Hannah Thompson

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March 25 2024

The Whisky Market In 2024 As Export Values Exceeds £2 Billion

The Scotch Whisky Association’s global export figures for 2023 apparently reflect a “more normalised” year and despite a globally tumultuous market, export levels are still showing growth compared to pre-pandemic levels. In contrast to a slow year for blended whisky, in 2023 the export value of single malt scotch saw 2% growth and exceeded £2bn for the first time.

In the collectible and secondary market we see different trends. Multiple reports and indexes show a secondary market which can benefit the patient buyer. The duality of the whisky market emphasises the need for a balanced whisky portfolio that can benefit from the distinctive nature of bottles versus casks as an investment.

The International Market for Scotch Whisky

Annually scotch whisky now contributes £7.1bn to the UK economy with exports worth £5.6bn. Blended scotch exceeds single malt in terms of both value (54.8% vs 36.1%) and volume (57.6% vs. 11.5%), but not growth. In 2023 blended scotch exports fell 16% compared to 2022. By contrast, single malt scotch grew 2% and 2023 became the first year that single malt scotch exports exceeded £2bn.

The SWA clarified that 2022’s growth was based on a rebound following the pandemic; the effects of restocking export markets and a fully open travel retail all created record growth in 2022. The SWA suggests comparing 2023 against pre-pandemic levels to give a more realistic picture of the long term growth in the global industry.

The USA was the largest single market for scotch in terms of value (£978m), but Asia Pacific was the most valuable region, with exports worth £1.8bn.

“Premiumisation of Scotch Whisky remains a driver in these key markets: single malt Scotch Whisky continued to rise in popularity among a growing cohort of consumers, with double digit growth in China and Singapore on 2022.” Explains the SWA in their analysis of global export figures released in February 2024.

The Secondary Market

Collectible whisky on the secondary market is seeing a different trend. Despite a new world record for a single bottle of whisky set in November 2024, both Knight Frank and Nobel and Co have both reported a decline in the areas tracked by their respective data sets. Our own data also shows similar trends.

Of course, collectible whisky is hardly alone in these trends. The patterns of low or negative growth in 2023 are ones which are mirrored across all high-value and luxury collectibles and reflect the global economic pressures of the time.

Where to Invest in 2024?

Whisky is an investment that is inherently suited to the patient investor. Nothing in whisky is quick, and this ethos should be carried through to any investment, whether in casks or bottles. At Longspey our ethos is “For The Long Term” and this continues to be our message for 2024.

Patient investing in assets that are inherently undervalued on the market continues to be our keystone for sustaining long term growth trends. Whether we are looking at casks or bottles, our expertise and understanding of the market allows us to craft portfolios that suit both our clients’ needs, and the market of the time.

The elegance of whisky investment is the solutions offered by casks and bottles can be used to create a balanced portfolio that reacts to the strengths of the market. For the investor willing to invest time, whisky is a unique long term investment, and we are perfectly positioned to help you take advantage of the potential it contains.

Stillhouse at Caol Ila By Konrad Borkowski

March 21 2024

Fool’s Gold: Why Whisky Cask Investment Is Not For Everyone

Hannah Thompson Uncategorized

At Longspey our ethos is “for the long term” and this is particularly important when considering building a cask portfolio.

Casks of whisky are the ideal legacy investment, perfect for building wealth over time, but time is the key component. Both quality and scarcity increase with age, and so time is the underlying foundation for cask investment. Yes, picking the right distillery to invest in can drive additional value—which is something we can assist with—but time is the most important factor because it allows for all three value drivers to happen.

If You Don’t Have Time, Don’t Invest In Casks

The relationship between age and value of casks is not linear. The relationship is complex because casks are not bottled evenly throughout their lifetime; 88-90% of all whisky is used for blends, of which the majority are less than 12 years old. Furthermore, while older whisky is deemed to be higher quality and therefore worth more than younger whisky, studies suggest quality doesn’t peak until around 18 years old.

The complex relationship between scarcity and quality means value tends to increase slowly for the first 10 to 12 years of a cask’s lifetime and begins to increase more rapidly once the whisky reaches its teenage years. The relative jump in price between 5 and 10 years is smaller than the jump between 15 and 20 and smaller still than between 25 and 30.

Time is the most important aspect for any potential cask investor. When buying casks as a private individual we suggest casks should be a minimum 10 year investment, that is for young whisky (3 to 10 years old) and older casks as well. For new-make spirit (0 to 3 years old) we suggest a minimum 15 to 18 year investment.

For investors looking to build a larger portfolio or cask maturation programme shorter return periods can be considered on a case by case basis.

Don’t Expect Per Annum Returns

The graph below is based upon the average price of bottles of whisky at different age points. It is provided to demonstrate how the value of whisky changes over time, and to show the importance of time for value in whisky regardless of the age at which you enter the investment.

Per annum figures are misleading because if you create a per annum figure from a 30 year old cask the rate of change would be significantly different than if you created it for a 10 or 15 year old. Pa returns are therefore misleading and not that useful.

More importantly you do not see returns from casks until you come to sell so there is an additional sense of unreliability for pa returns.

What Certificates Do You Need?

For private individuals looking to invest in five or fewer casks then you do not need any additional certification or registration. For businesses or individuals looking to invest in larger numbers of casks then the additional paperwork needed varies based on where you are based. UK businesses will need to apply for a WOWGR, overseas businesses will need to appoint a duty representative.

At Longspey we use our industry expertise and connections to facilitate UK and overseas based clients to invest at private and larger levels. If you wish to discuss your needs for building a cask portfolio then please get in touch for an initial consultation and discussion of suitability.

Mark Littler Whisky Investment Consultant

March 21 2024

The Limitations Of The Knight Frank Wealth Index For Whisky Investment

Hannah Thompson Uncategorized

If you invest in high value assets or premium property you have probably heard of Knight Frank. If you have an interest in whisky investment and you’ve read somewhere about fabled 582% returns on some kind of whisky investment, then you may also be aware that those figures are based on data from the Knight Frank Luxury Investment Index (KFLII).

While the whisky portion of the KFLII is interesting, its use in general whisky investment is somewhat limited by the scope of what it covers. Unfortunately it is also often misquoted with the intention to mislead.

The Knight Frank Wealth Report and Luxury Investment Index

The Knight Frank Wealth Report is released annually around March, it summarises and analyses the past 12 months of investments, especially house prices, but also other “investments of passion” that constitute the KFLII.

The KFLII is a weighted index that is currently made up of 11 different luxury investments of passion. An annual summary of the performance of the KFLII is released each year as part of Knight Frank’s Wealth Report. The assets that contribute to the KFLII are regularly reviewed for suitability. For example whisky was introduced in the 2019 report (which looks at 2018 data) handbags joined in 2020 and stamps were dropped in 2021.

It is important to note that the Knight Frank Rare Whisky Index looks at the 100 rarest and most expensive bottles in the world. That means the index represents a biassed sample of an already super niche part of the market.

Examining the performance of whisky in the Knight Frank report can be interesting, but it is only really relevant for collectors and investors who want to look at the past performance of a micro-view of the market. Even then it needs to be used with caution and understanding.

The Limitations of Index’s

As whisky investment has become more widespread, so too has the interest in and need for analysis of the market and how it has changed. While the Knight Frank Rare Whisky Index receives a lot of press, it is just one of the indexes available on the market, and it is important to understand its limitations—and the limitations of all indexes.

An index is a sample of the market that is used to act as an indicator of performance. They can be representative of a whole market, or a section of it. But they are still just a representation.

The 2024 Wealth Report shows the ten year performance for ultra rare and ultra expensive whisky dropped to 280% and the 12 month performance dropped to -9%, that’s compared to 373% and 3% respectively in 2023. However if you start to dig down into that data you can start to see further variations, as discussed by Andy Simpson the report:

“The worst performing 50 bottles lost 26% of their combined value, the remaining 50 bottles gained 5%, with the 20 best performers increasing by a respectable 20%.”

That means hypothetically if you owned one bottle you may have gained between 5% and 20%, or lost 26%. However, if you owned all 100, on average you would have lost 9%. But only compared to the 2023 values. If you bought all 100 bottles in 2013 you would have made 280%.

Even the use of single bottle indexes have limitations as they are looking at the average result of all sales. It is just as important to understand where, and when, to sell a bottle in order to get the best return.

Our expertise allows us to make educated suggestions for you and your individual aims. We use data to analyse and predict, but we are not simply reacting to what is doing well now. We also use our experience and understanding of the market to search for what has the potential to do well in the future.

When Not To Use The Knight Frank Index

It is important to be clear that the Knight Frank Luxury Investment Index very specifically looks at ultra rare bottles of whisky. Any mention of this index in relation to casks is strictly misleading and goes against the 2024 legislation released by the ASA governing the advertisement of whisky cask investments.

Using the historic returns of a sample of ultra rare, ultra high value bottles of whisky to indicate the potential for casks of whisky is akin to using the value of house prices in central London to sell bricks. The latter can increase in value when used correctly, they can even be used to make the former, but bricks alone do not create a multi-million pound property.

If you think you would benefit from our unique expertise and understanding of the market then please get in touch.

The Macallan 1926 60 Year Old Valerio AdamiI; the world's most expensive bottle of whisky

March 21 2024

What The World’s Most Expensive Whisky Can Teach Us About Whisky Investment?

Hannah Thompson Uncategorized

In 2023 a bottle of Macallan 1926 60 Year Old, with a label designed by the Italian artist Valerio Adami, became the most expensive bottle of whisky in the world at £2,187,500 / $2,714,25. The previous record (£1.45 million / $1.9 million) was also a bottle of Macallan 1926 60 Year Old, but with the Fine and Rare label. So what can the world’s most expensive whisky tell us about investing in whisky?

The World’s Most Expensive Whisky

The Macallan 1926 60 year old is not only the world’s most expensive whisky, it has also held the record more times than any other bottle.

The first record for the most expensive bottle of whisky was set in 1983 by a bottle of Macallan, and the record has been broken just 15 times. In fact, over the last 40 years Macallan has held the record ten times, for a total of 24 years, and nine of those records have been set by the five variations of bottles from cask #263.

Macallan’s dominance at the very top end of the collectors, and specifically the success of the 1926 bottle gives us some interesting insights into the world of whisky investing and collecting.

Age Isn’t Everything

The Macallan also holds the record for the oldest whisky in the world, The Reach is an 81-year-old expression distilled in 1940. The Reach is more than 20 years older than the world record holding 1926, however the most recent sale price for the 81 year old was £160,600 (EUR 187,500) in December 2023. Which shows that it is more than simply age that generates value with whisky.

It would be easy to think that early vintage makes the difference here. However, 1926 is not the earliest whisky in the world either. There are vintage releases from other distilleries that pre-date it, from the Springbank 1919 to various bottles from the 19th century, which don’t even get near the £1 million mark.

Rarity and Brand

The first bottle to surpass the million pound threshold was The Macallan 1926 60 year old featuring a unique hand-painted label by Michael Dillon, this one-of-one bottle fetched £1.2 million in 2018. This was followed six months later by a sale of the same bottle but with the Fine and Rare label, which sold for £1.45 million in 2019.

The Fine and Rare series wasn’t launched until 2002, whereas the 60 year old was first bottled in 1986. 2019’s record holding bottle was a rebottling of unsold stock and while the other editions were of 12 or one, there are believed to be up to 14 of the Fine and Rare version. Still a very limited edition by general standards, but the most readily available of the five editions of this series.

This shows us two interesting things about the perception of the whisky market; firstly, rarity is not the ultimate driver. Secondly, it can show us how the presentation of a brand on a bottle can become important; while the Michael Dillon bottle is a unique piece of artwork it requires an understanding of the series to portray status, which the recognisable Fine and Rare label does not.

Of course, saying it is, or is not, any singular property that imparts perceived value to any item is a simplification. Instead it is a combination of factors, both the physical properties of the bottle and the market at the time, which gives an item or bottle its value. It is the ability to recognise what combination of factors the market will want in the future that allows us to make educated decisions around potential investments.

Spotting Undervalued Assets

The current world record marks the fourth time the Valerio Adami version has been the most expensive whisky in the world, but it was the first time this particular version had broken the million pound mark. A Valerio Adami bottle first held the record from 1996 to 2001, then in 2018 it broke the record twice, but until 2023 it had never sold for more than £925,000.

There were originally 12 hand numbered bottles released with the Valerio Adami label. The current record is held by bottle number 12, which was last seen at auction in 2020, when it sold at an online specialist auction for £825,000 (not including buyer’s premium).

It is important to note that the images of the 2020 sale show the capsule with significant wear and splitting around the seal. The buyer has therefore obviously invested in the bottle, and they clearly state in the sale material that they had worked with Macallan to have it reconditioned.

The takeaway is that in 2020 the original buyer saw an undervalued asset. They used their knowledge and connections to move that bottle from unremarkable to world record holding.

The Macallan 1926 can help us understand the combination of factors needed to give bottles the potential for long term growth. The most recent sale also emphasises the benefits to be had from taking on undervalued assets within the market.

If you believe you could benefit from our expertise and understanding of the market then please get in touch for an initial consultation.

March 20 2024

How To Invest Safely In An Unregulated Market

Hannah Thompson Uncategorized 0

Whether you are looking at casks or bottles, whisky investment is largely an unregulated market. This can create barriers to entry for some investors and institutions, but makes the importance of working with trusted partners even more apparent.

Limited protection

While there is no governing body for whisky investment, consumers received some additional protection in 2024 when the Advertising Standards Agency introduced new legislation around the advertisement of cask investment.

The rulings bring promotional material for the sale of casks in line with the advertisement of other investment opportunities. They provide more transparency for those considering whisky casks as an asset; and ban the use of misleading figures that are often used to entice investors away from more stable, regulated investments.

There remain significant areas that are not explicitly covered in the guidance and these omissions mean there are still risk areas that consumers need to be aware of.

The co-founder of Longspey, Mark Littler has attempted to address some of the imbalance of information with a free online resource ProtectYourCask.com. The site is based upon the free but difficult to find advice supplied by the Scotch Whisky Association, and the content has been produced with fellow whisky enthusiast, independent bottler, journalist and Keeper of the Quaich Felipe Schrieberg.

The aim is to create an environment of education and trust around whisky investment so that patient investors can benefit from the long term potential of whisky investments.

Education and Trust

Mark Littler has always worked with an open and education led approach to whisky investment, and this is an ethos he has carried into Longspey. Of course, not everyone has the time to make themselves an expert on all aspects of cask investment. In which case, working with a trusted partner who understands the real world needs of investors becomes the single most important consideration when deciding to invest in whisky.

Charter Financial Planner and Fellow of The Personal Finance Society, Katy Littler spent 15 years in the financial planning industry and has joined forces with Mark to co-found Longspey. Katy’s experience and training in the highly regulated world of traditional investments makes her perfectly positioned to understand the needs of institutional investors, Family Offices and experienced personal investors.

Whether it is sourcing and verifying individual bottles, or building and managing a legacy maturation programme, the combination of expertise between Mark and Katy allows Longspey to expertly meet the needs of all types of whisky investor.

Longspey’s combined expertise in both whisky and finance gives our select clientele a unique advantage. Our team creates the foundations for long term sustained returns, and if you think we may be the right fit for you they please get in touch for an initial consultation.

March 20 2024

Insuring Your Whisky Investment

Hannah Thompson Uncategorized 0

At Longspey we believe that insurance is important when building a whisky investment, but it is just as important to understand the risks and inherent vices posed by your chosen asset. We help our clients build the right collection for them, and can help you create a legacy whisky investment based on your requirements and attitude to risk.

Once you have the foundations for your whisky investment plan, insurance is the next consideration. Specialist insurance will ensure that your collection is protected to the highest level, giving you peace of mind.

A small bottle collection may be covered on household insurance, but as general insurers have a limited understanding of the values of alternative assets like whisky, basic household insurance often won’t be suitable for the needs of larger collections and higher value bottles.

For example, standard household insurance policies won’t insure bottles above a certain value, often less than £1,500. Household insurance also won’t cover bottles stored in professional or self-storage solutions and won’t insure at market value.

One Policy For Bottles And Casks

If you are building a collection of whisky bottles and casks we suggest discussing your requirements with a specialist insurance broker. This will ensure that your collection is fully insured to your requirements, especially if it is stored across multiple sites. Howden provides the industry standard for whisky insurance and can create a policy to cover bottles and/or casks of whisky.

The specialist insurance from Howden starts around £350 for up to £100,000 of cover and can be used to cover multiple sites, including a bottle collection at home, in storage and in transit, as well as casks in bond.

As they understand the nature of whisky as an asset, a specialist insurer will usually offer cover based on fair market value at the time of loss.

Inventories and Records

It is important to keep track of your collection through up to date inventories. Receipts are useful. Photographs are not a requirement but for bottles they can provide an efficient way to document both bottle and condition. A record of the current market value is useful but not always needed, as it depends on the value of your collection.

Storing Whisky

You have an inherent responsibility to look after your whisky, ensuring bottles are stored correctly etc. Suitable shelving, security and storage are all your responsibility to maintain. In addition, no insurer will cover for things like inherent vice, which would cover natural evaporation.

This article is designed to offer a brief introduction to insurance, so make sure you discuss any limitations with your insurer to check you understand any limitations, conditions and exclusions.

If you think Longspey might be the right fit for building your whisky collection, please get in touch to start a conversation about your requirements.