Forget inflation, cask whisky investment plays by its own rules - Benjamin Lancaster

This time last year, inflation was sitting stubbornly at 10.5 per cent. Investors across the board were hesitant after being royally Kwarteng-ed, many asking, why invest now? While most assets were facing turmoil; whisky was playing by a different set of rules.

Cask whisky, unlike traditional publicly traded assets and commodities, is less susceptive to market woes and geopolitics. Whisky derives most of its value from ageing, so while Liz Truss was delivering a mini budget for the ages, whisky casks were busy appreciating in value. In fact, cask value grew by 1.7 per cent in 2022, when compared to the previous year.

Whisky, the substance, has broad international appeal driving its value upwards. Over 180 markets import scotch alone. Demand is not driven by one market specifically, it is far reaching, diverse and continues to grow, with 2.1 per cent growth expected in 2024. While this demand ultimately represents the bottle market, for many bottles are the gateway into casks. Exposure is the biggest driver for passion investments, and exposure doesn’t get much better than a good bottle of Laphroaig.

While global demand and a CAGR (compound annual growth rate) of 6.34 per cent is great to see, the industry must be realistic about the infrastructure around whisky. Legally, Scotch must be held in Scotland bound to a WOWGR licensed warehouse. With exponential demand from emerging markets in India, China and Southeast Asia, the industry must be careful to balance its demand with supply, without compromising on quality or the environment.

​Benjamin Lancaster, CEO & Co-Founder of VCL Vintners

India is the next great market for whisky. As many in the middle classes seek to add whisky to their portfolio, India is becoming a valuable market for whisky brokers, yet we must be aware of the risk this demand poses to scotch whisky. The amber liquid represents 26 per cent of all Scottish international goods exports. With tariffs in India set to be slashed from 150 per cent to 75 per cent, international demand will skyrocket – creating a bottleneck that will likely lead to accessibility into whisky dropping. While this may contribute to a rise in value for those holding assets, the market will dry up at the entry point, due to the 15-year lag time on cask ageing.

Another fundamental driver of global demand is the uptake from millennials of whom 31 per cent began investing before their 21st birthday. Many young investors want portfolios to reflect their passions – whisky provides an in-road here and can be done at the push of a button.

Whisky is an exceptional investment for investors across the globe. Value is added through its ageing process, and accessibility to casks through brokers has never been greater,

While whisky can hedge inflation through its supply constrictions, it is important whisky is used as a diversifier within a wider portfolio to help mitigate risk. Whisky is still a liquid – one that can spill and catch fire – and while it is incredible to own a piece of history, it is also a substance that must be looked after and carefully managed by logistics experts. The true risk of whisky casks is far from ordinary – like its unique upside potential, it plays by its own rules.

Cask value grew by 1.7 per cent in 2022 when compared to the previous year. (Picture: stock.adobe.com)

Whisky casks can be a perfect investment for those looking to sit back; watch the world turn, multiple prime ministers go in and out of power, geopolitics play out in front of their very eyes; and still come back to upside a decade later. If a diversifier of this nature appeals, it’s important to do your research before picking a cask broker.

Investing in whisky first and foremost should be enjoyable. Never use a broker that pressures you into decisions. If you get a bad vibe, back out.

Choose a broker that has been in the industry for multiple economic cycles with proof of handling market exits. Use Companies House and do your research on the broker, if anything looks suspicious, invest elsewhere.

You need a broker investing in logistics experts and warehouse capacity as the whereabouts and safety of your cask is paramount. Ask the broker to put you in contact with the Head of Logistics and ensure you will be given an ownership certificate before purchasing the cask.

Whisky investment is a unique and lucrative opportunity that has many upsides that are attractive in the current challenging financial climate. Hardship resistant with rising global demand, it is an investment to make both on a rainy day and on a sun-soaked bank holiday weekend. Being clear about the risk of casks is vital for the industry’s longevity. Helping investors from all walks of life to make a choice that is best for them is also in the best interest of the broker, and the survival of this special and beautiful liquid that binds us all.

Benjamin Lancaster, CEO & Co-Founder of VCL Vintners