Recent years have seen a series of unfortunate events unfold one after the other. Between the Covid-19 pandemic and the Ukraine war, the cost of essentials such as fuel and grain has skyrocketed. The European Central Bank highlights that inflation occurs when there is an increase in the price of goods and services across the board. Essentially, the value of currency decreases over time. As a result of this, savvy investors are beginning to turn away from short term investments heavily influenced by external environmental factors like stocks and bonds, which tend to take a beating during times of high-inflation. Many investors are now taking a more defensive approach to their assets as preserving wealth becomes just as important as yielding favourable returns.
Tangible Asset-Backed Investments
Tangible assets differentiate themselves from intangible assets like stocks and bonds as they have a physical form and intrinsic value. Luxury commodities such as gold, artwork and fine wine have long been viewed as alternative assets. Incredible growth in recent years has seen “uisce beatha” or whiskey, join this category of investments.
The process of making whiskey is both time and capital intensive for the distillery as the spirit in the cask must be aged for a minimum of three years before it can legally be called Irish whiskey. As the spirit matures, the distillery still has to continue production and meet overheads. As a way to balance the books, distilleries tend to release a percentage of their stock to those looking to purchase casks, whiskey enthusiasts or those with the intention to sell it at a later date for financial profit. Current market trends see demand far outstripping supply of the Irish spirit.
Investing in Irish Whiskey casks is the process of buying casks of whiskey from the distillery and holding ownership of the casks throughout the casks maturation period. There are no additional steps needed during this process, simply sit back and watch your casks of whiskey mellow and round out.
Why Whiskey?
You may wonder why investors are turning to whiskey as an alternative tangible asset, specifically, Irish whiskey. Unlike many traditional, tangible assets, the value of Irish whiskey casks are not as heavily influenced by external environmental factors as stocks and bonds. Whiskey casks are not tied to any specific financial market and therefore are not as heavily affected by the domino effect of market downturns. Rather than having a value determined by the economic climate, regardless the value of whiskey increases every year as it matures. Based on past performance and current supply and demand factors, annual returns are predicted to come in at around 8-12%, making it an ideal long term investment.
Irish whiskey is so much more than a tipple to be enjoyed on the weekend or a special occasion, it’s an economic force to be reckoned with. Irish whiskey is currently one of the fastest-growing spirit categories in the world. Recent years have seen record numbers for export growth, especially in the US market. In fact, 2022 saw Irish whiskey exports exceed €1 billion for the first time. Johan Radojewski, the vice president of marketing at Pernod Ricard USA, encapsulates the reasoning behind this growth perfectly; “Irish whiskey is grounded in heritage, craftsmanship, passion, and community. It’s steeped in traditions that make it one of the best categories the spirits industry has to offer.”
It’s important to note that Whiskey is an asset-backed investment, therefore, once you have purchased the cask, you are the sole owner of that cask and will always have access to the cask and its contents as long as it’s under your name. Meaning it is yours to sell or bottle whenever you wish. There is no expiration date on your ownership (please note, the cask must be kept in a bonded warehouse for the entirety of its maturation).
Exit Strategies for Irish Whiskey Cask Investments
Once the maturation length of your choice has come to an end, it is time to select an exit strategy that suits you. While whiskey appreciates in value every-year, there is currently a demand for Irish whiskey at any age, especially Single Pot Still. Exit strategy options typically include (but are not limited to) selling the casks to Whiskey brand owners, other distilleries seeking mature stock, or bottling your own bottles of whiskey to enjoy!
The future of Irish Whiskey is bright. The Irish Whiskey Association published a report, (The Irish Whiskey Global Report 2022), that highlights that strong growth in non-traditional markets like New Zealand, South Korea, and India is on the horizon. Additionally, the report focuses on trends such as market diversification, the growth of eCommerce, and the popularity of Irish whiskey amongst younger generations, factors which are driving growth in the industry and are here to stay.
If you’re interested in learning more about what Irish whiskey casks can do for your alternative asset portfolio, contact our team or schedule a call with us today!