Where Will the Whiskey Market Rollercoaster Stop?

For whiskey investors it can feel like the current market is bleak. Numerous indices and reports suggest that the decline in auction prices is continuing. Whiskey retailers are also seeing sales slow. Does all this signal the end of the secondary whiskey market? Was it all just a bubble that has finally burst?

We’ve seen a marked decline in sales of what you might call the premium end of the whiskey market in the first few months of this year, Richard Hawley, director of online whiskey store The Whiskey Vault, explained in an email to me about discuss the market. But it’s not all gloom and negativity.

Market cycles are all part of a mature market and can also provide opportunities. There have been some green shoots of recovery in recent weeks and it can be seen as an optimal time for savvy buyers to grab some vintage legends that are at a lower price than they have been for several years.

As a broker and consultant involved in many parts of the whiskey and antiques markets, I have seen significant changes over the past decade. My guess is that the downturns we’re seeing are all part of the normal investment cycle. These cycles can even be seen as a sign that the whiskey market is maturing. It’s a roller coaster we’d better learn to ride in the years and decades to come.

You may be wondering why the market is swinging right now, and while there are some very specific reasons that aren’t helping. Bid fatigue when you bid against unrealistic reserves caused by a change in the market but not by expectation is an obvious reason. As is the large number of online auctions that have appeared. However, the core issue is much bigger than the secondary whiskey market in the global economy.

Recent market history

Cast your mind back to 2021 and 2022, the glory years of whiskey investing, when it felt like no matter what bottle you bought, you’d be making money within days. In each auction the prices achieved were better than the previous one and everyone was trying to get their hands on the next new version.

Your average person was feeling pretty flush thanks to the Covid lockdowns. People had saved thousands thanks to the absence of parties and social events that were limited to a walk with a coffee. We came up with money in the bank in an employment crisis which meant people felt confident enough to ask for a pay rise and buy a higher wage. Savings rates were low while the potential high returns of alternative investments were pushed through targeted advertising. Whiskey investment was introduced to the masses, which only increased the competition for bottles at auction.

At the same time, many of the wealthy were frustrated with their more traditional investments. The surge in stock values ​​following the discovery of the vaccine was a distant memory. Now there was the prospect of rising interest rates, never good for stock values, massive supply chain issues and a war in Ukraine causing an energy crisis. Stock values ​​fell, and when traditional investments falter, alternative investments begin to look more attractive. Cryptocurrency stole the headlines, but there was also an unmistakable buzz about whiskey among the wealthy.

Markets in 2024

By contrast, we are all uncomfortably aware of where the economy stands in 2024:

  • Inflation reached the highest level in four decades.
  • Interest rates at the highest level in over 15 years.
  • The UK is limping out of a shallow recession with the US and Europe just ahead.
  • Everyone feels uncertain about what the future holds.

In short, the economic climate could not be more different from when bottle prices were booming. The average person feels much less secure in their job and has much less disposable income. Many people are keeping savings for emergencies and unfortunately, in some cases, they even use it for everyday life. This has resulted in a systematic decline in the volume and value of whiskey bottles at auction by 30% and 36% respectively for January-April 2024 compared to the same period in 2023 (Noble & Co Whiskey Intelligence Report 2024 Q2).

All affected

The market impacts are compounded by the fact that it is the buyers of lower and higher value bottles who are feeling the effects of the current global economic changes.

Your average income whiskey investor has found himself in a cost of living crisis. Easy access savings have increased and suddenly the security of a 5% bank savings account is more attractive 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 traded volumes but 45% of value. The squeeze on the disposable income of customers who drive 90% of the market will have a significant impact on the market as a whole. Many of the bottles in this sector have been rotary bottles, lower value mass market NAS bottles like the Folio and Concept series, and the drop in value for these bottles, in my opinion, is proof that the end consumer is feeling the squeeze. .

Flipping has been a lucrative market for many buyers, but the days of quick cashbacks, while not numbered, are becoming less frequent and easier to predict. Commented Hawley on the proliferation of NAS bottles at auction.

At the same time, wealthier customers, who will account for over 50% of the value of the secondary whiskey market in 2024, are returning to their well-tested, traditional and regulated investments. Interest rates on cash savings are high and stocks are rising on the hope that rates will soon start to fall in the UK (and indeed are already doing so in Europe and the US).

A waning appetite among the wealthy for high-value bottles was recently demonstrated by the failure of the 50-year-old Macallan 1928 to meet its reserve of 50,000 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 by Dalmore. The stunningly designed collaboration between Dalmore and Melodie Leung to raise money for V&A Dundee continued from the first edition which collaborated with Kengo Kuma and sold for $151,000 (118,750) in November 2022. The record also setting 2023 Distillers One Of Oneauction saw 17 new records set. For me, these changes in the values ​​achieved show a change in appetite among buyers in this sector of the market.

It’s important to note that whiskey isn’t the only alternative investment suffering in this climate. There has been such a downturn in the art market that Sothebys is stocking up and those who were previously excited about NFTs have gone silent.

Coming to market in 2024

If you’re wondering what to do, unfortunately there is no one-size-fits-all approach. If you want to continue investing in whiskey, then now is the time to buy. There are certainly good deals to be had at the moment and my sentiments are shared by Richard Hawley, Look out for vintage rarities and indie bottles whilst using respected review sites to get a sense of quality and prestige.

If you’ve had your fill and want out, my advice would be to hold on tight if you can. The end-of-cycle sell-off is not ideal and therefore indicators for the global economy suggest more positive times ahead. No matter how bumpy the ride, a roller coaster is usually pretty safe if you get on and off at the right time!

#Whiskey #Market #Rollercoaster #Stop
Image Source : www.forbes.com

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