Scotch Whisky is an extremely popular form of alcohol to drink. It is also a popular spirit for investors and collectors, not nearly at the level of wine but popular nonetheless. Scotch must be aged in oak barrels for a minimum of three years and must follow other regulations in order to be labeled as Scotch (such as being produced at a distillery in Scotland). The aging aspect of Scotch lends itself to buying and holding investing more than something like vodka or tequila that can be produced in a few weeks.
Here are the 5 most popular ways to invest in Scotch Whisky:
1.) Invest in Cask Schemes – some distillers will allow you to buy one or more casks when it is first produced. The cask is aged for 10 years and should appreciate in value as it gets closer and closer to the 10 year mark. The retails price of single malt Scotch is much higher than the cost to produce, but you also must pay 10 years of storage costs and some mark-up on the production cost. Cask schemes are risky because they require a lot of trust between the investor and the distiller or group putting the investment opportunity together. There have been a few of these schemes which have been exposed as frauds.
2.) Buy and Hold Rare Whisky – investors buy known collectible whiskys at auction or retail prices and hold them for future appreciation. Brands like Macallan, Glenlivet, and Highland Park are popular, as are lesser produced Scotches such as Mortlach, St. Magdalene, and Glenfarclas. While there is no guarantee it will continue to appreciate, The Rare Whiskey 101 Icon Index increased about 350% between 2008 and 2016, and then another 150% between 2016 and 2021.
3.) Buy Shares of Diageo – Diageo controls over 30% of the world’s market in Scotch and provides the most direct way to invest in a publicly company that produces Scotch. They sell over 35 million barrels per year and have several brands including Singleton, Oban, Talisker, Lagavulin, Cardhu, and Dalwhinnie. DEO trades on the NYSE, has a market capitalization of around $98B as of today and a yield of 2.2%.
4.) Invest in a Whisky Investment Fund – there have been a few funds such as Hong Kong- based Platinum Whisky Investment Fund which have sprung up to buy a large number of collectible whiskys for their investors. Their aim is to gradually sell off bottles of Scotch as they appreciate, in order to pay dividends and return principal to investors. They generally have high management fees and have to factor for storage costs and the high fees associated with selling at auction or through brokers. Most investors have the fall back position that even if the bottles don’t appreciate, they can end up cashing out by having some of the high end bottles returned to them for personal enjoyment.
5.) Treasure Hunt for Individual Bottles – many people are not aware of the collectability of single malt Scotch or the fact that some of the better bottles have appreciated substantially in recent years. Someone who is aware of auction prices and with the talent to identify what is real and what is fake, can buy and immediately re-sell (flip) bottles or cases from individuals that are looking to cash out.