Whisky vs Collectables

What is the Knight Frank Wealth Report?

The Knight Frank Wealth Report is the Knight Frank research group’s flagship publication and offers “a unique perspective on global wealth, prime property and investment.”

The perspectives compiled in the report are based on the Knight Frank Luxury Investment Index (KFLII) and the Knight Frank Prime Property Index (KFPPI). The KFLII measures “the performance of luxury assets over a 12-month period,” while the KFPPI looks at “the performance of prime property in key cities around the world.”

Where does Knight Frank get its whisky data from

Knight Frank’s take on the whisky market is based on the Knight Frank Whisky Index (KFWI) which tracks the price of a “case” of 12 bottles from some 300 whisky distilleries and is compiled by Rare Whisky 101, based on their Apex1000 Index and Apex100 indices.

What does the Knight Frank Wealth Report tell us about the whisky market in 2020?

There’s no doubt that 2020 represented a unique year for commodity investors, with the COVID-19 pandemic causing a global market sell-off.

The Knight Frank Wealth Report 2021 shows how whisky has performed as part of these luxury assets over a 12-month period, while also taking into account other factors such as currency fluctuations and political instability.

Looking specifically at the KFWI, we can see that there was an overall increase in value from January 2020 to January 2021 actually dropped by 3.5%. This is compared to an increase of 13% for wine (based on the Liv-ex 100 Index) and a 6% increase for classic cars (according to the HAGI Top Index).

While this might look like a slowdown in the market, it should be remembered that, in the past decade, the whisky market, as tracked by the KFLII, has increased in value by 586% and, as the wealth report points out, increased by 40% as recently as 2018.

By comparison, the markets that showed the greatest increase in value over the course of 2020, handbags, wine, and cars, have only increased by 108%, 127% and 193% respectively over the last decade.

This slight decline is also not representative of the whole of the market. As the report points out, “Most of the 100 single malts within the KFWI are ultra-rare luxury bottles and this part of the market saw more stress in 2020.”

The data from the Apex1000 Index shows an 8% increase in value for the top 1000 most valuable bottles over the course of 2020, with only the very top segment of the market showing more static prices and less demand.

What could have caused this slight slowdown at the top end?

The primary thing to bear in mind is that the Covid-19 pandemic effectively annihilated global supply chains. The cost of shipping goods around the world increased, and as a result, whisky prices at auction plateaued towards the end of last year.

Winning a bottle at auction in 2020 was one thing, but, if you weren’t resident in the country where it was being auctioned, the cost of getting it to you was becoming prohibitively expensive.

The effect of this was to limit the rate at which ultra-rare bottles were able to change hands, and as a result, it is expected that prices will see an upward tick once more over the course of 2022 as more and more pandemic restrictions and lockdowns are eased.

Another contributing factor is the fall in the value of The Macallan. It’s no secret that The Macallan has been dominating the rare whisky market and has 15 bottles in the top 100 most valuable.

The overall loss of value for those 15 bottles was enough to tilt the market down, even though the remaining 85 bottles actually gained around 5% in value during the same period.

The 8% rise in the value of the Apex1000 Index shows that the overall market for rare whiskies is still growing, but it’s doing so at a slower rate than in previous years.

This reflects a general slowdown in the luxury goods market, which has been impacted by global economic uncertainty.

What can be said with some certainty is that there is still a huge secondary market for rare whisky and it’s unlikely that the colossal 478% increase in value of the last decade will be undone by a single extraordinary event like 2020.

Is rare whisky still a good investment?

Simply put, yes.

The whisky market survived the worst economic depredations of the Covid-19 pandemic remarkably well. The slowdown in the luxury goods market has not impacted whisky prices to any great degree.

The secondary market for rare whisky is still buoyant with collectors and investors vying for the best bottles. The market for these bottles is also increasing outside of its usual parameters, with collectors in Asia and the Middle East challenging the spending of those in the U.S and E.U.

The reality is that investors looking for a tangible asset that is likely to maintain its value and that has shown a distinct increase in value over time should consider adding some rare whisky to their portfolios.