Whisky market

History.

At the end of the 15th century, a monk from Fife mentioned whisky for the first time. In 1494 he bought over a ton of malt to make the water of life. However, the beginning of the whisky market dates back to 1831, when it was allowed to produce it on an industrial scale. The industry developed quickly. The production collapsed in 1919, when prohibition began in the United States, which resulted in a sharp drop in sales. After 13 years, with the end of prohibition, whisky began its second youth. Today, as the sales and export results show, its popularity in the world is steadily growing.

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Single Malt Whisky

Single Malt is a whisky made at just one single distillery and is made using malted barley, yeast and water. It may be made up of several different casks from that one distillery. It may be made anywhere in the world but if it is not from Scotland it cannot be called Scotch single malt whisky. Within the category you also have single cask single malt whisky, which is whisky from just one cask, and cask strength single malt whisky which is bottled at the strength when it comes out of the cask, normally much higher than a normal bottling strength.

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Blended Whisky

Blended whisky is the most popular type of whisky on the market, and it dominates Scotch whisky sales. It is a mixture of single malt whiskies from a number of distilleries mixed with grain whisky - whisky produced from a column still using other grains to barley.
Blended malt whisky - sometimes called pure malt though this term is outlawed by the Scotch Whisky Association - is a mixture of malt whiskies from different distilleries, but it does not contain grain whisky.

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Grain Whisky

Grain whisky is produced from a mix of various grains such as wheat, rye and even corn. In Scotland it is used mainly for blended whisky and is less frequently bottled than pure grain whisky.

Market situation

In 2019, Scotch whisky export reached record levels both in volume and value. The Scotch Whisky Association, citing the HM Revenue & Customs (HMRC) data, announced that Scotch whisky export reached £4.91 billion last year, which was an increase of 4.4% over 2018. Meanwhile, the equivalent of 1.31 billion 0.7 cl bottles of whisky was sent abroad, which means a 2.4% increase compared to the previous year.

The value of whisky casks is also growing rapidly, which makes them one of the most profitable investments.

In mid-2014 at an auction in Hong Kong, the Macallan cask from 1991 was auctioned for over 1.9 million HK$. Whisky from the auctioned cask can be poured into 490 bottles, if of course the buyer decides to do so. In 2017, the 30-year-old Macallan cask was sold for around $375,000 at the Spink auction in Hong Kong. At the end of 2018, at another Hong Kong auction, a 22-year-old Macallan cask from 1996 hit the hammer. It was sold for over GBP342,000 - the price that exceeded expectations. Initially, the estimated price of the cask was to reach a maximum of 280,000.

One of the main reasons for such high prices at auctions are significant deficits of whisky casks aged over 12 years. As promised by key distilleries, we should expect to return to bottling whisky, as 12 and older editions, over the next 5-8 years, as soon as the current stocks of whisky maturate. The result will be a very significant increase in the price of 12-year-old and older whisky. We are already observing serious price movements on the example of older whisky, where limited editions in the last 2-3 years have gained in price in most cases by a minimum of several dozen percent. This trend will translate into the cask market with a delay of 5-7 years. At the same time, owners of 3-5-year-old casks treating their wallets as a long-term investment will benefit most.

Considering on the one hand the current macroeconomic situation and, on the other, a very optimistic long-term perspective for the whisky cask market, we strongly recommend investing in casks over a long time horizon. The shortage of the older whisky on the market and the huge demand from the Asian consumers mean that today, for every 12-year cask, you should pay the equivalent of 3 analogous casks from 0 to 3 years old. Very large spreads of cask prices in favor of older ones are particularly observed between few-year-old and several-year-old casks, ready for the production of expensive spirits. Therefore, we are currently focusing on purchasing casks up to 5 years old, i.e. filled after 2015, and at the same time we recommend our clients to invest in freshly filled casks with a time horizon of 10-12 years, which will allow to multiply profits from wallets. Of course, not every cask will bring the same rate of return. In this area it is necessary to have a lot of knowledge about whisky and factors affecting its quality. When choosing the right casks, we are supported by the Investment Committee consisting of the greatest authorities in the whisky industry. As a result, we can be sure that the product chosen for our customers is the best choice, guaranteeing the highest possible rate of return, while maintaining full security understood as ownership of assets.

Krzysztof Maruszewski, CEO
4 St James's Place, SW1A 1NP