Whisky casks experience an average growth of 13.09% per year which outpaces the growth for the S&P 500, gold, and bitcoin when compared since July 2018. Plus, while these other investment options might spike and plummet rapidly during times of economic or political uncertainty, whisky casks experience a steady climb regardless of what’s going on in the rest of the world.
The keys to unlocking that mystery can be found in the uniqueness of the investment itself. Whisky casks don’t behave like other types of investments because they’re unlike anything else on the market today. From the way casks mature and grow into different assets over time to the flavour of the cask itself, whisky truly drives what it means to be a one-of-a-kind investment option.
The most important piece of whisky cask appreciation happens in the cask itself. Spirit left to mature in casks begins to embody the flavours of the wood and softens as it ages. Whisky kept in its cask longer is, therefore, more desirable to enthusiasts.
Each passing year, the whisky in a cask essentially becomes a new asset because of the changes in flavour. Unlike other assets, like art and gold, whisky casks evolve over time and increase in value naturally. Because of this, casks nearly double in value every five years as they mature.
The demand for Scotch whisky is rising. In 2018, exports in the prolific spirits category grew 11.3% and blended scotch gained 7.8%. Combined, the two categories soared above £4 billion in exports. Because of whisky’s unique nature, distilleries can’t just craft new whisky and release it to the market quickly. Whisky must be matured for at least 3 years, though the best scotch ages for decades beyond that. This creates a large demand for well-aged whisky casks, which drives the prices up as they mature over time.
As the demand for whisky soars, more and more liquid held in casks is emptied for consumption. When this happens, it takes decades to replenish the kind of spirit that enthusiasts are after. Supply constraints now exist throughout the industry because the number of available casks continues to dwindle as they are emptied for consumption.
Distilleries throughout Scottland are expanding but it will be decades before those expansions can truly impact the supply. These supply constraints coupled with the growing demand create an opportunity for cask owners to reap large returns.
The type of cask used during maturation is another driver in whisky cask appreciation. While ex-bourbon casks are prevalent on the market and grow steadily in value with age, they are overshadowed by sherry casks. Whisky aged in sherry casks provides a rich flavour that has become popular among consumers over the years. While these casks require a larger up-front investment, it’s clear that they deliver greater returns for investors as they grow rapidly in value throughout maturation.
The Final Key: Patience
As is the case with most investments, it’s beneficial to get in on whisky cask investment at the ground floor. However, with whisky casks, it’s not a specific time window with an expiration date. Rather, investors can begin investing in casks today and hold a cask from “the ground floor” of maturation while the cask is young. Then, patience takes over.
With patience, a cask owner can wait as the spirit matures over 5, 10, or 20 plus years in order to capitalize on astounding returns. During this time, the natural maturation of the whisky will change the spirit into a desirable and elegant dram. With the demand for whisky on the rise, well-matured casks will be in short supply. Investors that buy casks and patiently wait as they become the industry’s next tasting experience can experience significant returns as the spirit appreciates in value over the years.