macallan, setting the record for the most expensive bottle of whisky ever sold.

The clear reality is that high-net-worth individuals (HNWI’s) from across the globe are actively seeking out rare and ultra-exclusive whiskies and are prepared to pay increasingly higher prices to own them. This demand for rare whiskies has seen collectors evolve away from single bottles and into the acquisition of casks, often with a seven-figure value.

At the same time, the consistent profits available have drawn in larger numbers of increasingly educated investors who are looking to adroitly diversify away from increasingly risky stock markets and low-return bank-based assets.

A Macallan 1991 NFT Auction

Worlds-First Scotch Cask With Digital Artwork Label: Secured On The Blockchain

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