“Rare whisky continued on its upward trajectory, a new report from Bordeaux Index has said, with prices around 13% higher than the previous year and strong demand continuing.
Although there was a similar number of whiskies listed on its trading platform in 2023 to 2022 – unlike in fine wine where volume dropped “materially” – growth had came at a slightly slower pace.
There were particularly strong performances from Scotch including Springbank, Balvenie and Dalmore, while Macallan performed better in cask than in bottles, it said. where a “more nuanced dynamic” was seen, “partly due to prices of new releases somewhat testing market limit”. As a result, some (though not all) Macallan bottlings would represent good value in 2024, with potential for top Macallan bottlings and sets such as Red, Lalique, which “are now trading too cheaply – especially given recent headlines around old Macallan records”.”
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%).
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.
…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.