Monthly newsletter for September 2023
We have been keeping up with the interesting market dynamics over the last few months. 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 and protect our investor’s portfolios.
The recent 2023 Knight Frank Wealth Report shows that whisky has declined -4% over the last 12 months and the press have picked up on the news (please note this is an index tracker compiled by Rare Whisky 101 which contains only 100 bottles of the “oldest, finest, rarest single malt Scotch whisky ever created”). When you look at Rare Whisky 101’s actual indices year-on-year, their Rare Whisky 100 Index is down -18%, Japanese 100 Index is down -1.21%, and RW Apex 1000 Index is down -1.5%. Here is an excerpt from the recent Knight Frank report:
…Macallan has seen particularly punishing losses with its index re-tracing 11.7% over the past twelve months. The broader market (according to the Rare Whisky 101 Apex 1000 Index) is down just 1.5% over the last twelve months, so while certain brands and higher value bottles are having a harder time, the market as a whole is relatively resilient, albeit currently underperforming traditional bank savings rates. Clynelish is performing well (its index is up 3.9% in the past twelve months), but Balvenie has been the standout brand recently with its index increasing a mighty 22% over the past twelve months.
As our current investors know, at SVC we have seen this coming for a few months now and we feel that we have positioned ourselves well. The fact that we continue to beat the market at +6.41% return YoY is testament to solid diversification, research and industry insight. We want to keep all our investors as updated as possible on the dynamics we’re seeing in the industry, as well as the opportunities on the horizon.
The centre of consumption for whisky continues to shift to the East, and the Asian growth story is now impossible to ignore for many producers and distributors. Asia is now the number one region globally for Scotch whisky with six of the 10 largest export country destinations, overtaking Europe earlier this year. What is even more interesting is the shift to premiumisation in Asia, with consumers increasingly interested in trying new brands, rather than consuming generic volume, which has led to more interest in rare bottles by Asian collectors. Drinks International recently released their Millionaire’s Club report which ranks the world’s top brands and spirits. What is fascinating to see is the rapid expansion of whisky in the Indian market, to the point of making McDowell’s Whisky (from Diageo) the #3 most consumed spirit globally. Royal Stag (#6) and Imperial Blue (#7) from Pernod are also in the top 10. Our bet on India providing tailwinds to the premium and rare whisky market over the next few years is beginning to materialise, and we’re excited as to where this will take the industry. Whisky is so on-trend right now that South Korea is now the fastest growing market globally.
However, we are taking all this industry dynamism with a pinch of salt, ensuring that our bottle selection and investment strategy plays into the long term appreciation of the portfolio. So smart investments across in-demand and supply constrained brands is as key as it has ever been, not just buying into the hype too quickly. As we know, there is always a fickle counterpoint that we need to watch out for, for example we should not forget that South Korean whisky demand tanked by 75% during its previous peak in 2002.
Marek, Marc, Neil, Gary