Liquid Insights: The State of the Whisky Market

‍Luxury Spirits Market

The 2021 luxury spirits market delivered record highs for volume and prices and the music has yet to stop in 2022. The annual growth rate for luxury spirits between 2016-202 was 18% and that number more than doubled, up to 47% in 2021 as whisky and tequila demand reached new heights. There was an immediate surge in prices after the United States lifted tariffs on single malt Scotch in the first quarter of 2021 and that increase reverberated around the globe as multiple markets experienced record years. The Icon 100, the primary index tracked by Rare Whisky 101, is up 402% since its inception in 2012 and has gained 15% year-to-date. The index includes whisky from the Macallan distillery and while it does not include any from Karuizawa, the performance coming out of the Japanese market is in an entirely different stratosphere.

First tracked in 2014, the Karuizawa Index is up 527% since inception and has gained 19% year-to-date. The index consists entirely of bottles sealed in the 21st century and reflects the newfound demand for Japanese whisky and the growing market share captured by Asia. Volume at auction houses in Hong Kong and Korea for whisky has spiked dramatically, with record consignment numbers in 2021 and total sales up more than 300% since 2015 across the region.

The Macallan Index, which is also tracked by Rare Whisky 101, has gained 385% since its inception in 2012. The index soared between 2012-2018, returning 231% in less than six yers. Although the index provided modest gains from 2018-2021, a recent resurgence has pushed the index to gains of 35% over the last year and the market has offered a 17% appreciation rare over the past six months. The recent growth has propelled Macallan to capture command over the overall collectible whisky market with a 39% market share. That total is 30% greater than any other distillery and even with the jump in volume, prices have remained stable as new releases continue to demand top dollar.

The Offerings

Karuizawa Geisha Collection

Vint is back with another collection from Karuizawa and this offering once again combines the best the distillery has to offer. This collection includes the  34-year and 38-year vintages of the single malt Ruby Geisha from the shuttered Karuizawa distillery. As mentioned above, the Karuizawa Index on Rare Whisky 101 is up 527% since 2015 and has gained 42% over the past 12-months. One of the driving forces behind the unprecedented returns is the limited quantity of Karuizawa available, the fact that no more will be produced, and growing demand for single malt within the Asian market. Auction volume for Karuizawa has more than doubled over the last five years to meet that demand but prices continue to rise, showing that even when the Karuizawa market is reaching peak liquidity, the supply is still not enough. This was also evident in the first offering from the distillery that Vint released, which featured the "36 Days of Fiji" Collection at a $187,000 market cap, and sold-out the same day it opened. This collection is the only complete set on public market in the United States and even with that factor in place, which could led to an understandable premium in the valuation, the price per bottle is in line with the fair market values of the individual components. The average auction price with buyer's premium for the 34-year is around $37,000 and the 38-year is closer to $40,000. Those prices do not include the tax and storage of the bottles either and the premium for a complete set properly stored would appraise at a higher multiple that individual bottles.

The Macallan 1938 Red Ribbon

Pre-war whisky with a handwritten label? Talk about a dream collection piece. Rally will offer this single bottle of 1938 Macallan Whisky at a $20,500 market cap and the history and appreciation behind the bottle make this an intriguing offering. Produced near the dawn of World War II, many of the most expensive liquid produced by Macallan was distilled during the war and this offering is no exception. Prices for single bottles of 1938 Red Ribbon Macallan were closer to $10,000 less than three years ago and in some cases even lower due to seepage and damage. In the last two years, we have witnessed a boom within the pre-war market as prices have doubled and the average multiple for a comparable bottle is up 2x since 2020. The label on this bottle is virtually untouched and there seems to be little to no damage on the seal or ribbon. Performance for whiskies on Rally have been strong to date as the three examples currently trading are up 22% overall against a total average platform return of -12.24%. This is the oldest whisky offered by Rally and their third IPO that yields from the Macallan barrels. In 2018, The Macallan officially opened a new distillery in Scotland's Speyside region that took six years of planning and $186 million to complete. The 370-acre estate showcases a unique architectural design that is built into the hillside and has 95% of its energy powered via renewable resources. The Macallan has been a driving force on the global whisky market and with these recent developments, the Macallan has made a point to show that they are here to stay.

The Risks

The music is still playing, so when will it stop? The whisky investment market is relatively new, at least in terms of trackable data, and there has not been a long term decline in prices for blue-chip producers over the past decade. The market as a whole flatlined between 2018-2019 and the Macallan Index dropped -23%, but the industry then experienced a rocket-like trajectory beginning in the first quarter of 2020. While volume and activity statistics point to a continued bullish thesis, there are always concern that tastes can change and if the Asian market slows, the single malt market could follow. For now though, the whisky market survived the impact of Covid-19 and has thrived in the midst of increased demand and auction activity.

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