ByGuy Ovadia
Updated Mar 2, 2022
Many companies on MoneyMade advertise with us. Opinions are our own, but compensation and in-depth research determine where and how companies may appear.
Stock Trading
Whiskey
Investing in whiskey stocks isn't as straightforward as it seems. Sure, there are a plethora of Scotches, Bourbons, Japanese, and other whiskeys, but most of the big brands are owned by highly diversified alcohol companies that also sell wine, beer, and other spirits. So this begs the question, can you invest in whiskey stocks?
The answer is most certainly yes, but how do we avoid investing in fine wine so as to not water down our whiskey investment?
As an asset class, the price of luxury whiskey has outperformed the S&P 500 as well as other collectible investments, all while experiencing less volatility.
Well, the beauty of publicly traded stocks is that the companies you invest in are required to be transparent and update shareholders regularly about their balance sheets. The information is out there, you just have to do a little digging.
Whiskey has performed extremely well as both a consumer good and asset class. On the consumer side, whiskey sales have overtaken vodka in the US, and exports of single malt Scotch are up 159% since 2004. Growth is even faster in Asia with whiskey demand increasing in both India and China. The developing global whiskey market benefits from consumers paying closer attention to high-quality alcoholic beverages.
As an asset class, the price of luxury whiskey has outperformed the S&P 500 as well as other collectible investments, all while experiencing less volatility. The Distilled Spirits Council of the United States reported that in 2020 revenues on high-end whiskeys were up by 37% and that of super-premium whiskey varieties rose by 136%. Overall, everything indicates that whiskey investments are both profitable and an effective market hedge.
How to start investing in whiskey stocks and publicly-traded whiskey companies
The first step is identifying alcohol stocks and finding out to what extent they're involved in the whiskey business. Alcohol is a highly diversified industry, so there are few publicly traded companies that are dedicated just to the production or sale of whiskey. So, this is the stage where you must decide how much you're comfortable being exposed to the broader food and beverage industry.
Diageo (DEO)
One approach is bottom-up: you can research the most profitable whiskey products and find which companies are producing them. You may find that one company actually owns a few whiskey brands, perhaps also a few varieties from a particular region. For instance, Diageo, which owns Johnnie Walker among its many brands, controls about 38% of the global Scotch market.
Brown-Forman (BF.B)
Market share is a useful metric for the top-down method, as well. In this approach, an investor will pick companies or brands based on their total market share. For example, the two most popular whiskeys in the U.S. are Jim Beam Bourbon and Jack Daniel's Tennessee Whiskey and they control a market share of around a combined 40%. These two brands are owned by Suntory and Brown-Forman, respectively, both of which have diversified their businesses beyond just distilling whiskey.
Pernod Ricard ADR (PRNDY)
Although market share is important, investors ultimately want to add the strongest performing whiskey stocks with a strategic diversity of international whiskey brands to their portfolios. In other words, the final step of selling the whiskey is most critical for investors because that's when profits are realized. That's why the best whiskey companies to invest in will have several brands of varying qualities with high margins that target particular market segments.
One of the strongest-performing companies with an effective international brand strategy is Pernod-Ricard. While they have diversified to wines and spirits, Pernod-Ricard has a wide selection of brands that cater to a broad spectrum of consumers. Household names like Chivas Regal, Jameson, and Seagram's have positioned Pernod-Ricard as a company that appeals to the broadest possible market when it comes to whiskey.
Get wild, drink whiskey
How impulsive are your investments?
Investing in private whiskey companies
Let's say you're not satisfied with buying stock in a company that isn't solely focused on producing and selling whiskey. If that's the case, then these large publicly-traded companies are probably not the right investment for you. When companies go public, they can grow too big for their britches and must expand beyond their original mission or market segment.
Related Investments
Grape Minds Drink Alike: What to Look For When Making a Wine InvestmentFrom Casks to Riches: How The Macallan Became a Whiskey UnicornOver the Hedge: The Best Commodities To Invest in 2022The solution to this is to invest in a private whiskey company. It's difficult to get shares in a private company as a retail investor because early-stage companies are looking for wealthy investors to serve as financiers. However, those with enough capital should consider private whiskey investments as a serious growth opportunity.
Another obstacle to investing in a private whiskey firm, at least if you're looking at a foreign company, is customs. Many regional varieties like Scotch and Irish Whiskey can't be distilled outside of their distinct geographical area. So if you want to invest in a whiskey company from a prolific distilling region like the U.K., you'll have to register with Her Majesty's Royal Customs.
Investors with a significant stake in an up-and-coming whiskey brand could profit if it eventually gets acquired by a larger company. Although private companies are not held to the same standards of transparency, such an investment always has the potential to blow up if the brand catches on.
Alternative whiskey investing strategies
If you're looking for a long-term whiskey investment, one of the best ways is to buy whiskey rather than purchasing shares of a company that produces whiskey. Not everyone has the expertise to know which whiskey will have the best ROI, but luckily alternative investment platforms like Vint and CaskX have your back.
Investing in bottles of high-end and vintage whiskeys like The Macallan can be very profitable and also serve as a hedge against market volatility and inflation. Investing directly in high-end whiskey has never been easier with Vint. Vint is a wine and spirits investment company where users can buy and sell shares of their collection. Users invest in the underlying asset—which Vint holds in storage—and then profit when Vint makes a sale from their collection.
The popularity of whiskey bottles has led investors to adopt a longer-term strategy by buying whiskey before it's bottled or even fully matured. Buying whiskey casks is cheaper and can be more profitable than investing in cases of bottled whiskey, but some cask investment schemes are deceptive or, at worst, scams. That's why the most legit way to invest is CaskX, a platform that allows accredited investors to invest in barrels of young Scotch and Bourbon which they insure, store in the proper conditions, and sell, passing the profits onto investors.
