Navigating Whisky Investment: Trends, Risks, and Strategies

Dear All,

Over the years, the market for rare and collectible whisky has seen significant growth, with bottles fetching astonishing prices at auctions. However, like any investment, whisky is not immune to market fluctuations and risks. The whisky investment landscape has experienced some downward trends over the last few months, prompting SVC to stay nimble, reevaluate our strategies and adopt measures to mitigate risks that protect our investor’s portfolios. The good news is that we continue to beat the market, which, depending on the index you track, is down -2 to -18% YoY (for SVC we’re at +6.41% YoY). However, we remain prudent in this environment, and would like to share our thinking moving forward.

The Whisky Investment Landscape & Recent Trends

Whisky investment, once considered a safe haven for capital appreciation, has faced its share of challenges in recent times. Several factors have contributed to the downward trends witnessed in the market at the moment:

1. Market Saturation: The surge in popularity of whisky investment has led to a flood of new releases and limited editions entering the market. This saturation has diluted the value of previously sought-after bottles.
2. Global Economic Factors: Economic uncertainties, such as the impact of the COVID-19 pandemic which caused a massive surge in whisky prices, now seems to have abated and consumers are spending their excess cash on experiences as opposed to luxury goods. Resulting in a decline in demand for luxury goods, including high-end whiskies.
3. Counterfeit Concerns: The high value attached to rare bottles has attracted counterfeiters, making authentication a critical ongoing concern for investors.
4. Shifting Consumer Preferences: The preferences of whisky enthusiasts are evolving, with a growing interest in craft distilleries and more unique flavor profiles. This shift can impact the demand for traditional investment-grade brands and bottles.

Mitigating Risks in Whisky Investment

While whisky investment carries inherent risks, there are strategies that can help investors navigate the challenges and potentially safeguard their investments:

1. Diversification and Rebalancing: As with any investment portfolio, diversification is key. Our original split was 80% in bottles and 20% in casks, and we are now looking to shift value into 30% casks. We then intend to bottle these casks to return cash into the portfolio, which over the last year has seen our best returns. 
2. Research and Due Diligence: Thorough research is vital before making any investment. At SVC we will continue to study historical price trends, evaluate the reputation of distilleries and brands, and keep abreast of industry news that could influence the market. Our team does this daily, and we do not intend to stop any time soon.
3. Collectibility and Rarity: We will continue to focus on bottles with strong collectible potential and rarity. Limited releases from well-regarded distilleries tend to hold their value better than more common offerings, especially if it is exceptional liquid.
4. Authentication: The risk of counterfeit bottles is still a concern. We only work with reputable dealers and auction houses that have a track record of authenticity verification. At SVC we continue to be fully insured against counterfeits, and we are also looking at cutting-edge technologies such as blockchain to ensure the provenance of a bottle.
5. Long-Term Perspective: Whisky investment is often most fruitful when approached with a long-term perspective. Short-term market fluctuations may not accurately reflect a bottle’s true potential value. This is more relevant than ever with some very large price swings on bottles almost every other month, and are providing opportunities for us to find deals in the market and invest strategically.
6. Networking and Community Engagement: Engaging with whisky communities and forums across the globe can provide insights from seasoned collectors and investors. Our network continues to offer us valuable advice and help us stay updated on market trends.

We at SVC are confident that whisky as an investment remains a solid alternative asset class with good potential for financial gains. While recent downward trends have underscored the need for cautious investment approaches, it’s important to remember that no investment is entirely risk-free. By diversifying, conducting thorough research, prioritizing authenticity, maintaining a long-term perspective, and tapping into the wisdom of the whisky community that we are a part of, we are confident that SVC will mitigate most of the risks associated with the market’s volatility over the coming months. Not only that, but expect to get stronger in the process.

Marek, Marc, Neil, Gary