The supply chain crisis is beginning to envelop the UK spirits market, in particular the scotch whisky industry, causing huge issues for retailers but sparking a boom for whisky cask investors, with prices for certain scotches tripling in the next year!
These supply chain issues stem from a number of issues ranging from the fallout of COVID 19 and Brexit, causing an enormous shortage in the stocks of whisky on supermarket shelves. From the largest brands to the smallest distilleries, supply chain issues are a universal problem for the scotch industry. How did this happen and how can a whisky cask investor benefit?
The Making of a “Perfect Storm”
Firstly during COVID, many distilleries were forced to shut their doors, halting the supply of scotch itself. Essentially, not enough liquid was being put in casks, creating an initial disruption in the annual supply of scotch.
However, this is a ripple effect, the tremors will not be felt for another few years since any scotch takes longer than three years to mature. Thus in two years this shortfall in scotch supplies will blossom into a ravenous demand for whisky, with private investors being the ones to reap the benefits.
As you might have seen with the shortage of petrol in the past few months, the lack of HGV drivers is having an effect on the ability for retailers to even get their stock onto shelves. While the closure of distilleries is a longer term issue, the price is still going up now due to the fact that not enough drivers are willing to work in the remote regions of Scotland where much of the distilleries are located. Leading to further inabilities for scotch stock replenishment, driving prices up for certain whiskies by 300%!
Adding to retailer woes is the inconclusive nature of Brexit trade agreements meaning that vital supplies such as packaging, glass and casks are all being held up in customs around the world. This is preventing many of the largest brands from even being able to shift their own stocks, putting private investors at an even greater advantage.
Finally scotch is receiving reduced competition from other spirits, particularly US bourbon and southern hemisphere whiskies. While scotch remains the holy grail for spirit fans, the general consumer tends to go with ease of access. This culminates in further driving demand for scotch since at least as a domestic product some of it is hitting the shelves.
“At the end of the day, this is simple supply and demand. Retailers are struggling to get the stock, so private investors like my clients benefit.” - Mussei Kidane, Senior Portfolio Manager.
As time wears on these problems are looking to further spiral with no easy fixes in sight, meaning next year could be a very happy time for cask whisky investors. With the holiday season in full swing, and whisky being one of the most popular gifts, fortify your family’s financial future and invest in cask whisky.
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