WHISKY casks are continuing to significantly outperform traditional investment and alternative investment options including gold, according to the latest data-driven market report issued by financial advisers Braeburn Whisky.
The 2022 Whisky Cask Market Report, which brings transparency to the alternative investment market in the form of Braeburn’s unique BC20 Whisky Cask Index, observed average projected growth for whisky casks of 14.95% – a rise of just under 1.7% from 2021.
Meanwhile the value of the BC20 Index, which analyses data of cask valuations by region using a specially created algorithm that allows it to predict how a specific cask of single malt will appreciate on an annual basis, grew by 15.86% last year.
The report named the best performing Scotch Whisky cask distillery in 2022 as Laphroaig, with projected growth of 18.75%, with Bunnahabhain’s Staoisha second at 17.74% and Bunnahabhain itself a close third at 17.57%. The distillery outside of Islay with the biggest growth was Highland Park at 17%, while all the distilleries listed in the report’s top 20 showed consistent growth in 2022.
Niall Brown, Chief Executive Officer Braeburn Whisky, said: “Our report shows, despite a year in which inflation has rocketed and global markets suffered instability due to the ongoing issues with COVID and the Ukraine conflict, the overall performance of the cask investment market remains in rude health.”
The report found that the buoyancy of the cask market reflected the current strong global performance of the Scotch Whisky industry as a whole. Investment is breaking new ground, with record numbers of new distilleries opening, while latest industry figures reveal exports topped £6bn for the first time, exceeding pre-COVID levels. Other positive factors include the removal of tariffs on Scotch Whisky imports into the US and movement on trade talks in other international markets such as India.
The BC20 Index showed how such current optimism further reinforced the opportunity that casks provide as a hedge against inflation and uncertainty. As a result investing in secure, tangible assets such as Scotch Whisky casks are set to become even more attractive, with the number of investors including casks as part of a broader diversification strategy continuing to grow.
Globally, the market with the highest volume of cask investment was Europe, at 74.78% – with the UK alone the largest market at 74.34% of the total share – followed by Asia at 18.35%.
Meanwhile the number of millennials and Generation Z investors rose to 36.49% of total cask buyers, while more women were also investing in casks, at 7.14% of the total.
Regarding the return on investment of the casks themselves, the report found ‘new make’ casks from 0-3 years of age offer greater percentage investor returns, with an average increase in both cost and appreciation of 38.31% in 2022. This was largely driven by inflation in raw materials and associated production costs.
Older age cask choices, while requiring a greater initial buy-in as they are in their prime, were projected to yield returns of 9.81% due to their rarity – a feature that intensifies with each passing year as their stock gets bottled. In addition, as the higher initial prices of casks permeate across the broader market, it is expected these increases will also have a significant impact on ageing Scotch Whisky stocks.
Braeburn’s BC20 Index is based around a data-modelling algorithm, which provides a specific and transparent way of using data to quantify cask investment returns as well as compare casks with other investments. The algorithm – calculated using a matrix of real and estimated data points for different distilleries – not only predicts how a specific cask of Scotch Whisky will appreciate on an annual basis, it also back-checks those predictions.
Niall Brown said the report’s Average Annual Capital Growth Rate was based on data points from the sales of more than 6,000 casks across over 80 distilleries, providing the largest data sample available of the cask investment market to date. As the number of data points continues to grow, so does the accuracy of the report which traces the development of cask valuations and puts them in context.
He continued: “While gold dropped and markets generally finished around the same mark as the year before, the value of the BC20 index rose by double digits. It shows more investors are turning to Scotch Whisky as a means of not only growing but also protecting wealth in these times of high inflation and market instability.
“But as this interest grows, so does the need for reliable and transparent data that provides real insight into this expanding market. That is why our report, our BC20 Index, and the algorithm behind it, are vital and reliable methods of measuring year by year the fluctuations, intricacies and changing trends in a market that is ripe for opportunity.
“Not only that, it brings a real analysis of what for many is an investment from the heart. Millions of people love whisky, and the history that surrounds Scotland’s national drink. They are drawn by the romance of owning a cask from distilleries known the world over, watching their investment mature, just as the whisky does as it interacts with the wood of the cask.
“Our report once again shows how Scotch Whisky is providing a really effective way for investors to diversify their portfolios towards safer ground, hedging against the inflation and uncertainty that are currently affecting global markets.”