Never in our lifetime have we seen so much uncertainty surrounding the investment market. Yes, successful investments aren’t as predictable as they have been in the past, but that doesn’t mean it’s time to halt, it’s simply time to adapt. Scotch whisky has already proved to be a lucrative investment since it became one of the most desirable luxury asset classes in 2019 according to the Knight Frank Luxury Investment Index and turbulent times have ceased to knock it from its pedestal. But what if we told you, 2020 could be the best year yet to make that investment?
The value of whisky isn’t directly affected by the ever-fluctuating stock market which is one of the reasons why investors have been turning from gold to whisky investments during Covid-19. Whisky is an asset class that will always be valuable due to supply and demand. The first lockdown in March 2020 caused distilleries across the world to close which is something that hasn’t happened in the past. According to the Scotch Whisky Association at that time, “87% of production sites are either operating at reduced capacity or have closed entirely”. While this was devastating for the economy and distillery owners alike, this event in history could be music to investor’s ears in 15 to 20 years.
Not all whisky is created equal. That’s why some whiskys will be valued in the hundreds and some bottles sell at auctions for thousands or even millions. A bottle of The Macallan Fine and Rare 60-Year-Old 1926 recently made the headlines when it sold at auction for a record 1.9 million. So, what exactly is it that sets some whiskys apart from the rest? Is it the brand, the age or the quantity? Or all three?
As we can see from The Macallan sale, the brand does make some whiskys more highly sought-after than others. Age is another significant factor that determines the price that a batch of whisky will sell for. Whisky casks are not sealed tight, so over time, whisky evaporates which means there will be less to bottle the older it gets. Naturally, this means that there is a smaller quantity available when compared with less mature whisky batches, which means they are worth more. Pair this with global demand for Scotch Whisky being at an all time high and an impressive asset value growth standing at 564%, it is no surprise prices for whisky created in 2020 are predicted to sky rocket. The second factor is scarcity. The smaller the quantity, the more covetable it will be to a collector or an investor. With whisky production almost coming to a halt at the beginning of 2020, this can only mean the whisky produced during this year will be highly coveted.
There isn’t a whole load of positive things that we can take out of 2020, but rare whisky will be one of them. As mentioned previously, lower production units create rarity which drives desirability, and in turn generates exceptionally valuable whisky. As Covid-19 impacted over three quarters of the whisky production sites, the amount of whisky produced will be the lowest in history and the only whisky created during truly unprecedented times. This provides investors with a unique and potentially lucrative investment opportunity.
2020 will be remembered for a plethora of reasons, for a time when the world stood still and we were forced to adapt in all areas of our lifestyle, not just investing. This year marks a unique year in the world of whisky production. We predict it will also increase the price that collectors will be prepared to pay for whisky produced in this year further down the line. After all, you are not just purchasing a cask of whisky in 2020, you are purchasing a piece of whisky history. One thing is for sure, this year is unlike any other and will forever be known as the year that broke the mould.
Will 2020 be the year you try your hand at whisky cask investment?