Whisky investment has emerged as an attractive alternative investment to add to any portfolio. In addition to its growing popularity across international markets, the whisky sector observed a double-digit growth in 2022, a result which the more traditional investment sectors can only dream of.
But how does whisky investment measure up against other alternative investments such as gold, fine art, and cryptocurrencies?
Rising interest rates, surging inflation, and a serious cost-of-living crisis have all contributed to volatile upheavals in global markets. It’s unsurprising, then, that savvy investors are turning away from the stock exchange and looking towards alternative assets in which to invest their money. And with good reason. Alternative investments such as Scotch whisky have been remarkably resistant to the economic downtown and continue to outperform traditional investments.
In fact, the Scotch whisky market is looking in rude health. The recent Global Whisky Market Overview 2023-2028 found that whisky sales are on track to reach £99.48 billion by 2028, up from £69 billion in 2022, with a compound annual growth increase of 6.34%.
What are alternative investments?
Essentially, an alternative investment refers to anything that doesn’t fall into the traditional investment categories of stocks, bonds, or cash.
Alternative investments, or alternative assets, are extremely varied in nature and can include real estate, commodities, and collectibles – which are often referred to as ‘passion investments’. The best-known examples of passion investments are fine art, antiques, vintage cars and, of course, Scotch.
The reasons why people invest in alternative assets are also varied. Some are simply looking to diversify their portfolio; others are seeking to balance traditional investments with tangible commodities; others still are excited about an emerging sector and are keen to get their foot in the door.
Understandably, all investors are hoping for strong returns – and whisky cask investors are no different. For example, in 2022, an ultra-rare cask of Ardbeg whisky sold at auction for a staggering £16 million, the highest price ever recorded for a cask of whisky. However, while whisky cask investment is typically viewed as a long-term asset, it’s important to remember two crucial factors before you invest: knowledge and experience.
Why whisky is a top-performing asset
The sheer variety of alternative investments provides investors with a slew of opportunities to shape their portfolios according to their own circumstances, investment goals, budget, timelines, and interests. Yet, given the current economic landscape, some investments can be riskier than others.
Gold, for instance, has seen wild fluctuations throughout the year, affecting prices almost daily. Similarly, cryptocurrencies like Bitcoin have tumbled sharply in the past 12 months, leading to extreme caution and even panic. Likewise, non-fungible tokens (or NFTs) have experienced a dramatic fall from grace since their highly reputed inception back in 2021.
Even the fine art market, which has always been a solid alternative investment for the ultra-wealthy, has witnessed erratic shifts in sentiment. For example, Damien Hirst was once the most successful living artist on the planet. However, the price index for works by Hirst has plummeted 60% since his peak.
Scotch whisky has continued an upward trajectory across the globe. The latest Knight Frank Luxury Investments Index shows that rare bottles of whisky continued to be the 10-year leader of investments of passion with a 373% growth since 2012, comfortably beating fine art at 91% over the same period.
In addition, the Scotch Whisky Association reported that global exports of Scotch exceeded £6 billion for the first time in 2022, which is the equivalent of 53 bottles of whisky exported every second – up from 44 per second in 2021. And while these eye-watering stats only refer to bottles of whisky, the desire for the best and rarest whisky bottles is historically linked to ‘the spirit of the cask’ from which it came.
This is one of the key advantages of investing in a cask of whisky, because the whisky inside it continues to age, and the shape and size of a whisky cask, plus what it is made from, has a profound effect on the Scotch whisky spirit maturing within.
A new alternative investment for growth
And this is only the beginning. According to the BC20 Whisky Cask Index, whisky casks have ‘significantly outperformed all the traditional investment options in recent years’, with the market in whisky casks observing a projected growth of 14.95% in 2022.
Another growth-driver is the rapidly changing demographic of whisky cask investors. Far from the outdated perception that whisky investing is for gentlemen of a certain age, Millennials and Gen Z now make up an impressive 36.49% of total whisky cask buyers, while female cask buyers represented 7.14%, up from 6.81% in 2021.
This injection of fresh optimism, coupled with the surging popularity of Scotch across international markets, has established whisky cask investment as a top-performing alternative asset, and one that is expected to become ever more desirable over the next few years.
By Aaron Damiano Sparkes, Founder and CEO, Whisky 1901