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WCC Quarterly Report: March 2024

Executive Summary

According to the Scotch Whisky Economic Impact report 2024, there has been a 29% increase in GVA (Gross Value Added) since the last industry report in 2018. In spite of macroeconomic headwinds, the industry has shown impressive resilience.


Industry Metrics

  • The whisky industry in Scotland contributes £7.1bn GVA p.a

  • Productivity per employee is £273k

  • Over £2bn has been invested into new industry CapX projects since 2018

  • Maturing stock volume increased by 10% between 2018 and 2022

  • 10 new distilleries opened, taking the total to 148 (at the time of the report)

  • Supports 66,000 jobs across the UK

  • Accounts for 77% of Scottish food and drink exports


Scotch Whisky Impact by Region

  • Highlands & Islands – £799m (25%)

  • Central Scotland –  £442m (14%)

  • Glasgow – £627m (19%)

  • Mid Scotland and Fife – £507m (16%)

  • West Scotland – £379m (12%)

  • Lothian – £244m (8%)

  • South Scotland – £160m (5%)

  • North East Scotland – £77m (2%)


Cask Market Summary

Whisky casks remain an effective hedge against inflation, continuing to show low correlation. Whisky casks can be compared to other traditional alternative asset classes like art and gold as it is also a tangible asset-backed investment. What sets whisky apart, however, is its maturation process that ensures it becomes more complex and scarcer year-on-year due to the cost of time required to create older whisky. Most whisky doesn’t make it to 12 years old before it is bottled, let alone 18, 25, or 30.


The main factors influencing the cost of a distillery’s casks are: spirit age, cask type, cask size, the brand’s perceived value, supply vs demand for their spirit. Picking a distillery which already has a high brand value is easy enough, but it is the rising stars of the industry which will offer the best returns, especially if their booming reputations cause demand to significantly outstrip their capacity to supply whisky. 


Ultimately, this is driven by consumer sentiment and purchasing habits, with the meteoric rise of Springbank in recent years being a classic example. With the cost of their casks now carrying a hefty premium, rivalled only by Macallan, picking the next Springbank becomes a key focus.



Brands on our Radar - Top 5

Here are some of the brands we are keeping a close eye on in 2024. We only included brands which we have seen casks available from. These brands all sell at a premium due to their brand’s reputation and desirability, but they have the potential to increase in value if their brands continue on the same trajectory.


Each distillery is measured with a useful metric, ‘Average Premium on Litres per Year’ (Avg. Premium L/Y). This figure represents the average premium you can expect to pay for the brand over and above the market value of a more entry-level single malt whisky without any added brand value. This figure also represents the added risk if the brand instead drops in perceived value. The higher the premium paid, the more you are paying for the brand.


Distillery

Region

Avg. Premium L/Y

Bunnahabhain

Islay

£8.30

Caol Ila

Islay

£13.89

Ben Nevis

Western Highlands

£9.02

Craigellachie

Speyside

£5.26

Glenallachie

Speyside

£7.58

*Avg. Premium L/Y is calculated based on spot price values from March 2024 and is subject to change.


One distillery which didn’t quite make our top 5, but is worth keeping on your radar is Longmorn. Longmorn distillate is in high demand due to its popularity with independent bottlers and a lack of supply to the brokerage market. Since casks are scarce and usually snapped up quickly, we have left it off our list. We have most recently seen casks trading for an average brand premium of £18.14 per L/Y.


Value Single Malts Picks - Top 5

If you have a more conservative risk appetite, choosing distilleries which offer spirit close to entry-level pricing per litre takes brand out of the purchasing equation. Any brand appreciation is then a bonus, and you are simply carrying the cost of time for the industry. In this case, your return on investment will be closer to the market rate per litre multiplied by your holding period.

Below are our top distilleries who are selling casks for close to the market rate per litre of spirit.


Distillery

Region

Avg. Premium L/Y

Dalmunach

Speyside

£0.52

Ardmore (peated)

Highlands

£0.36

Knockdhu (AnCnoc)

Highlands

£0.53

Glen Garioch

Eastern Highlands

£0.72

Allt-a-Bhainne

Speyside

£0.22

*Avg. Premium L/Y is calculated based on spot price values from March 2024 and is subject to change.


A distillery not in the top 5 but worth keeping an eye on from a value perspective is Loch Lomond. Due to having a plethora of configurations to create different styles of spirit, their fillings have several different names. Two styles from Loch Lomond that are often good value are Inchmurrin and Croftengea (peated). Inchmurrin we have recently seen trading at our market value for spirit (no premium), and Croftengea (peated) trading at an average premium of £2.47 per L/Y.



Brand Deep Dive - Bunnahabhain Distillery

Bunnahabhain, situated at the north of the island of Islay has a loyal and growing cult following. Bunnahabhain’s reputation is built upon the consistent good quality of their core range, and the versatility of their spirit. Bunnahabhain spirit presents very well across many cask types, not just the staple ex-bourbon and ex-sherry casks, which are to this day the cornerstone of the industry.

Although they are best known for their unpeated expressions, their peated releases are also well received by avid whisky consumers. Their Staoisha heavily peated fillings are sought after by independent bottlers, often bottled young as a powerful smoky juxtaposition to the usually gentler Bunnahabhain house style.




Choosing between Bunnahabhain’s unpeated and peated casks comes down to your time horizon and your budget.


Staoisha is usually bottled young to preserve its heavily peated character since peat dissipates as whisky matures. If you have a short time horizon (say 5-10 years), then Staoisha casks make sense.

If you have a larger budget or a longer time horizon, then Bunnahabhain’s house-style unpeated spirit is a great choice. Bunnahabhain is especially sought after when it is matured in ex-sherry casks.


The sweet, fruity and subtly salty spirit can work beautifully in these casks. A Bunnahabhain sherry butt has the potential to age for a long time, providing a longer time frame and greater flexibility around when the whisky needs to be bottled. Given sherry casks are more expensive than their more common bourbon counterparts, we would recommend a medium to long term outlook to achieve the best possible results.


If you would like to learn more about investing in Scottish Whisky Casks, get our free investment guide here



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