With whisky remaining the top performing luxury asset over the past decade according to the Knight Frank Luxury Index, investors are increasingly embracing this reliable alternative asset as a hedge against uncertainty on the wider markets. Since the start of the pandemic in March over half of UK investors have expressed an interest in investing in whisky.
This increased demand comes against a backdrop of contracting supply, with the Covid-19 pandemic expected to significantly impact the output at many distilleries in Scotland, Ireland and Japan. During the pandemic 87% of Scottish distilleries were forced to fully close or had to run with very limited staff. As a result production is expected to be reduced for 2020.
At distilleries like Glenturret where most of the whisky making process is carried out by hand operations had to be suspended for several months during Scotland’s first lockdown, while at Kilchoman on Islay production was halted for six weeks. The disruption also extended to exports, with shipments falling during January to May 2020 29% by value and 24% by volume compared with the same period the previous year.
The project fall in Scotch production levels is good news for investors who have already invested or who are able to enter this lucrative market right now. Scotland’s 133 distilleries typically export 1.3 billion bottles per year with 90% of the nation’s entire whisky production destined for export. To fulfill contracts to their export markets, distilleries will have to commit more of their production to exports.
This will have a knock-on effect of reducing the amount of aged casks available for the distillery and the investment market. This is anticipated to push prices up over the next 5 to 10 years as the availability of aged whisky in casks contracts. Investors able to secure aged casks at this time are likely to enjoy an excellent return on their investment in the mid- to long-term.