I read this in an article earlier this week: “Gold held its value reasonably well through COVID-19 while the stock market dropped 19.8% gold grew by 7.6%”. All I could think was, why settle for ‘reasonably well’? In contrast, the annual growth of whisky casks over the peak of the pandemic was 13.12%.
The impact of the downturn
With GDP floating around +/- 0.1, recession has been a talking point all year for the UK.
There has never been a better time to consider alternative investments that have a low correlation with traditional markets. In short, it might be time to swap physical for liquid gold.
Both are physical assets, however, whisky unlike gold is produced for consumption. I recently had a client describe it to me as a “natural burn cycle”. If we stopped making whisky right this second, with casks maturing we have an estimated 5-7 years until we run out, whisky is being consumed faster than it is flowing out of the stills. This is amplified during times of recession and pandemic, there are impacts on this production that in turn increase the value. With the rate of consumption continuing to grow, any impact on production will strengthen that supply and demand value growth.
Economy down, whisky sales up
To highlight this, During the pandemic, I know over 40 colleagues who were put to redundancy due to distilleries closing or lowering production. Despite this, Diageo managed a 2% sales increase during the same period, ou the back of this Distell reported they have doubled profits. With bars and restaurants closed people around the world were buying and opening premium bottles. Off-trade sales were up 30%!
Why not, instead of relying on traditional investors turning to gold, hoping to minimise loss or grow slightly in value during times of uncertainty, look instead to an alternative that naturally appreciates with its value increased by production shortages?
A sustainable investment over time
On a tangent – which is not unusual for me…
With the world moving towards more sustainability, alternative investments that don’t add to the world’s emissions are becoming increasingly desirable. First hand, I have watched distilleries strive for carbon neutrality. Bio-fuel, waste recycling, heat-transfer pumps, and some distilleries are even planning on using anaerobic digestion to aid steam generation.
The industry intends to be Carbon Neutral by 2040, and it’s well on track. In 2018 the Scotch whisky industry produced 530,000 tonnes of CO2, in comparison the Gold industry produced… 126,400,000 tonnes of CO2.
In terms of investing in the future, the inherent sustainability and low-carbon footprint of single malt production are definitely worth considering next to the resource-intensive impact of mining gold (or even Bitcoins).
I will concede that I am entirely biased. Although I will also admit that the figures are accurate.
