The 2021 Mid-Year Whisky Cask Market Overview has now been released, and it comes with some positive news for investors in whole casks of single malt whisky. This bi-annual report, published by Braeburn Whisky and Cask 88, gives industry-leading insight into the state of the whisky cask market by tracking the BC20 Index and the average annual capital growth of cask investments from distilleries across Scotland.
This report arrives at a time of some uncertainty in markets. As the shock of the pandemic slowly subsides and the economy begins a structural adjustment, the outlook for investors is complex. The impending impact of inflation and the current uneven global recovery makes predicting future performance extremely difficult.
However, within this context, the most notable message that comes out from this edition of the report is the remarkable stability demonstrated by Whisky Casks.
Stable growth at 12.84%.
After dropping slightly in the second half of 2020, the BC20 Index continues to show stable average annual growth at a rate of 12.84%, almost identical to that reported at the start of 2021 (when average annual growth was 12.76%). This means that the BC20 Index remains higher than at any point in 2019 and has been remarkably steady over the last 18 months. In fact, over the last 18 months, the average annual capital growth rate has fluctuated by less than a percentage point. The inherent stability of whisky cask investment is most likely due to the unique characteristic of whisky casks themselves, which offer dual channels of appreciation (the value gain offered by liquid maturation combined with the highly positive supply vs. demand dynamic).
Steady performance compared to other assets
Over the period covered in the report, the BC20 index has shown the most stable and consistent growth among all the asset classes. In comparison, during the first half of 2021, gold dipped slightly when investors moved their money back to stocks and shares as the economy recovered. However, investments in cask whisky were unaffected by the trend away from tangible assets and continued to rise above the average. Clearly, the lack of fluctuation in the whisky cask market proved attractive to investors who were looking to diversify their portfolios away from perceived risks in the global economy.
Little change among top distilleries
The lack of significant movement in the top distilleries in the report demonstrates the good internal stability of the whisky cask market. The top 10 distilleries in the report maintained a solid performance over the last 6 months, with an average projected capital growth of 15.59%. Once again, the top three places are taken by Islay distilleries, with the only change being in their positions in respect to the last report: Staoisha (the peated version of Bunnahabhain) and Laphroaig have swapped places and Bunnahabhain remains in third place.
Movers & Shakers
For the first time, this edition of the report also casts a spotlight on some distilleries that didn’t make the top ten, but which are worth keeping an eye on for the positive growth potential of their casks for investors looking to pick up the potential stand-out casks of the future. Among these ‘movers & shakers’ were the Speyside distilleries Benrinnes and Craigellachie, alongside the Bruichladdich distillery from Islay. It will be interesting to see if any of these distilleries break into the top ten in the next report at the end of 2021.
More movement in the market
The report highlighted a significant increase in demand for casks of younger ages in 2020, and this trend is now continuing into 2021. The reasons for this are likely twofold: the market for private cask ownership is maturing, and more profiles of investors are looking to enter the market at lower price points and with longer term investment goals in mind. This edition of the report showed growth among New Make casks at above 33%, compared to 6.85% for the oldest and most valuable casks. This is normal as, on average, younger casks will increase significantly for the first years of their lifetime, while casks in their prime increase at a lower percentage, but at a much higher rate in monetary terms.
Confidence in casks
How do investors feel about the future of the whisky cask market? How are they planning to build their portfolios? The report includes data from a survey of almost 2,000 investors worldwide, asking them for their feelings about the future of their investments. The key takeaway from the survey was the remarkably positive sentiment that investors have for the coming months.
Among the investors surveyed, 81.6% said they expected the whisky cask market to grow in 2021. In contrast, only 68.2% of respondents said they expected growth in the stock market. It is interesting to note that fewer than 4% of investors thought the whisky cask investment market would fall in 2021. The bullish outlook of whisky cask investors is reflected in the data revealed in the report, which shows stability across nearly all regions and distilleries.
What’s next?
This, the third Whisky Cask Market Overview, offers us an interesting snapshot of the progression of an investment market that is still in its infancy, but gaining ground every day. With a longer perspective, it is now possible to start to see trends that are set to condition the future of the market as we move forward to calmer economic times.
Compared to the volatility of other kinds of investments, such as cryptocurrency, the whisky cask investment market stands out for the reassuring stability it offers to investors. In times of economic uncertainty, whisky casks are proving increasingly attractive to investors looking to diversify their portfolios and hedge against the impact of inflation or unpredictability in the future performance of the stock market. An essential component for investor portfolios as we move forward into the next stage of the global economic cycle.
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