Sun, Jun 04, 2023 page12

• Whisky lifts spirits of inflation-hit investors

  Many people are diversifying their assets to safeguard their cash, with a good annual return on casks being 8 to 12 percent

  • By Olivier Devos / AFP, ANNAN, Scotland
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  The smell of aging whisky, known as the angels’ share, wafts across from 9,000 oak barrels stored from floor to ceiling in two vast warehouses at Scotland’s historic Annandale Distillery.

  “Annandale has seen a huge boom over the last few years,” the facility’s general manager David Ashton-Hyde said as workers wandered around the site checking the vast casks for leakages.

  Whisky is toasted by some industry experts who describe it as liquid gold, yet others call for caution owing to scams.

  

  Workers fill casks that are to be stored for a minimum of three years before the product can be called Scotch whisky at the Annandale Distillery in Annan, Scotland, on April 21.

  Photo: AFP
  Warning: Excessive consumption of alcohol can damage your health 

  The spirit is surging in popularity as inflation remains stubbornly high, with many investors keen to diversify assets to safeguard their cash.

  “Whisky has always been an asset class which has performed,” said Benjamin Lancaster, cofounder of VCL Vintners Ltd, which specializes in marketing casks.

  Annandale sells its whisky directly to customers worldwide and via two specialist investment firms, one of which is London-based VCL.

  The global whisky market hit US$87 billion last year, drinks market research firm IWSR said.

  It expects it to top US$100 billion before the end of the decade.

  The sector has been boosted by some record announcements in the past few years, including the sale last year of one cask of single malt whisky for ￡16 million (US$19.9 million).

  It was sold by Ardbeg Distillery, which is owned by luxury goods group LVMH Moet Hennessy Louis Vuitton SE, on the western isle of Islay.

  The market for rare bottles of whisky has taken off in the past decade, with annual price increases of 20 percent on average, Bordeaux Index said.

  “Alternative investments appear to be luring in more people, partly through frustration with returns from the stock markets, which have been hit with waves of volatility as inflation has soared,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown PLC.

  “Figures showing dramatic increases in price are often specific to a type of rare bottled whisky,” Streeter said. “If you aren’t an expert and haven’t done your homework, there is a big risk that you could be duped out of hard-earned savings.”

  “The world of whisky investment is sometimes a bit murky,” Ashton-Hyde said.

  Worried investors want assurance their casks are safely stored, he said.

  Whereas investors can keep their bottles at home, casks of whisky produced in the UK must be stored in the region where the spirit was made.

  Individuals can purchase a 200-liter cask from Annandale, starting at ￡3,000 for newly produced whisky from the distillery founded in 1836.

  It was later operated by Johnnie Walker and Sons, before closing for almost a century until its reopening in 2014.

  Ashton-Hyde said the price of most of its casks doubles in value within five years, while trebling over a decade.

  “The main attraction of aged whisky as an investment is that supply is limited,” IWSR product director Tommy Keeling said. “Most products were created decades ago.”

  IWSR expects the whisky industry to reach US$105 billion by 2027, driven largely by Scotch whisky, but also by growth in Japanese and US offerings.

  Keeling pointed to increasing investment demand especially in China, but also in India, which has “a big whisky-drinking tradition.”

  He added that “the [COVID-19] pandemic also played a role” as consumers had time to look into investing.

  Investment in rare bottles of whisky have been more profitable over the past decade compared with high-end vehicles, fine wines and luxury watches, consultancy Knight Frank said.

  However, their progress is slowing, with such bottles rising only 3 percent in value last year, far below inflation levels around the world.

  As for casks, a good annual return would be 8 to 12 percent, Lancaster said.

  That would be enough to attract a wide spectrum of investors.

  Meanwhile, customer inquiries at VCL have jumped over the past year.

  As for Annandale, Ashton-Hyde said it was focused on a quality product.

  “Annandale as a distillery doesn’t offer returns on investment,” he said. “That’s not our business. We’re in the business of making a wonderful spirit.”
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