The global landscape of investments has changed dramatically in recent years, with the general public now having a greater ability to take trading in to their own hands and invest and trade in a range of commodities through online platforms and investment advisors. Technology has led the way in a virtual environment to allow people to discover new and interesting markets which have previously not been explored. This being said, 2020 has also demonstrated the global volatility of stock markets and poor returns on extremely low interest rates, driving them to discover ways to diversify their asset portfolios.
A way of mitigating the risk of investments is to purchase luxury commodities which appreciate in price over the years. It has become increasingly common for people to invest in classic cars, coins, watches and artwork whilst other commodities have not been considered as viable investment opportunities. However, it is now becoming more apparent than ever that assets which have previously been considered as merely a consumer goods, have great potential for long term investors. One such luxury commodity is whisky, which has previously been washed away for our own satisfaction, is now showing great potential as an investment asset. Additionally, whisky is a tax-free asset which other traditional financial assets fail to offer investors.
Whisky is quite unique in that fact that it provides more stable longevity than many other alternative investment items. Unlike its luxury commodity competitors which can be negatively impacted by the aging process, whisky maintains its quality over time if it is left unopened and the urge to consume the asset is resisted. This therefore means that collectors have the ability to maintain their asset in a safe and secure place for as long as required in order to receive the best possible returns without having to consider the impact of product ageing. This therefore allows for whisky enthusiasts and novices alike to build an expansive collection portfolio focused on specific distilleries across Scotland and Ireland, or targeted to particular bottle releases.
As with any investment opportunity, it is important to consider the returns on investments. Looking back historically, in the 10 years period prior to 2019, classic cars value appreciated 258%, coins 193%, and art 158%, whilst rare whisky excelled above the rest claiming growth of 582%. It is therefore no surprise that investors are exploring how to capitalise on this appreciation in value. Even amidst the backdrop of tariff uncertainty, the export value of global Scotch Whisky exports grew by 4.4% to £4.91billion in 2019 (figures compiled from HMRC export data) with growth in over 100 international markets. In the year of 2019, there was an extraordinary increase of 40% on rare whisky bottle values, ensuring that it outperformed the established alternative luxury commodities.
Although previous returns are important to consider, it is also imperative to understand future market trends in order to establish how whisky investments will perform in the future. Ever since President Biden announced that under his jurisdiction the 25% tariff on British exports has been suspended for four months, there has been a lot of encouraging signs within the whisky market. Over the past year since the tariff was imposed, the Scotch Whisky Association has reported that exports to the US have fallen by 35%, amounting to a loss in exports of over £500million. There is little doubt that the suspension of US tariff will enhance the Scottish economy and encourage US consumers to purchase commodities from Scotland once again at more competitive rates, rather than sourcing goods from alternative countries.
The rest of this editorial will be published in print at a later time.