The market for whisky has been sliding since 2022, but is this cause for alarm or just an impact of the wider economic climate?
For whisky investors, it can feel like the current market is all gloom. Multiple indexes and reports suggest the downturn in auction prices is continuing. Whisky retailers are also finding sales slowing as well. Does this all signal the end of the secondary whisky market? Was it all just a bubble that has finally burst?
“We have seen a noticeable downturn in the sales of what you could call the premium end of the whisky market in the early months of this year,” explained Richard Hawley, director of online whisky shop The Whisky Vault, over an email with me to discuss the market. But it is not all gloom and negativity.
Market cycles are all part of a maturing market and can offer opportunities as well. “There have been some green shoots of recovery in the past weeks, and it could be seen as an optimum time for savvy buyers to snap up some vintage legends that are at a lower price than they have been for a few years.”
As a broker and consultant dealing with multiple parts of the whisky and antiques markets, I have seen significant changes over the last decade. My opinion is that the falls we are seeing are all part of the normal cycle of investing. These cycles can even be seen as a sign that the whisky market is maturing. It is a rollercoaster that we had all better get used to riding in the years and decades to come.
You might wonder why the market is faltering right now, and while there are some very specific reasons that are not helping. Bid fatigue when bidding against unrealistic reserves caused by a shift in market but not expectation is one obvious reason. As is the sheer number of online auctions that have appeared. However, the core issue is much bigger than the secondary whisky market—it’s the global economy.
While the market may be slow, there is still value to be found, especially in bottles that were released prior to the boom in 2015.
Cast your mind back to 2021 and 2022—the glory years of whisky investing when it felt like no matter what bottle you bought you would make money within days. At every auction, the prices achieved were better than the one before, and everyone was trying to get their hands on the next new release.
Your average person felt pretty flush thanks to Covid lockdowns. People had saved thousands thanks to no holidays and social events being limited to a walk with a take away coffee. We emerged with money in the bank into a hiring crisis that meant people felt confident enough to ask for pay rises and shop around for a higher salary. Savings rates were low while the high potential returns of alternative investments were pushed through targeted adverts. Whisky investment was introduced to the masses, which only increased competition for bottles at auction.
At the same time the very wealthy were frustrated with their more traditional investments. The uptick in share values after the vaccine breakthrough was a distant memory. Now there was the prospect of interest rates rising—never good for share values—massive supply chain issues and a war in Ukraine causing an energy crisis. Share values plunged and when traditional investments falter, alternative investments start to look more appealing. Cryptocurrency stole the headlines, but there was also an unmistakable buzz around whisky amongst the wealthy.
In contrast, we are all uncomfortably aware of where the economy stands in 2024:
In short, the economic climate could not be more different to when bottle prices were booming. The average person is feeling much less secure in their job and has far less disposable income. Many people are keeping savings for emergencies and sadly, in some cases, even using them for day to day living. This has resulted in a systematic drop in volume and value of whisky bottles at auction by 30% and 36% respectively for January to April 2024 compared to the same period in 2023 (Noble & Co Whisky Intelligence Report 2024 Q2).
The Noble & Co report found that the £100 to £1,000 price bracket accounted for 90.4% of volumes… [+] traded, with significant declines observed in higher price brackets, particularly the £1,000 to £10,000 range.
The impacts on the market are compounded by the fact that it is both the purchasers of lower and higher value bottles that are feeling the effects of current global economic changes.
Your whisky investor on an average income has found themselves in a cost of living crisis. Easy access savings have rallied and suddenly the security of a 5% bank savings account is more appealing than volatile alternative assets, which also take time to release the money when you need it.
Nobel and Co report that £100 to £1,000 bottles account for 90.4% of the volumes traded but 45% of value. The squeeze on the disposable income of the patrons driving 90% of the market is going to have a significant impact on the market as a whole. A lot of the bottles in this sector have been flipping bottles, ‘lower value’ mass market NAS bottles like the Folio and Concept series, and the drops in value for these bottles are, in my opinion, proof that the lower end consumer is feeling the squeeze.
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“Flipping has been a profitable market for many buyers, but the days of making a quick buck turnaround, whilst not numbered, are becoming less frequent and straightforward to predict.” Commented Hawley on the prevalence of NAS bottles at auction.
At the same time the wealthiest patrons, who make up over 50% of the value of the secondary whisky market in 2024 are returning to their well tested, traditional and regulated investments. Interest rates on cash savings are high and shares are rallying in the expectation that rates will soon start to fall in the UK (and indeed are already doing so in Europe and the USA).
A fall in appetite among the wealthy for high value bottles was recently demonstrated by the failure of the Macallan 1928 50-year-old to meet its £50,000 reserve at Bonhams. Then the Dalmore Luminary No.2 barely made its reserve at Sothebys when it sold for $117,400 (£93,750). The Luminary was the second in a three part series from Dalmore. The stunningly designed collaboration between Dalmore and Melodie Leung to raise money for the V&A Dundee followed on from the first edition which collaborated with Kengo Kuma, and sold for $151,000 (£118,750) in November 2022. The record setting 2023 Distiller’s One Of One charity auction also saw 17 new records set. To me these changes in achieved values indicate a shift in the appetite amongst buyers in this sector of the market.
It is important to note that whisky is not the only alternative investment suffering in this climate. There has been such a downturn in the art market that Sotheby’s are making redundancies and those who previously raved about NFTs have gone rather quiet.
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If you are wondering what to do, unfortunately there is no one size fits all approach. If you want to keep investing in whisky then now is the time to buy. There are certainly good deals to be had at the moment and my sentiment is shared by Richard Hawley, “Look out for vintage rarities and indie bottlings, whilst using respected review sites to understand quality and prestige.”
If you have had enough and want to get out then my advice would be to hold tight if you can. Selling at the bottom of the cycle is not ideal and indicators for the global economy do suggest more positive times ahead. No matter how turbulent the ride, a rollercoaster is usually safe enough if you get on and off at the right time!
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