“Investing in whiskey is a global phenomenon that shows no signs of slowing down.”June 2020
- 478%
The growth in value of fine whiskey from 2011 to 2021, making it the best-performing luxury asset in the world, according to Knight Frank.
- 9.85%
The expected compound annual growth rate of the American whiskey market through 2027, according to American Whiskey Market.
- $1,630,000
The price tag for a selection of American whiskeys sold at a Sotheby's auction in March 2022, a new record for American whiskey.
Whiskey Market Opportunities
Anyone who has taken Economics 101 knows that supply and demand influence prices. Right now, American whiskey is experiencing high demand and low supply. These economic tailwinds translate to a golden opportunity for whiskey investing.
American distilleries like to tell you that they make the world's finest whiskey. What they won't tell you is that most whiskey comes from a handful of silent distilleries.
For instance, the Van Winkle family doesn't make Pappy Van Winkle's Family Reserve itself. It has the much larger Sazerac Company distill and bottle it for them.
Vinovest cuts the velvet rope, allowing you to invest in brand-name whiskeys before they become brand-name.
1) International Demand Is Booming
Experts are bullish on whiskey. They expect the global market to grow from $59.8 billion to $81.21 billion in value by 2025. For those keeping score at home, that translates to a 9.18% compound annual growth rate.
Now, Americans are proud producers and consumers of whiskey. They're not the top market, though. That honor belongs to India. Indians consume 1.5 billion liters of whiskey annually, which accounts for nearly half of all whiskey consumed in the world. What's more amazing is that 85% of Indians abstain from drinking! That's not all. India's GDP has increased fivefold since 2000. (As a point of reference, the United States' GDP has only doubled in that same time.) As India continues to climb the economic ladder, expect more Indian consumers to cheers their newfound wealth with great whiskey.
| Top Whiskey Consuming Countries | |||
|---|---|---|---|
| India | 1.5 billion liters | ||
| United States | 462 million liters | ||
| France | 140 million liters | ||
| Japan | 109 million liters | ||
| Great Britain | 77 million liters | ||
2) Domestic Demand Is Close Behind
Even the Covid-19 pandemic couldn't slow the growing domestic demand for American whiskey. Whiskey sales have increased every year since 2010, hitting 76 million cases in 2021. Those figures are only expected to grow with whiskey gaining market share on beer and wine in recent years.
US whiskey suppliers are also having a moment. They saw gross revenue jump 5.3% to $29 billion in 2019, a $1.5 billion gain. More and more, American consumers are seeking out luxury and authentic experiences, something that only investment-grade whiskey can provide.
| Cases of Whiskey Sold | |
|---|---|
| Year | NUmber of Cases |
| 2010 | 47.1 million |
| 2011 | 47.8 million |
| 2012 | 49.7 million |
| 2013 | 52.8 million |
| 2014 | 56.6 million |
| 2015 | 59.4 million |
| 2016 | 61.8 million |
| 2017 | 64.0 million |
| 2018 | 66.1 million |
| 2019 | 69.3 million |
| 2020 | 72.8 million |
| 2021 | 76.4 million |
3) More Women Are Drinking Whiskey
Whiskey isn't just a “man's drink.” According to A Taste of Dawn Magazine, women made up just 15% of whiskey drinkers in the 1990s. Today, they account for almost 40%. Women are also responsible for 70% of the alcohol purchasing decisions in the home. Turns out that women like damn good whiskey as much as men.
4) High Startup Costs Limit Supply
Starting a craft distillery isn't cheap. Whiskey comes with a lot of overhead costs, including mash tuns, fermentors, boilers, cooling systems pumps, and tanks. Did we mention you need a building for all this equipment, too?
High startup costs and multi-year aging windows mean that craft distilleries likely won't break even selling their own whiskey for years, if not decades. It's why so many turn to large-scale producers for private-label whiskey. The craft distillery can order a unique blend and sell it as their own, and no one is the wiser.
5) There's a Barrel Shortage
All bourbon must be aged in new, charred oak barrels. If it's aged in something else, it's not bourbon. This legal requirement puts considerable stress on the supply side.
First, producers cannot reuse barrels. Even though it would be much easier and cheaper to do so, they have to continuously find virgin barrels instead. With the surging demand for whiskey, producers need more barrels than ever. The problem: whiskey barrels don't grow on trees. (At least not literally.) A single barrel can take several days to make. The barrel-making process is highly artisanal with coopers doing much of the work by hand.
As a result, the whiskey market is experiencing a barrel shortage. As Colin Keegan of owner Santa Fe Spirits put it, “We were warned by our barrel supplier in December, so we placed our first order of the year as a larger one. It's usually six weeks delivery, and now it is six months.”
How American Whiskey Works
The whiskey you buy at the liquor store is overpriced. To understand why and how Vinovest cuts out the middleman, we need to step back and look at the American whiskey industry as a whole.
Tier 1
Producers
Producers or manufacturers ferment, brew, distill, and bottle whiskey. Producers can only sell to distributors and may not do business with other producers.
Tier 2
Distributors
Distributors purchase and resell whiskey from producers to licensed retailers. Whiskey distributors typically mark up the price 25% to 30%.
Tier 3
Retailer
Retailers can only buy from distributors. They resell whiskey to consumers through bars, restaurants, and liquor stores. Retailers typically mark up the price another 25% to 30%.
“The American whiskey industry is at a 50 year high... Consumer interest in American whiskey, especially rare, ultraaged, ultra-expensive expressions is growing exponentially.”June 2020
The American Whiskey
Industry at a Glance
American whiskey producers come in two flavors: industrial and craft. Vinovest works with both during the investing process.
Industrial Distilleries
These large-scale producers provide high-quality whiskey to national brands at discounted rates. These producers often do not have brand names. Instead, they provide a majority of the whiskey to the brands consumers know and love. Think Whistle Pig, Breckenridge, and George Dickel.
Brands come to the industrial distilleries in search of a specific blend or aged spirit. Their goal? Set their brand apart from the competition. Vinovest partners with a state and federally-licensed industrial distillery in Wyoming. So, if you ever want to visit your whiskey, book a flight to the Cowboy State.
Bourbon vs Whiskey: What's the Difference?
All bourbon is whiskey, but not all whiskey is bourbon. Any whiskey with at least 51% corn, 40% alcohol by volume, and aging in new charred oak barrels is bourbon.
Craft Distilleries
The United States is home to more than 2,000 craft distilleries. These small and mid-sized businesses are the fastest-growing sectors of the craft spirits industry. They are also one of the largest producers of bulk grain spirits and aged American whiskey.
The problem? Starting a distillery isn't cheap. According to Breaking Bourbon, most craft distilleries require at least $1 million to get their operation up and running.
That's not all. Most American whiskey brands age their casks at least four years before bottling. (Imagine waiting four years before your business could make a sale!) The multi-year delay in sales means most craft distilleries purchase private-label casks from industrial producers and sell them as their own.
| Craft Distilleries in US | |
|---|---|
| Year | Number of Distilleries |
| 2011 | 234 |
| 2012 | 396 |
| 2013 | 472 |
| 2014 | 588 |
| 2015 | 800 |
| 2016 | 1,308 |
| 2017 | 1,216 |
| 2018 | 1,586 |
| 2019 | 1,836 |
| 2020 | 1,902 |
| 2021 | 2,290 |
The Vinovest Strategy
1) Investing in Casks
Vinovest only offers whole casks, not bottles Why? Several reasons. First, casks improve in flavor and value over time. Individual bottles do not. Once whiskey is bottled, the flavor remains the same until the day it is consumed. This arrested development limits bottled whiskey's potential return.
Second, whole casks are cheaper than individual bottles. (Anyone who is a card-carrying Costco member already knows the benefits of buying in bulk.) By buying bulk, casks translate to a more affordable option and have lower per liter storage costs than bottles. Third, you have 100% ownership of casks. You can sell, sample, or ship your cask whenever you like. While this flexibility is possible with individual bottles, it's not possible with fractional ownership of casks. Instead of sharing your cask, we want you to have the whole thing. Other benefits include:
No need for shipping Storage and insurance covered by Vinovest management fees An excuse to head to Wyoming to visit and taste your casks!
Once Vinovest allocates your funds, the whiskey's title and ownership are registered in your name. We will provide documents to prove your ownership in your Vinovest account. The next question becomes: how long will you hold it?
2) Aging Your Casks
Your casks must remain at the distillery or a bonded warehouse while aging. A few things happen to whiskey while it ages: 1) it decreases in volume due to evaporation, 2) it loses alcoholic strength, 3) it develops more flavor.
While the cask breathes, it also loses water and alcohol content. The evaporation rate, also known as the angel's share, is typically 2% of the remaining volume per year. (Great if you're an angel. Annoying if you're an investor.)
Factors That Impact Your Future Cask Value
- Year of production
- Type of barrel
- Distillery
- Age
- OLA (Original Litres of Alcohol) measured when first filled
- RLA (Remaining Litres of Alcohol) at re-gauging
- ABV (Alcohol by Volume)
3) Selling Your Cask
We strongly recommend holding your cask for 2 to 4 years. The exact hold time will depend on your horizons and the cask's age at purchase.
Our portfolio managers will alert you when your whiskey is ready to sell. Next, we will reach out to our global network of buyers to initiate the liquidation process. Once we obtain multiple offers for your cask, we will work with the most competitive bids to negotiate the highest price for your cask.
You'll also have the option to have your whiskey bottled for personal use.
“Rare whiskey is shaping as the perfect hedge in an economic downturn”June 2020
Brands Using Vinovest Casks
Some of the most widely recognized and respected brands outsource their production and could be your future Vinovest customers.
Feeling stuck?
Let our team of experts help you pick a cask.
