Monthly newsletter for December 2023

Dear All,

Firstly, Merry Christmas and Happy Hanukkah to you all! We wish you a wonderful start to 2024, and thank you for all your support again in 2023 – we are looking forward to the opportunities around the corner next year.

Based on what we’re seeing on auctions, higher value bottles are the ones that are currently experiencing softness, so we are adjusting our portfolio to ensure we are positioned optimally. In fact, we are already seeing some very good deals out in the market as some collectors start to sell on the secondary market due to financial pressures (eg. Hanyu Cards, Karuizawa ‘65/68), and especially now that the very questionable cask market starts to deflate. So we are going to be doing an incremental push on our cask bottling plans and fundraising to ensure we have liquidity to put to work at the optimal time. Mid and lower level whisky with a strong brand are all up, like Macallan and Yamazaki, but it’s the £100 to £200 bottles that are keeping the market going – which means that the consumer has not gone anywhere. The December and January auction period is usually a lot quieter, with some seasonality in pricing, so we are using this period to raise liquidity for our move to invest at the bottom of the market. We recall someone wise once saying “be greedy when others are fearful”!

In terms of moving into cash, we have already ordered the bottles for the bottling of a minimum of 3 casks over the next 6 months. We foresee a 15-20% upside once we move these bottles through our distribution partners, which will create a nice bump in our portfolio and allow us to see through this volatile period in 2024. Bourbon is actually holding up quite nicely, so we will ideally do a batch of that too. In addition, we have decided to scrap our 2.5% annual operations fee for all our investors this year and look to reinvest those funds directly back into great bottles for the portfolio that come up over the next 12 months (we’re actually excited for this, and hopefully this also shows our commitment to what we’re trying to build here).

As far as the industry is concerned, we have been speaking to many experts in the area, contacts at distilleries, distributors and bottlers. As mentioned, everyone is saying that consumer demand is still strong in the mid-lower end of the primary market. In the secondary market a lot of the big producers (Diageo, Suntory, Edrington, etc) have noticed the price declines in their high-value bottles, which is affecting their margins, brands and overall category, so they have already started to slow down the supply of stock going into 2024. Many of the bottles that are now on release are still very difficult to get hold of, and this will keep the market high even during this tough period for the consumer (Suntory just announced that they expect their prices for Hibiki, Yamazaki and Hakashu to more than double over the next year). Most serious collectors that understand this market will hold on to their bottles and wait for this market dip to pass. In the long run these higher value bottles are seriously limited and will only continue to be less traded, so the lack of supply will then start to have a positive effect on the price (as can be perfectly seen with Macallan’s most sought after whisky that just sold on auction for US$2.7M). Noble & Co recently released a new whisky report that tracked 8,500 transactions of “fine and rare” single malts, defined as whiskies selling for more than £1,000 per bottle, showing a -7% drop (vs our portfolio showing a +1.46% increase over the same period, which means we’re ahead of the market by almost +8.5%).

Asian news this quarter is all centred around India, which is quickly becoming a force to be reckoned with in the whisky market both in terms of consumption and production. However, it’s going to be a rocky road as trademark and distribution disputes continue to be worked out between local and international players.

The industry continues to launch enticing bottles, like the 42 year old Port Ellen and 48 year old Glen Scotia, but now at more reasonable price points. So we will continue to watch these very closely in the market. What we’re most excited for is the announcement yesterday of the final approval of the Dornoch distillery. Other new bottle launches include Macallan Folio 7, Glenlivet 74 year old and the fourth release of Diageo’s Prima & Ultima, which includes a Talisker 47 year old in the series. Limited edition Yamazaki and Hakushu whiskies have also been released by Suntory to celebrate their 100 years of whisky-making.

Marek, Marc, Neil, Gary