Everyone is bullish on bourbon these days. Largely ignored and forgotten a few decades ago, America’s homegrown spirit is heralded nowadays as one of the leaders in the premiumization movement transforming the spirits industry. This has led to the birth of bourbon investing, as the price of aged barrels keeps rising as demand outstrips supply.
Cask X was the first company to introduce the idea of investing in bourbon barrels to the public. This practice had taken root in Scotland when the global demand for scotch took off with the new Millennium. As investing in whiskey portfolios continues to take root, many people question where the market may be heading.
We reached out to Jeremy Kasler, the Founder and CEO of Cask X, to shine a light on a drink everyone seems to be reaching for these days and where he sees the market heading.
Some say that the bourbon market is due to plateau sooner rather than later, with so many brands hitting the market. What are your thoughts on that?
One of the most important things about the American whiskey market is increased investment from international spirits companies. Some people say that’s not good because it’s changing the landscape from family-owned brands to something larger, but you must look at the bigger picture.
They’re not necessarily buying into bourbon businesses to sell to the American market. They’re buying into the possibility they see for bourbon and American whiskey in the worldwide market. Bourbon only took off here recently, you go back a few decades, and no one was talking about bourbon except a few insiders. Then it blew up here. It’s still relatively new elsewhere. There are a ton of markets that bourbon can penetrate across the globe. These companies are just starting to market it to the whole world. Think about this: there are around 350 million people in the United States but 8 billion globally, which is a whole lot of new drinkers. It’s an exciting time.
Where do you see that growth coming from?
While America is the biggest market for bourbon right now, there are many other opportunities. Big spirits companies like Campari, Suntory, Brown Forman, and others are starting to market it in key markets like India, South America, Europe, China, and the rest of Asia. Anywhere where there is a population with spending power. That’s part of the reason why you are seeing many of the distilleries in Kentucky and other key areas ramping up production and laying down barrels. They anticipate demand for bourbon to continue rising for the next few decades as the world acquires a taste for it.
Looking at the scotch market, you can understand what could happen. It wasn’t that long ago that only a few brands of scotch sold worldwide, and they were primarily blends. Nobody really drank single malts. Now, the whole market for scotch has changed. Everyone is looking for premium products, which has driven high demand and prices. Many in the industry, including investors, think this blueprint can be repeated with bourbon. Plus, I am bullish that scotch has acted as a beachhead for good whiskey worldwide. It has helped refine drinkers’ tastes; many are primed for bourbon.
Bourbon has been on quite a tear lately; do you think barrel prices will continue to rise?
I don’t have a crystal ball, but we think bourbon barrels will continue to rise in value. A couple of things are going to drive that. The first thing that will affect prices is the cost of raw materials to make bourbon. Barrel prices have almost doubled in the last three years; corn is more expensive, and shipping is more expensive. The entire infrastructure surrounding whiskey is more expensive, so that’s driving the prices higher.
Then, you factor in the increase in demand for the liquid. Even though more bourbon than ever is being distilled, the demand keeps growing as it penetrates new markets. That also is going to drive prices upwards. Plus, all these spirits conglomerates buying up distilleries is creating a scarcity of liquid. They will be holding onto all their barrels for their brands. So, the distillers we work with will be the only spot that independent bottlers and private brands can turn to for liquid. All these signs point to continued growth.
That sounds great, but why should someone sink their money into whiskey instead of another investment?
Bourbon represents a good investment because it is a tangible commodity. It is something real that is bought and sold. When you buy whiskey in barrels, you own something, and your money isn’t tied up with something that only exists on trading desks. It’s something you can lay your hands on, especially if you visit the distilleries with us on one of our VIP trips. This is becoming increasingly rare from an investment perspective, and our clients love this aspect.
Plus, when you buy into bourbon barrels as an investment, you are making a long-term bet. This is not something that you day trade or a get-rich-quick scheme. A typical investment with us will run around five to eight years until the liquid is old enough to be bottled. I tell my clients that it helps if they love bourbon if they are going to do business with us because then they will understand that good things come to those who wait.