Is Whiskey a Good Investment? All You Need to Know

Whiskey, as it turns out, is not just a delightful tipple to be enjoyed on a blustery evening by the fire but also a surprisingly versatile instrument in the world of investing. 

Within this guide, we’ll be unpacking the ins and outs of whiskey investing. We’ll walk you through the process of investing in this exquisite amber liquid, examine the potential risks and rewards, and give you an idea of the potential returns that might await you. 

What is whiskey investing?

Whiskey investing refers to the practice of purchasing premium whiskey in either bottles or casks with the intention of reselling it at a higher price in the future. This approach is rooted in the belief that fine whiskey, as it matures in its oak cask, is getting better and richer in flavor. By becoming a desirable delicacy, it becomes a rarer commodity. And as demand goes up, so does the price. It’s a form of alternative investment, similar to investing in other physical commodities (or collectibles) such as wine, art, or classic cars.

What factors make whiskeys investment-grade?

Investment-grade whiskies are, simply put, those whose value is expected to appreciate over time, with the most critical factors to its value:

• The distillery’s prominence: Not every distillery garners the same admiration. The most coveted ones, whether due to inherent quality, marketing prowess, or a blend of both, magnetize collectors. Top-ranking distilleries vary by country. In Scotland, Macallan leads the pack still. Japan prizes its oldest and most historic distilleries, including Karuizawa, Hanyu, and Suntory Yamazaki. In the US, the bourbon boom has seen distilleries like Buffalo Trace, Blanton’s, and Weller rival, and sometimes outshine, old favorites such as Van Winkle. In Ireland, the Old Midleton Distillery still dictates value despite ceasing operations in 1975 (known as a silent distillery that no longer makes new whiskey but releases its historical production as it matures). Other rising stars in Ireland include Cork’s Red Brest and The Teeling Whiskey Company;
• Age: Experts agree, like aged wine, long-aged whiskey holds intrinsic appeal. It becomes smoother and more intricate due to prolonged interaction with the oak. However, whiskey only ages in the cask, not the bottle. And because the volume and ABV of a cask gradually decrease due to the angel’s share (about 2% annual loss through evaporation), if the barrel is left for an extended period, the whiskey contained within will either completely evaporate or have an alcoholic strength below 40%, rendering it ineligible to be legally classified as whiskey. As such (given the challenges of maintaining the spirit above 40% ABV over several decades), truly aged whiskey is a rarity. 

How to invest in whiskey?

There are several ways to invest in whiskey, including:

• Investing in whiskey bottles: Like wine investing, the most typical method of investing in whiskey involves buying bottles directly and holding onto them until you decide to sell them for a profit. However, if you go this route, you’ll need to thoroughly research the distilleries, the batches and their specific characteristics, and the expected appreciation of the bottles. You must also ensure proper storage and obtain insurance to protect your bottles from damage;
• Investing in whiskey casks: Another way to invest in whiskey is by purchasing whole casks from a distillery. This approach offers benefits, including greater volume (a 53-gallon barrel holds 266 bottles) and early access to potentially exceptional whiskey, enabling you to invest before it gains recognition. However, be aware that in every batch of whiskey, some barrels spoil, and some simply turn out mediocre. Additionally, remember that you’ll also be in charge of covering storage and bottling fees set by the distillery;
• Use a whiskey investment service: To avoid this laborious investment process, consider investing in whiskey using a whiskey investment platform, such as Vinovest (a wine and whiskey investing platform that allows you to invest in entire casks of whiskey). Vinovest handles authentication, storage, and insurance for your whiskey casks while also managing the sale of the whiskey once it has matured, making it a completely hands-off investment experience. To learn more about Vinovest, refer to our in-depth guide on the whiskey and wine investment platform;
• Investing in whiskey stocks: Like with most other assets, investing in whiskey stocks can be done by buying into the market as a whole, i.e., investing directly in the companies that produce, market, or distribute whiskeys, such as Brown Forman (NYSE: BF), the corporation responsible for many popular global brands like Jack Daniel’s, Old Forester, and Woodford Reserve, or Diageo (NYSE: DEO), the company behind Johnnie Walker. This approach, albeit less gratifying, will allow you to easily buy and sell shares via your broker and monitor them like any other stock market investment.

Why invest in whiskey?

Whiskey has barreled its way into the investment scene as a dynamic alternative to more conventional investments like stocks or bonds, providing a chance for portfolio diversification and a cocktail of other intriguing perks. Here’s a taste of why whiskey might be an enticing pour for investors:

• Supply and demand dynamics: As the global thirst for premium and super-premium spirits, including whiskey, continues to rise, the value of rare and vintage whiskies naturally climbs in correlation. Factors like growing disposable income in emerging markets, an increasing appreciation for luxury goods, and the e-commerce boom are fueling this trend. For example, US whiskey sales have been on a steady upward journey since 2010, with more than 78 million nine-liter cases sold in 2021;
• Non-Correlated Charmer: Fine whiskey shows little to no correlation with mainstream assets, making it a valuable diversifier, particularly during times of market volatility;
• Reduced volatility:  As a diminishing asset, fine whiskey encourages long holding periods, leading to a more predictable and steady pricing trajectory;
• Rare commodity: The best bottles aren’t made overnight. It takes decades for them to reach maturity, making them both costly to produce as well as scarce;
• Hedge against inflation and market downturn: Over the past decade, fine whiskey has proved its track record as an excellent investment, sailing past mainstream assets like equities, bonds, and commodities. For instance, the Rare Whisky 101 index soared by 329.45% between 2012 and Q1 2023;
• A tangible asset with inherent value: Investing in whiskey means having direct ownership of the underlying asset, allowing you to manage and utilize it as you wish;
• Longevity: Unlike wine, whiskey neither matures nor degrades in the bottle. Stored correctly, it’s got an indefinite shelf life. Now, that’s a lasting investment!

Whiskey is a long-term investment

The idea that investing in whiskey casks can yield a 10% annual return may have caught your attention, but there’s more to it than meets the eye.

To start with, the value of whiskey increases because of two essential factors: quality and rarity. Essentially, the value of whiskey grows with time because of the increased quality brought about by the interaction with the wooden cask and because the scarcity of whiskey increases with age. 

What’s more, this idea of an annual return on whiskey is slightly misleading. You see, casks of whiskey aren’t like bonds: they’re not kicking off yearly coupons. No, your cask is sitting there, biding its time, not making you a penny until you decide to sell it. Furthermore, the 10% is not a guarantee; it’s more of a best-case scenario. You’ll need to buy a young cask, avoid overpaying, and keep it as a long-term investment until it reaches maturity.

The truth is, if you’re in it for the long haul, you might, in all likelihood, end up toasting to that 10% annual return. But as any good investor knows, past performance is not indicative of future results, so you’d better do your homework before backing up the truck on whiskey. 

Pros and cons of investing in whiskey

Like any financial instrument, investing in whiskey presents a mixed blend of pros and cons, such as:

Pros

• Portfolio diversification: Investing in whiskey can help diversify an investment portfolio, as it exhibits a low correlation with traditional financial markets, providing a buffer against market volatility;
• Potential for high returns: Rare and collectible whiskeys will likely appreciate over time, offering potentially high returns for investors with a special knack for discovering valuable bottles or casks;
• Limited supply: The supply of aged whiskey is limited because of the time it takes to mature, creating scarcity and driving up the value;
• Inflation hedge: Tangible assets like whiskey can act as a hedge against inflation, as their value often increases over time, regardless of economic conditions;
• Tangible asset: Investing in whiskey casks or bottles will give you physical ownership of the underlying asset, offering a sense of security and satisfaction;
• Enjoyment: For many, the interest in whiskey investment stems from a passion for the drink itself. Investors often enjoy learning about different distilleries, production methods, and tasting notes, making the investment process not just financially rewarding but also personally enjoyable.

Cons

• Time: Navigating the whiskey market is like learning a new language. Not everyone will be able to decode the subtleties of quality, provenance, and market trends;
• Counterfeit risk: The whiskey market is not immune to counterfeits. Get duped, and you’re in for a nasty financial hangover;
• Storage costs: Your whiskey will need a cozy climate-controlled home. That’s where storage costs come in, racking up the bill;
• Bottling costs: Moving the whiskey into bottles and labeling them will add to your tab;
• High initial investment: Whiskey casks typically demand a sizeable initial investment;
• No guaranteed returns: While some whiskeys appreciate in value over time, there is no guarantee that a specific bottle or cask will increase in value or provide a positive return on investment.
• Illiquid asset: Whiskey is an illiquid investment, as it may take time to find a buyer willing to pay the desired price for a bottle or cask.
• Long holding period: High-quality Scotch may require 15-25 years, or potentially more, to attain its peak worth.

In conclusion

Undoubtedly, this amber asset presents an intoxicating mix of potential gains, but it’s not a game for those seeking a quick buzz. Remember, whether you’re a whiskey lover trying to yield dividends from your hobby or an investor eyeing a new diversification avenue, you’re in it for the long haul. Like a fine-aged malt, your investment, too, needs time to mature.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

FAQs about investing in whiskey