2023-06-04 04:00:00
In the warehouses of the Annandale distillery in the south of Scotland, 9,000 oak barrels are stored from floor to ceiling. A smell of aging whiskey wafts through: a little alcohol slowly evaporates, it’s called the angels’ share. Employees are busy between the huge barrels, watching for the slightest sign of a leak. There is there for at least 30 million pounds (nearly 35 million euros) of whiskey “at the price of filling”, explains the general manager, David Ashton-Hyde. In reality, their value increases over time and “the vast majority of barrels are sold for double the filling price after 5 years, and triple after 10 years”.
Investing in whiskey, sometimes referred to as “liquid gold”, is growing in popularity, raising hopes of high returns to counter inflation. But some call for caution in the face of deceptions, scams and counterfeits. David Ashton-Hyde says he is sometimes approached by worried investors who want to make sure their whiskey is there, in their name, in its secure warehouses. “The world of whiskey investing is sometimes a bit murky. It took us a long time to find the right partners,” he confirms.
A barrel sold for 18 million euros
The sector has seen its popularity boosted by certain record announcements in recent years: the Ardbeg distillery (LVMH), for example, sold a barrel last year for an unprecedented price of 16 million pounds (some 18 million euros). The market for rare whiskey bottles has meanwhile seen annual price increases of around 20% per year on average, according to Bordeaux Index. “Whiskey has always been an asset class that has had good results” but where it was previously reserved for a few connoisseurs, it has become more democratic, summarizes Benjamin Lancaster, co-founder of VCL Vintners. This London firm specializing in investment in whiskey casks markets in particular those of Annandale.
Investment in whiskey benefited from the comparison with stock markets “suffering from waves of volatility” with inflation and interest rate hikes, adds Susannah Streeter, analyst at Hargreaves Lansdown. But the spectacular yields “are often specific to a rare type of whisky,” she warns. And because of a “lack of transparency and regulation” and because proving ownership of casks “often proves difficult”, investment in whiskey is “high risk”, she said.
Annandale, a distillery established in 1836, once operated by Johnnie Walker, closed for almost 100 years before restarting in 2014. In refurbished buildings, the last brew began to ferment in a wood-paneled vat. After three or four days, the golden liquid will be distilled in a copper still. Each week, Annandale produces around 48 casks, which can be sold for at least 3,000 pounds (nearly 3,500 euros), and whose value improves with age.
A growing global market
“The main attraction of old whiskey is that the supply is limited. Most of the products were created decades ago,” says Tommy Keeling, head of spirits at London firm IWSR Drinks Market Analysis. The increase in wealth in Asia, long easy access to credit or even confinements during the pandemic (which gave consumers time to develop their whiskey culture) have also boosted demand, according to him.
The firm estimates that the global whiskey market in 2022 was worth $87 billion, and is expected to reach $105 billion by 2027, driven primarily by Scotch whiskey, but also from other producing regions such as the United States or Japan. Tommy Keeling notes in particular a growing interest from Chinese or Indian investors, while VCL Vintners assures that the sector attracts clients of all ages and budgets.
According to a study by Knight Frank, investments in bottles of rare whiskey have seen their growth slow, but they have been much more profitable over ten years than fine wines, watches or luxury cars. VCL Vintners, which saw inquiries from potential customers jump over 40% last year, advises them that the return on investment for kegs is between 8 and 12% per year. Annandale does not promise any return. “It’s not our job,” says David Ashton-Hyde, who says he wants to focus on making “wonderful spirits.”
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