Scottish whisky is selling fast in every corner of the globe as drinkers and collectors embrace the ‘wee dram’.
In fact, in 2020, 36 bottles of Scotch were shipped every second to 166 global markets, totalling 1.1bn a year. Emerging Asian consumers are spending more than ever on Scotch, with Singapore and Taiwan now ranking just behind the US and France as the largest importers.
Alex Presley, a professional wine and whisky trader for private clients and enthusiast, quoted “The entire scotch whisky market is a ‘sleeping giant that is about to be awoken’ within the global market”.
“I have clients all over the world that are all looking for the same thing, diversification, and Scotch whisky has shown it could be the perfect vehicle and answer. With whisky tariffs being abolished around the globe, collectors and consumers get more for their money, so I feel we can only see prices increase further over the next few years. How much is anyone’s guess, but the signs are it will be significant. Climate change is also having a major impact on the production of single malts, and the price of barley is increasing continuously; clearly I don’t have a crystal ball, but like a lot of traders I believe prices can only really go one way. It may not seem the most exciting market to be involved in however, there are serious perks for higher income earners”
Scarcity and demand
The market for artisan whiskies is growing as the population ages, and a new, affluent middle class emerges. But, as demand increases, production levels have fallen. National lockdowns during the pandemic prevented new casks being filled, for example, and this scarcity will push up prices. A shortage of barley, a key raw ingredient of single malt whisky, could also reduce supply.
That’s why we at UKV believe cask whisky is a ‘sleeping giant’ – a highly investable market that will soon awaken. We’re so confident in its potential that we’re opening a new office in Dubai, the gateway to the UAE. From here we will meet growing demand for Scotch from emerging economies in Southeast Asia, East Asia and India.
Whisky as an alternative investment
Oliver O’donavan, Head of European sales for wine and whisky merchant UKV International AG says “Whereas whisky was once a niche investment, it is now holding its own as a serious contender in the alternative investment space. Its appeal lies in the fact it is a tangible soft commodity which has demonstrated both stability and strong long-term performance. Its global nature means that, as an asset class, whisky, particularly single malt scotch, can weather turbulence in mainstream markets.”
There are also tax benefits, especially for high net worth individuals across the globe, making cask whisky a compelling investment option.
The investment case is strengthened by a supportive regulatory and trade environment. Post Brexit, the UK government is negotiating free trade deals with key overseas markets such as India, where it aims to cut duties of up to 150% on Scotch whisky. This could grow exports to the country by £1bn over five years, and open up the market to smaller producers previously hamstrung by tariffs and red tape. This is just what the industry needs to recover from a challenging 2020 in which Covid-19 and US tariffs hit exports.
Why is Scotch whisky so sought after by discerning collectors? They appreciate the time and skill that goes in to producing Scotland’s most iconic whisky brands.
For example, the Balvenie distillery in the Scottish Highlands still grows and malts its own barley in the traditional way, before drying it in a kiln to infuse with peat for a more complex flavour. The whisky is distilled in copper stills and then stored in casks which are ‘toasted’ just enough to caramelise the wood sugar and release its flavours. Then the Malt Master, who has worked at the distillery since 1962, samples every whisky to decide which will be matured for 30 years or more.
The most important thing that contributes to the quality of small-batch Scotch whisky is time: the process can be neither rushed nor replicated. Time is key to its investment returns too: private collectors of rare cask whiskies often buy into them at an early stage and then wait for the whisky to mature. These ‘armchair investors’ are providing the ultimate in patient capital, and know their wait will be rewarded.
Low-production single malts dominate the luxury export market, and collectors are happy to pay very high prices for them. What sort of sums can these whiskies command? In 2019, a bottle of Macallan 1926 sold for $1.9m at auction, setting a new record for the most expensive single bottle of whisky.
While collectors may eventually savour their whisky themselves (perhaps in a cut glass tumbler in front of a roaring fire), investors have different reasons for seeking out Scotch.
So, whether you’re a drinker, a collector or an investor, it’s clear to see that Scotch whisky has enormous potential to perform on the world stage. That’s worth raising a glass to.
To find out more, visit https://ukv-international.com/
3. ‘Golden opportunity for Scotch whisky as UK launches India talks’ – Office of the Secretary of State for Scotland, Department for International Trade, Jan 2022 https://www.gov.uk/government/news/golden-opportunity-for-scotch-whisky-as-uk-launches-india-talks
4. ‘Lost decade of growth’ as tariffs and Covid hit Scotch Whisky exports hard – Scotch Whisky Association, Feb 2021 https://www.scotch-whisky.org.uk/newsroom/2020-scotch-whisky-exports/
5. A bottle of whisky sold for $1.9m, smashing auction records – CNN, Oct 2019 https://edition.cnn.com/travel/article/whisky-auction-record-trnd/index.html