Is the Whisky bubble in burst mode?

[Delboyscap]

Is anyone else seeing the signs of the whisky bubble bursting, or is it simply just the state of the economy? In fact, are these two things one and the same thing, or can they even be separate elements?

I see many data points that suggest that the bubble is bursting. Here in Australia there were a LOT of whisky investors, but the state of the economy, rising interest rates and ridiculous housing prices, coupled with cost of all the essentials rising are obviously hitting discretionary spending hard.

Is anyone else seeing signs that the bubble is coming to an end? Or is it more likely just a stagnation period due to the economy? Will we return to times where getting a bottle of Springbank 12 SC is not like winning a Golden Ticket at Charlies Factory?

[Bookie]

I would lean towards it being the state of the economy which may be slowing or stopping the whisky bubble from getting bigger or at least it has slowed it.

[Delboyscap]

Yes, it might simply be the economic factors as I am seeing signs of that pinch in other areas other than whisky. But I do wonder what impact it will have on the investors who are no longer getting the returns on their investments and how that might impact the drinkers.

[BigShing]

We're probably never going back to the time when Springbank/Kilkerran and the likes are accessible, because too many people are aware of the drinks now, the quality of the whisky is too good, and they've not been greedy like Diageo and Pernod and priced their range out of the casual market.

[Uncle Bobby]

[Delboyscap]

Yes, very good points Uncle Bobby. I see the same, a market that is stagnating, particularly on certain lines. I am signed up the mail lists for quite a few of the bigger retailers in Australia and they have had sales on Japanese Whisky and Macallan recently which shows stagnation, as both of those markets have been crazy for some time.

Maybe we are entering a bit of a market correction. I fear for a LOT of the newer Australian Distilleries that have opened over the last 5-10 years. Not only might we see the collectors markets bursting, but a lot of distilleries could be in real danger, especially if they are still not solvent which is hard to achieve for a few years.

[whiskyone]

I don't think the bubble is bursting for one major reason. There are so few places to invest now, I suspect whisky will keep increasing in price in the medium to long term.

The banks offer little incentive to save, the stock market is abysmal and more corrupt than ever, not to mention the entire economy and global banking system is on the verge of collapse. Inflation is destroying everything.

Whisky, precious metals, property and other luxury items look the best place to invest currently. Property will be the next bubble to burst though as so many people are living beyond their means on cheap debt. Interest rates will need to keep going up from here now, so the property bubble is the biggest bubble that will need to burst.

As there is a lack of safe places to invest to beat inflation, I see no reason why the whisky market will tank.

What we are seeing is a slight correction in my opinion. The whisky market is consolidating a little but will likely start moving upwards again once weak hands and those who are desperate for cash have cashed in.

One thing I know as a matter of fact is that a lot of seriously wealthy people are getting out of pounds and dollars and buying whisky, watches and luxury cars.

If the wider economy was awash with opportunity, then it would be tempting to suspect money might be moving out of whisky, but with little opportunity to beat inflation or make a profit, I expect to see whisky becoming even more of an investment vehicle in the coming years.

[Delboyscap]

You raise a good point, in that there are two ways to invest; one to make money, and secondly to preserve wealth in tangible assets. From the second perspective I think you are right, that the market may stay strong in that area, and people will continue to invest in those assets.

From a making money perspective though, I wonder if that area will suffer the most. A lot of people have been investing heavily into whisky, expecting great returns and only for that reason. In a lot of ways it has been fuelled by fashion too and trends of people drinking spirits again and the rise of craft distilleries, especially gin and whisky. But of course whisky, is often funded by disposable income, so there will be a hit there for many distilleries not 'fashionable' or trending. I fear a lot of distilleries may go under.

I suppose as you say, there is/will be a massive market correction going on, in which only a few distilleries will be immune from that. It will be interesting what happens from here. I think the whisky that has true inherent value may still thrive, but a lot of whisky these days only has value bestowed upon it by marketing teams, and gullible consumers. Interesting times coming.

[whiskyone]

Yes, I agree with much of what you say. Disposable income has dried up and will continue to dry up. This will impact many distilleries and it should impact the more "fashionable" bottlings. Bottles where hype is the biggest part of the valuation will suffer the most.

The entire market has an element of hype built into it so most bottles will see a correction, but once the correction is over, I expect to see the genuine quality bottles to start moving up again quite sharply as the economy tanks and big money moves towards the bottles of inherent quality and value.

The usual "premium collectable" NAS bottles where the valuation is 95% hype may fall further or at least stay flat for some time once the correction is over I think.

I also think the market rose too sharply between around October 2022 to February 2023. So many bottles were selling for a ridiculous price in that period as we saw a sudden desperate flight into the whisky market by people with serious cash as the pound tanked hard. I think that was the Liz Truss effect. I even recall seeing NAS bottles of Penderyn that had been selling for years for around £30-£40 up to the middle of last year suddenly selling for around £1000 in that period.

When you get a sudden spike in the market like that it can often encourage a sell-off as people cash in on the spike and then a secondary sell-off for a short period afterwards as people perceive the profit taking to be bearish when in fact it's just natural market mechanics.

You'll also note what the whisky market did in the years following the 2008 crash as money moved in to whisky. There's a bigger crash coming very soon in my opinion.

Overall I see no reason to be bearish in the medium to long term as the fundamental reasons for investing in whisky are strengthening month on months as inflation reaches breaking point.

[Simps]

I don't think the bubble is going to burst anytime soon but you might see a slow down in some parts of the market, higher end and hyped whisky. Great aged statement whisky will always be in demand as that is what has always been the most sought after, and at the heart of the drinking, collecting, investor market.

You only have to look at some of the whisky forums on the internet and Facebook and read the number of questions from some new members asking what is the best whisky to invest in ?, or I have brought this at auction how much is this worth?. There will be a lot of people who will get their fingers burnt by not doing their research. They are somewhat responsible for the spike in the popularity and scarcity of some whiskies, especially Springbank, Hazelburn, and longrow lately as every release is now considered an investment and the majority not opened.

It has also only been the past five to ten years since the hype for nice fancy packaged limited releases has grown, unfortunately these have been pushed massively by some distilleries and there has been a buying frenzy on release of some of these examples partly because people expect a big profit on flipping them, I think some of us are seeing that they are not always a good buy as apart from a nice box they are filled with very average whisky (a night in earth being one, it was awful) and the word "limited" is used very ambiguously by some distilleries 10000-15000 being seen as limited nowdays.

Ultimately whisky is there to drink and enjoy and if you can afford to invest you have got to accept to lose as well. It just means that if the investment side does go pop there will be some great examples around for the drinking part of the whisky community.

[Delboyscap]

[Delboyscap]