Is this the moment to invest in whisky casks?

The Whisky Cask Market Report 2022

Every investment is based on information and intuition, but while we all follow our feelings, having concrete data in hand is always the best way to make any decision. The whisky cask market is growing and becoming more complex as the volume and type of casks increases, so data-led reports can be useful to sift through the noise and conflicting advice.

The release of the annual Whisky Cask Market Report offers investors the most comprehensive and detailed overview of the performance of the whisky market available. This, the sixth edition of the report, tracks historical cask data from over 80 distilleries, now comprising 1000s of casks from all of Scotland’s regions. 

What does the data tell us from this year’s report and are there any trends that we can identify that will help us to make better investment decisions over the coming years?

The Whisky Cask Market Grew by 14.95%

14.95% growth in 2022

Despite a year of significant economic challenges in global markets, whisky casks continued on the steady upward trajectory seen in recent reports. In fact, the 1.6% increase in 2022 compared to 2021 (one of the biggest annual rises since data was first collected for this report) can be directly attributed to investors looking for safer havens to protect their portfolios against the impact of inflation. 

The steady growth in value of the whisky cask market appears robust thanks largely to the inherent properties of whisky casks as an investment, which increase in value as the whisky interacts with the cask over time. 

The BC20 Index Continues to Rise 

15.86% GROWTH IN 2022

The BC20 Index is a basket of 20 casks from various distilleries (from famous, to more niche) whose value has been tracked over the seven years that data has been collected for this report. This index provides an interesting overview of the general health of the market and a useful tool to compare whisky cask investment to other kinds of assets.

Once again, the BC20 Index grew above the general whisky market with an average projected performance of 15.86%. This reflects the trend of growth seen over the last four reports due, principally, to the growing popularity of whisky among consumers across international markets. 

This growth, combined with the intrinsic value of whisky as an asset class, has established whisky casks as a safe haven for investors in turbulent times. 

However, the impact of inflation on cask prices in general should not be discounted and may be pushing values higher than expected. 

Nevertheless, the slow appreciation of whisky (which is not even regarded as whisky until it has spent 3 years in the cask and cannot be expected to deliver significant profits until a number of years have passed) means that, compared to other similar assets, we can expect the impact of inflation on the real economic value of casks to be negligible over time. 

Whisky Casks Outperformed Gold and the Stock Market

Comparative Asset Analysis

Tangible assets traditionally offer investors security when diversifying their portfolios. The historic performance of whisky casks compared to stock markets revealed in the report underlines that trend. However, it is also interesting to see how whisky casks stack up against gold, another safe haven in times of economic uncertainty.

Traditionally tied to the dollar, gold is more closely related to the performance of global markets than whisky casks, which gain value independent to market circumstances. While other assets or investment classes can offer quicker returns, very few can offer the stable gain in value that are inherent to whisky casks.

Laphroaig Hits The Top 

A key aspect of the report, and one that investors are especially interested in, is the distillery league table, which tracks the growth of casks from individual distilleries, identifying the best performers in 2022. 

The report points out that all of the top 20 performing distilleries saw growth in 2022, clearly pointing to a rise in the whole market, driven by inflation and a growing demand for quality single malt whisky. 

It also showed remarkable consistency with most of the top-performing distilleries from the last report featuring again. The table is now led by Laphroaig, which saw 3.16% growth in 2022 compared to 2021. 

The rest of the distilleries in the top five were also familiar from previous reports, with Staoisha in second place, Bunnahabhain in third and Highland Park, the first non-Islay distillery of the top performers, coming fourth. The Islay distillery Caol Ila took the fifth spot from last year’s surprise entry Mortlach, which has now dropped down to the sixth position. 

The UK is the Largest Market

As the whisky cask market becomes increasingly global, having data about different countries and regions gives an insight into where investment is strongest and where it has the most potential for growth. 

Interestingly, the report showed a slight shift away from Asia and back to Europe, which could, perhaps, be a consequence in the continuing growth in the popularity of new make and more accessible casks. The Asian market has traditionally been focused on Premium and Blue Chip casks with some of the biggest single cask sales of recent years occurring in that region.

Currently the data shows that Europe constitutes 74.78% of sales compared to 18.35% for Asia. In the previous report, these figures were 70.97% and 21.7% respectively. In the regional country by country breakdown, the UK is, by some margin, the biggest market for whisky cask investors in Europe with 74.34%. In Asia, China leads the way with 48.76% of the total market. 

New Makes & Inflation

Fluctuations in prices for casks according to their age is particularly interesting to investors looking to build a portfolio that reflects a good spread of casks of different values. Therefore, this section of the report is particularly valuable for investment strategies.

The impact of inflation on new make casks, which are subject to the dramatic rises in energy and production costs seen across every industry, is particularly striking, with the cost and value of this cask age hitting almost 40% annual appreciation. Although, it is important to note that in the current climate, investors should not expect to automatically see those returns when exiting their investments.

Casks of other ages also saw gains, although much less dramatic than for new makes. While, interestingly, the most expensive casks on the market dropped slightly.

It will be very interesting to see the data for next year’s report as the world is expected to enter a more stable economic climate. However, if we have learnt anything from the last few years, it is that nothing can be taken for granted. 

Time to invest in whisky casks?

All investors look to enter a market low, and then exit on a high. So, where do whisky cask investors sit on that continuum today? After analysing the data contained in the report a more complete picture of the whisky cask market emerges.

There’s no doubt that cask prices have risen considerably over the last two years and that those investors lucky enough to have invested in younger casks before inflationary pressures hit distilleries have been able to see considerable returns on their investments. 

However, the overriding message of the report is the inherent stability of the whisky cask market with steady rises continuing in 2022 despite a less than healthy global economic outlook. Given the continuity reflected in the report, there is no reason to believe that stability will decrease anytime soon—particularly as the popularity of single malt continues to grow, and exports increase.

Buying a cask today perhaps requires more research and the help of an expert portfolio manager to guide you through the process, but the opportunities continue to be there.

If you would like to get all the data, please download the 2022 Whisky Cask Market Report here.

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