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Alternate asset classes: spirits

Alternate asset classes: spirits

Expensive wines and rare whiskies have become quite a trendy alternative asset class (and not just for the bourgeoisie). Some collectors are even building a “personal vintage” made of bottles distilled or released in their birth year. Celebs like George Clooney, Ryan Reynolds, and Bob Dylan are also launching their own liquor brands, and not just for the “hunk” appeal.

What matters massively when acquiring fine bottles is age, provenance, quality, and scarcity. Spirits that score highly on these metrics are also considered highly collectible, such as those from now-closed distilleries or “zombie” distilleries (once shuttered but then brought back to life). 

Since sales of spirits have been shifting online (like everything else these days), the market has reached new highs — a total value of over $167b according to Crunchbase. Though alcohol’s embrace of e-commerce was slow, due to tight regulations that deterred companies, startups like marketplace Drizly (recently bought by Uber) and delivery platform Gopuff are speeding up the game. Within the first quarter of 2021, alcohol e-commerce saw some major company activity and projections have now gone up to $40b by 2024, according to International Wine & Spirit Research.

For the last edition of our alternate asset class deep dive series, let’s explore a few of the best-selling spirit categories and the investment opportunities they offer.

Fine wine 

Treating your wine as an asset class can pay off significantly, as Shark Tank’s Mr. Wonderful knows very well. Looking at the Liv-ex Fine Wine 100 tracker, the value of fine wines is growing by 25%, and this year it is predicted to hit heights not seen since 2011. Just a couple of months ago the popular wine recommendation and marketplace app Vivino raised $155m with its Series D round — looks like it’s striking “wine o’clock”! 

But, be prepared, successful wine investing requires patience and good care, just like a baby — you should be ready to hold this asset for 5-10 years, possibly longer, and be equipped to store it properly, with controlled heat, light, and humidity. 

Vinovest is an interesting venue to discover opportunities in the wine market and put together a wine portfolio geared to your personal risk appetite and investment time horizon. In the case that you are a connoisseur yourself and want to buy on your own behalf, then check out Vinfolio, a marketplace that provides a far more in-depth selection of wines intended for more serious wine investors.

Whisky 

Whisky is the most widely collected and tracked category, dubbed the “liquid gold” in the spirits market. While whisky fans mostly buy a personal batch to mature and then enjoy a decade or so down the line, the classic spirit can also present an investment opportunity. 

A look at the Apex 1000 index shows an increase of about 6% in the last 12 months and a whopping 592% increase over a 10-year span in the value of the 1,000 best-performing bottles of whiskey. According to global trader BI Fine Wine & Spirits, the number of collectors is growing in Asia, where rare whisky went up by 25% last year after consumers gradually came back to the post-Covid-19 market. 

Last year, a rare bottle of 60-year-old Macallan distilled in 1926 broke records, fetching an eye-popping $1.9m at an auction, while in November, a full lineup of Hanyu Ichiro’s ‘Full Card Series’ whisky sold for more than $1.5 million in a Hong Kong auction hosted by Bonhams. 

Also, tailored platforms like WhiskyInvestDirect, which directs private investors to the best pieces and offers maturation services while their investment grows in value, are now making it easier than ever to invest in individual precious bottles or iconic collections.

Gin 

Ever heard of “ginvesting”? Yes, correct, it’s the perfect way to make the G&T boom profitable! As opposed to Scotch or Cognac, gin is a rather inexpensive spirit to produce because it requires no aging, so margins can be very high. According to IWSR Drinks Market Analysis, global gin sales grew by 6.1% in 2019, making it the second-fastest-growing spirits segment after non‐alcoholic variants. 

In recent years, a number of leading firms have turned heads with budding acquisition activity in the gin category, focusing their attention on the premium‐and‐above brands. For example, Fords Gin was sold to Brown-Forman (BF.B) last year, while Diageo (DGE) announced the acquisition of Aviation American Gin for as much as $610m. 

With the ginaissance (yes, that’s how they called it) still going strong, new and longstanding distilleries have cropped up around the world, creating one-of-a-kind taste profiles reflective of their regions. Examples range from the Himbrimi Old Tom Gin distilled in Iceland, the Empress 1908 Gin from British Columbia, and the Alaskan Amalga Distillery Gin.

why it matters
The demand for investing in spirits becomes quite visible at times of stock exchange instability as private investors start looking for more unique assets to diversify their portfolios. Wines, whiskeys, and gins can truly do that if put away for years (or even decades) and sold unopened.