The Allure of Investments in Wholesale Bourbon Barrels
Kate Lynch, December 5, 2023
In the realm of alternative investments, the allure of wholesale new-make bourbon barrels has emerged as a unique and enticing opportunity. Investors are increasingly drawn to the prospect of capitalizing on the appreciation in value that occurs during the aging process, with a specific focus on barrels intended for sale after maturing for a mere two years. This niche within the whiskey investment landscape provides a distinct advantage, combining the art of (a little) patience with the promise of significant returns.
Aging Gracefully:
The crux of the appeal lies in the transformative journey that each new-make bourbon barrel undergoes during its aging process. As the whiskey interacts with the charred oak, it absorbs flavors and compounds, evolving into a more refined and complex spirit. Investors who opt for wholesale new-make barrels are essentially betting on the magic that occurs within the confines of the cask, knowing that the longer the aging process, the higher the potential appreciation in value.
Two-Year Maturation: A Strategic Choice:
The decision to focus on barrels intended for sale after just two years of aging is a strategic one. This relatively short maturation period allows investors to strike a balance between realizing returns in a timely manner and harnessing the enhanced value associated with aging.
Unlike other whiskeys, which may be aged 10 years or more before being bottled, we've found that the price of wholesale bourbon barrels increases most rapidly in the first two years.
In recent years, the huge spike in demand for bourbon has pushed up the price of 2-year barrels to more than 3x the wholesale price paid by investors for the new-make barrel just two years earlier.
The short holding period also allows investors to pivot quickly if the bourbon market softens.
Limited Holding Period, Maximum Appreciation:
The beauty of investing in wholesale new-make bourbon barrels lies in the unique risk/reward profile of an asset that becomes intrinsically more valuable with time.
An investment in the stock market, real estate, or even gold obviously relies on the asset increasing in value over time. Historically, all three markets have tended to go up over the long term, but there's a huge potential for volatility over any given two-year period.
But new make bourbon barrels transform over the first two years from something with low demand (un-aged bourbon) into something with tremendous demand (aged bourbon).
That difference in demand is such that the current price of the unaged bourbon is only about 50% of the current price of 2-year bourbon.
If demand for bourbon continues to grow, and the price of 2-year aged bourbon goes up, investors can generate 40%+ annual returns.
But the huge difference between the price of the new-make and the 2-year bourbon today means that the market could drop as much as 50% without investors losing money.
Risk Mitigation Through Innovation:
The inherent risk in any investment is a consideration for all investors. However, the wholesale new-make bourbon barrel approach introduces an innovative element that mitigates some of these risks. By focusing on a shorter maturation period, investors can navigate market fluctuations with more agility, potentially reducing exposure to external economic uncertainties or changes in cultural trends.
Conclusion:
The allure of wholesale new-make bourbon barrel investments, with a targeted two-year maturation period, represents a strategic and exciting venture for those seeking a blend of appreciation in value and a streamlined investment horizon. This niche within the whiskey investment landscape offers a unique balance of patience and profitability, inviting investors to savor the rewards of their foresight as they witness the transformation of new-make spirits into liquid gold within a relatively short span.
About the Author
Kate Lynch has an accomplished career in Investment Banking, having previously worked for Deutsche Bank, Bear Stearns and Performance Trust, applying her expertise in bank M&A and capital raising. Kate continues to consult with banks while also managing a variety of real estate investments. In 2023, she joined her brother Rick Lynch's boutique investment vehicle, Estate Barrels, providing high net worth investors the opportunity to own bulk bourbon barrels and to capture value from its increasing value with age.
