How To Invest In Whisky: A Beginner's Guide

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If you’ve been looking into alternative investments, there’s a good chance that whisky is on your radar. Returns in the whisky market over the past decade have been incredible, and it’s increasingly becoming known as not just a drink, but an investable asset. In this article, we’ll look at some of the drivers of the market, the pros and cons of investing in whisky and some tips on how to start investing, regardless of your budget.

Why can whisky go up in value? 

Whisky needs to mature 

Legally, whisky has to mature for several years for it to be called whisky. For example, Scotch whisky needs to mature for at least 3 years before it can be bottled. Often fine whisky will be left to mature for much longer to develop flavor, which can take decades. Newer distilleries can therefore be keen to get investors to purchase some of their casks before they’re ready to be bottled, as it helps them with their cash flows. 

Growth in demand

The demand for whisky, in general, has increased over the past 10 years. According to data from the Distilled Spirits Council of the United States (DISCUS) on sales of premium spirits in the US, scotch whisky has shown a 20% growth rate in 2021; Irish whisky a 19% growth rate and while Japanese whisky saw a small decline, it grew by 14% annually over the past 5 years. There is also strong potential in emerging markets: many of the most expensive whisky bottles today are auctioned in Hong Kong and according to the Scotch Whisky Association, demand for scotch whisky has grown by 123% in the past two years in China. 

The perception of whisky is changing

When it comes to the most high-end and collectible bottles, it’s no longer just quality or taste justifying the prices. Similar to other luxury products, it is very much about brand perception.  

“Why do people spend money on a Patek Philippe versus a Casio? It’s all about the construction of economic value, tied to social status. In the past 5-10 years we’ve seen whisky starting to become such a premium luxury good, that it’s now as desirable as collectibles such as rare watches or blue-chip art,” says whisky expert Mark Littler.

Ways to invest in whisky

There are 3 main ways to invest in whisky:

Cask Investment

As mentioned above, whisky needs to mature and usually increases in value as it develops in the cask. Cask investments, therefore, are one way to get exposure to the whisky market. Prices typically start at a few thousand dollars and the time frame is normally anywhere from 5-15 years. It’s often pitched by sellers as a more “stable” type of investment with 5-20% annual returns. The main risks include demand and market dynamics changing over such a long time period, scams (more on that below), and a lack of transparency and data to value casks.

Flipping Bottles

Compare this with flipping sneakers. Distilleries come out with limited releases and they’re not always easy to get your hands on. Therefore, flippers are constantly following what comes out and are quick to get their hands on new releases, which they might be able to sell on the secondary market for a profit instantly. With this option, you only need a few hundred dollars to get started, but disadvantages include that it is a more active approach and takes more time, more akin to a “side hustle.”

Collectible Bottles

Collectible bottles are those that are revered by collectors, are limited in quantity and usually carry a high value. Often, these collectible bottles contain older whiskies, which have matured for decades, like the iconic 78-year-old Macallan, which has a current market value of around $120,000. Values of these collectible whiskies goes up as supply shrinks over time as bottles get consumed, as well as an increase in demand over recent years. 

Some of the top collectible brands include Macallan, Bowmore, Brora and Yamazaki, and rare whiskies have gone up in value immensely, more on that below. While there are various fractional platforms making collectible bottles more accessible, the main disadvantage with collectible bottles is normally that costs to get started can be prohibitive, and that you’ll need to think of proper storage and potentially insurance.

Here’s more about investing in whisky and what makes a bottle collectible. 

Historical whisky investment returns

As with any alternative investment, data can vary depending on the methodology used to calculate returns, but it’s without a doubt that the whisky market has been one of the best performing alternative asset classes over the past 10 years. 

A few key data points:

Rare Whisky 101 Indices 

• Rare Whisky 101 is one of the prime resources for whisky data. Its “Icon 100” index tracking the most important whiskies in the market has gone up by around 390% over the past 10 years. Japanese whiskies - which are extremely in demand - have gone up by 570% And premium brands such as Macallan and Brora have gone up by 370% and 650%, respectively. 

 Knight Frank Index

• According to the Knight Frank Index, rare whiskies have gone up in value by almost 500% over the past 10 years. 

World Records

• At the top very top end of the market, we’re also seeing growth. Whereas in 2002, the world record for a bottle of whisky stood at less than $50,000, it currently stands at nearly $2 million.

Pros of investing in whisky

• Return potential: as the data points above show, whisky has delivered strong returns over the past decade.
• Diversification: alternative assets such as whisky can be a good way to diversify your investment portfolio.  
• Recession-resilient: while not completely immune to recessions, Morningstar rates alcohol and liquor “recession resilient”, which makes it an interesting asset and industry to explore in tough market conditions. 

Cons and risks of investing in whisky

There are specific risks and hassles that come with collectibles in general, important ones including:

• Authenticity: it is crucial to ensure authenticity 
• Storage: collectibles need to be stored correctly to keep them in perfect condition 
• Insurance: you may want to insure very high-value assets against, for example, theft or fire
• Liquidity: collectibles can’t be sold as instantly like stocks

Specifically, when it comes to whisky, there have been multiple investment scams where fraudulent sellers were selling whisky casks that did not exist, so it’s important to do your research.

You can learn a bit more about the whisky market and the history of whisky here. 

How to add whisky to your portfolio

Are you exploring adding whisky to your portfolio? 

Koia makes alternative assets accessible, focusing on collectible assets such as whisky, watches, art and NFTs.

Koia fractionalizes high-value collectibles so you can get access from just $20. Koia also takes care of storage, authentication and insurance and is open to international investors.

Brora Triptych Collection

An example whisky collection available on the Koia platform is the Brora Triptych collection. 

Asset Value: $37,000

Fraction Price: $200

Fractions Available: 185

What makes this set special?

• Rare and highly collectible: only 300 sets have been released to celebrate the reopening of the Brora distillery, which lay silent for 38 years.
• The Bora distillery closed in the 80s and lay still for 38 years. In 2021, Diageo brought the Brora distillery back to life. As one of the world’s largest spirits companies with a multi-billion dollar annual marketing budget, it is expected it will continue to grow brand awareness and cement Brora's reputation as a premium whisky brand. This could positively impact demand for ultra-rare releases such as this triptych. 
• Brora's performance has been strong, with prices increasing by more than 600% over the past 10 years (source: Rare Whisky 101, Brora Index)

Explore the collection

Before you rush off to the distillery to purchase this limited edition collection, unfortunately this special edition has now sold out, making it a prime whisky for collectors to go after. Luckily Koia has acquired one, which can be bought via Fractions on their website.

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