The Single Malt Fund Trading Company
15 April, 2020
2020 – Q1 Whisky Investment and Market report
Firstly, we hope that our readers and their families are safe and well and coping during these unprecedented times. From its roots in Wuhan, China, Covid- 19 has now spread across the globe, devastating the world economy. Business is on hold, central banks are printing money like it is going out of fashion and stock markets are going up and down like a yoyo. The drinks industry has, of course been rocked, like everyone else. The on trade in most markets has shut down, although losses have been, in some way, compensated by people stockpiling from the off trade ahead of lockdowns. Moet Hennessy (owners of Glenmorangie and Ardbeg) reported sales of -13% in Q1, which was not bad given the climate. Q2 is expected to be much worse. Diageo, the world’s biggest alcoholic drinks company has estimated the impact of Covid-19 on organic net sales to be between GBP 225 million and GBP 325 million in this fiscal year. Pernod Ricard is forecasting a 20% decline in sales this year and, like Diageo, are suspending share buy backs in order to preserve cash. Production across the whisky world has either been scaled back or halted although talks are now under way to reopen distilleries and bottling plants. Everyone agrees that the long term prospects for the Scotch industry remain strong, so it is good to see that, amid the crisis, the industry is focusing on looking after it’s people and supporting industry partners, such as bartender associations.
The Rare Whisky Market
In the midst of the Covid-19 crisis, we received news from Rarewhisky101, the leading analysts of the secondary whisky market, that the secondary market for rare whisky remains buoyant. The key takeaways from their Q1 2020 report were as follows:
- The APEX 1000 (covering 1,000 different bottles/whiskies with more than 36,000 measure points in Q1) increased 3.22% during Q1 2020.
- Volume wise, 33,665 bottles were sold during Q1 2020, compared to 34,000 in Q1 2019 – a decrease by merely 0.9%.
- Value per bottle increased encouragingly from ≈ £ 316 on average in Q4 2019, to ≈ £ 323 on average in Q1 2020 (£ 326.28 in March) .
We are also greatly encouraged by the news from Sotheby’s that a bottle of Karuizawa 52 year old sold for a record price for Japanese whisky of GBP 363,000 in their auction in March.
The Single Malt Fund has always maintained that there is little correlation between the market for rare and collectible whisky and the more traditional stock and bond markets. This news of an increase of 3% in the value of sales of rare whisky at UK auctions bears this out. When one compares this 3% growth with a drop of 25% in the FTSE or a decline of 60% in the price of Brent Crude, it is arguably the case that investing in rare whisky is as attractive now as it has ever been. As the guys at RW101 ask; “could whisky be a new safe haven similar to gold?”
Very hard to predict what the future holds, given the current climate, but there are reasons to be confident. Time will tell.
TSMF Activities in Q1 2020
Understandably, things have been quiet on the trading side during Q1, with focus on fund raising and then, towards the end of the quarter, dealing with the Covid crisis. We are also forging ahead with the development of our e commerce platform. Despite the unprecedented times, we did manage to get our hands on a few bottles from our local and friendly supplier at Irish Distillers in Q1. When offers of the rarest and most collectible brands in Irish Whiskey come along, it would be irresponsible of us to ignore them. The launch of Redbreast 27 was THE highlight of the quarter. To get hold of some of the very limited quantities of this iconic release from, arguably, the hottest brand in Irish whiskey right now, was very pleasing indeed.
MD, The Single Malt Fund
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The Single Malt Fund AB (publ)
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