Impact of world events on whisky investments – Economic and political factors

The Impact of World Events on Whisky Investment 

Whisky investments are gaining popularity as an alternative asset class. However, although the value of rare whiskies often increases, the whisky market – like almost all other markets – is not completely immune to economic and political events. It is therefore important for (potential) investors to understand how these events could potentially affect the value of whisky. In this blog, we discuss the impact of world events on whisky investments and focus in particular on the economic and political factors.  

Whisky investments and the economic situation 

Of course, the economic situation also plays a role in the whisky market. Factors such as inflation and currency exchange rates can therefore affect the price of whisky. Below, we'll outline a number of factors that can change the value of your whisky investment.  

Currency ratesWhisky is traded internationally, which means that currency rates can have a direct impact on prices. For example, Scotch whisky is often valued in British pounds. The moment the value of the pound falls against other currencies, whisky bottles can become more attractive to foreign buyers. This increases demand, and therefore the price. However, conversely, a strong British pound can actually raise the price for international buyers and that in turn depresses demand.  

Inflation
In periods of inflation, investors often look for investments that retain their value. Whisky is an example of this. This is because whisky is not directly dependent on, for example, the stock market and often retains or even increases its value in times of economic uncertainty. Whisky investors see this as a way to diversify their portfolios and thus protect themselves from inflation. In contrast, in times of low inflation or economic prosperity, prices may stabilize or rise more slowly.  

Trade barriers and tariffs
The introduction of trade barriers, such as import tariffs, can significantly affect the whisky market. For example, in 2019, in response to a conflict with the European Union, the United States introduced a 25% tariff on Scotch single malt whisky. This of course caused a significant price increase for American consumers and reduced the demand for Scotch whisky in the US. This was felt, especially because America is one of the largest markets in the world. Such measures can therefore distort the market and have an effect on whisky prices, both in the short and long term.

Whisky investment and the political factors 

In addition to the economic factors mentioned above, political events can also affect the value of whisky investments. 

Political instability
Political instability can lead to disruptions in both the production and distribution of whisky. Consider, for example, the referendum on Scottish independence in 2014, which brought uncertainty about the future of the Scotch whisky industry. Although Scotland ultimately remained part of the United Kingdom, the uncertainty during the referendum certainly had a temporary impact on the market. For example, it caused volatility in the prices of Scotch whisky.

Changes in laws and regulations
Changes in laws and regulations can also have a direct impact on whisky investments. For example, government regulations regarding the production and sale of whisky can increase costs or restrict access to the market. For example, strict environmental regulations can lead to higher production costs for distilleries, which in turn can affect the price of whisky. 

Impact of Brexit on whisky
An example of a political event with a major impact on whisky is of course Brexit. The United Kingdom's departure from the European Union brought new trade rules and uncertainty for the whisky industry. Although a decline in exports to European markets was expected, the whisky sector has shown resilience. However, whisky investors must of course take into account possible future changes in trade agreements and legislation.  

Diversification and market research 

So it's clear that world events can indeed have a significant impact on whisky investments. It is therefore important for (potential) investors to remain alert to both economic and political developments. How can you take this into account? This can be done in various ways.  

Think diversification, where you spread your investments across different whiskies, brands, and regions. This makes you less dependent on one market or type of whisky. In addition, we recommend doing careful market research every now and then. This will help you stay informed about economic trends, political tensions, and trade regulations that may affect the whisky market. Moreover, we would like to tell you that a good long-term vision is key. Insight and patience can help you get through (possible) periods of volatility and uncertainty.  

Scotch Whisky Investments helps you further 

Do you need help investing in whisky? Then you have come to the right place at Scotch Whisky Investments. It's easy to get started and our specialists will be happy to help you. Feel free to contact us to ask all your questions!