Why are whisky cask investments attractive?

Whisky casks can become more valuable over time. This increase in value makes them an interesting investment opportunity. In the same way you could buy fine wine, art, or classic cars, whisky casks are 'alternative investment assets'. But why do they increase in value, and what makes whisky cask investment attractive? Here are three reasons cask whisky investment is appealing.

First, whisky grows in value as it ages

Whisky is a living, evolving, thing. When first distilled, it is a clear, colourless liquid. It will have some flavour, known as the distillery character. But, that flavour will be raw, unpolished, and incomplete. So much so, that when first distilled it can't even be called Scotch.

To develop a whisky's flavour, it must be aged. Rules vary somewhat depending on the country the distillery is operating in. But if we stick with Scotch, it must be aged in an oak barrel for at least three years. During this time, natural chemical reactions in the cask change the character of the whisky. The raw nature of the new make spirit softens. The wood of the cask imbues and develops new flavours. And, the colour we associate with whisky develops. This process takes time. But that time is what creates the flavour. And, in the case of that three year rule, allows you to call it Scotch whisky.

Beyond time, there are other variables that impact how a whisky ages. There's the size of the cask (read more about cask sizes here). What the cask held before the whisky (find out more about where casks come from here). Even the species of wood, and the micro-climate the cask is stored in. But in simple terms, ageing whisky creates a product that is more flavoursome, and more desirable. And this is a key reason why whisky is more valuable at the end of maturation, than it was when it first went into cask.

Second, cask whisky is a tangible asset that can be audited and insured

Whisky casks are physical, tangible assets. They can be seen, touched, and even sampled periodically. It is a regulated good which is tracked and audited throughout its lifecycle. This provides provenance. You know it’s sat safely in a government bonded warehouse, in the same way HMRC want to know where the cask is. And last but not least, it can, and should, be insured. This insurance provides extra protection to the investment, while you hold it. Find out more about Insurance, and Bailment, here.

Third, whisky cask investments have been performing well

Maturing casks of whisky have had an average annual return of 8-9% over the past decade¹. There are two market forces that have benefitted cask whisky investment.

First, whisky itself has been growing in popularity. The US alone imports nearly £750m of Scotch². And Asia in particular has been a growth area; Singapore imports nearly £250m of Scotch². Industry commentators expect that growth to continue. The global whisky market is expected to grow by over 37% between 2021 to 2025³.

Second, as the cask market has opened up, investments have become easier. This has increased liquidity and eased cask trade. Not only does this make it easier to buy casks, it makes it easier to sell casks. There are several different ways to exit from cask whisky investment. You can find out more about how to sell a whisky cask here.

Would you like to learn more about cask whisky investment?

It's important to note that the value of all investments, whisky casks included, varies over time. That fluctuation means values can go down, as well as up. And past performance is not necessarily a prediction of future performance. But whisky casks are a fascinating, and appealing, option to consider.

If you'd like to learn more about whisky cask investments, get a free copy of our Whisky Cask Investment Guide here. It will explain more about cask whisky investment, and go into the details further. You can also talk to one of our cask experts, who will discuss your individual needs. Contact us here today.

References:

1. The Scotch Whisky Industry Review (Alan S. Gray)
2. HM Revenue and Customs. “Leading 5 Destinations for Whisky Exported from The United Kingdom (UK) in 2020, by Value (in Million GBP).” Statista, Statista Inc., 17 Feb 2021
3. Statista. (December 8, 2021). Size of the whiskey market worldwide from 2012 to 2025 (in billion U.S. dollars). In Statista.