For all that negative headline clamor, the Distilled Spirits Council of the United States reported that U.S. Spirits exports hit a record $2.4 billion in 2024—$1.3 billion of which was American Whiskey.

In fact, whiskey sales made this spirit a $5.2 billion business in the United States that year, with a 6.6% compound annual growth rate in sales for the last 20 years. Since 2003—and then for the next straight 20 years—whiskey sales generated an unbroken record of increases. A barely perceptible 1.8% decline in 2024 sales broke that record uptrend.

Source: 2024 American Whiskey Fact Sheet / Distilled Spirits Council of the United States

The Bad News

Have recent trade tensions and tariffs hurt whiskey exports? Absolutely. Second quarter 2025 data revealed a significant 13% downturn in American whiskey exports.

Also a factor is that American Whiskey inventories were at nearly 1.5 billion proof gallons by the end of 2024, tripling since 2012. Part of that occurred when 2020 tariffs were lifted, sharply boosting exports, as well as during Covid-19 when domestic consumer demand spiked. Distillers ramped up production to accommodate.

For a while, it was as if the dual demand trends would never end. But end they did. With the epidemic tapering off early in 2024 and reimposition of tariffs in 2025, demand tapered off as well. Whiskey already in the barrel had fewer takers among brands experiencing slower sales. Barrel prices fell.

The Good News

All of this is good news for institutional whiskey investors.

Yes, you read that right.

During peak demand in 2023, barrels of new-fill whiskey fresh from the distiller routinely commanded over $1,000. Now the new-fill can be found in the market for around $600, sometimes even lower. Moreover, since production wound down in 2024 and remains tight in 2025, there is a potential shortage of whiskey developing. (Note: If you’re wondering how there can be a shortage when inventories are overflowing, you are likely missing one of the key dynamics of the whiskey market. For that, you’ll have to read on a bit further.)

An Asset Class Act

All of these positive economics and others are why Family Offices, Wealth Advisors, and RIAs to ultra-high-net worth clients are adding whiskey as an asset class to their investment portfolios. Additionally, there are some new whiskey-focused private equity fund entrants coming into this market, such as Prospero Spirit Funds and ASM Capital Partners.

These investment professionals make decisions by thorough, diligent, and careful research and analysis, not some knee-jerk emotional reaction to whatever the headline of the day may be. They look to put their money to work when prices are low and don’t make rookie investment mistakes like trying to time the bottom or investing after the rally has ‘proven itself’ only to completely miss all the initial upside.

What they see in whiskey is an asset class offering portfolio optimization, diversification, recession resilience, long-term capital appreciation, targeted returns exceeding 20%, and very low correlation to public markets. Whiskey is a proven asset class for these investment professionals.

Skeptical?

Pay Attention: Out of all the alternative asset classes held by these smart-money investors, whiskey and spirits are in the Top 5.

Whiskey’s Designated Economic Drivers

Nuanced and complex, the institutional whiskey market has its own economics and price drivers.

Age is the premier driver. At its core, investing in whiskey is a long-term maturation play: whiskey in the barrel tends to appreciate in value over time. It’s why it has been a tried-and-true money maker for hundreds of years. The economics improve with age as much as the whiskey in the barrel does.

Given the economic importance of age, the institutional whiskey investor is focused on what is aging in that barrel. By law for whiskey to be American it must be produced in the United States and distilled from fermented grain mash—usually a combination of corn, rye, wheat, and barley. Known as the mash bill recipe, these can be very specific and carefully guarded secrets. Rabbit Hole Spirits, a Louisville, Kentucky distillery, notes that with just those four grains, there can be nearly 125,000 different mash bills for whiskey. In fact, there are even certain laws governing the amount and type of grain in mash bills. For example, bourbon mash must be at least 51% corn.

In Hot Water

Hot water is added to the mash and the whole thing is cooked up to release the grains’ sugars. Add yeast to the cooked grain to start the fermentation process, then strain, distill, and put into oak barrels. Of course, it’s not exactly that simple. There is a reason most Master Distillers have advanced degrees in chemistry or other sciences.

Now for that barrel holding the whiskey, or in industry slang, the “wood”. A standard barrel, called a “bourbon barrel” (even if it isn’t used for bourbon) holds about 53 gallons (~200 liters), and weighs in at over 500 lbs when full. On average, a barrel will fill around 225 standard-750 ML bottles. There are legal rules for barrels here too: Bourbon and similar grain-defined whiskies can only be aged in charred new oak barrels.

Forward Looking

The age factor is why distillers are always thinking at least four years ahead, predominantly because, from the first splash of new-fill whiskey into an oak barrel, it takes about four years for the whiskey to acquire sufficient flavor to be marketable. In fact, for some whiskies, such as bottled-in-bond, the length of time it must age in the barrel is mandated by law.

As those four years go by and the whiskey and oak do their thing, the whiskey inside those barrels is appreciating in value. Additionally, the overall supply and demand for whiskey may shift. Brands looking forward say, two years, may find they need more four-year aged whiskey at that time. That means whiskey currently aged only two years will be in demand now to meet the brand’s needs two years from now.

Whiskey Brokers and Whiskey Exchanges

In Wall Street terms, the market is “over-the-counter”. For distillers and brands selling and buying whiskey by the barrel, there are institutional whiskey brokers, such as LQD Assets, LLC, with a U.S. domestic market focus, or Gordon PWC’s concentration on the Scotch and Japanese whisk(e)y markets. They either buy for their own portfolio or match buyers and sellers.

Additionally, there are online whiskey exchanges such as Hogshead, Barrel Hub, and DBFEX where barrels are listed like stocks, with key details such as number of barrels available, fill date, mash bill, proof, distillery, and the state in which it was distilled. The online exchanges are improving pricing transparency and facilitating more active investment in barrels.

Whiskey Houses

In all these transactions, barrels are recorded as to ownership and stored in rickhouses as the whiskey matures. Rickhouses can be enormous. Jon Newton, the Director of Business Development for Castle & Key, casually noted with understated pride that this venerable distillery’s 115-year old “Warehouse B” is the longest rickhouse in the world.

It’s 4.5 stories high and 534-feet long. Using traditional horizontal stacking for best airflow, it can hold 36,000 barrels at full capacity. There are none longer, but there are many even larger. Take a drive through the Whiskey Trail around Louisville, Kentucky. These monolithic rectangles are around nearly every turn.

The economics during the first four years is good—but gets even better as whiskey moves from barrel to bottle.

It’s All Over A Barrel

As 2025 comes to a close and distillers plug the last barrel’s bung hole, that’s all there is in the market for this year’s production. They can’t make any more. The 2025 supply is set forever.

With that in mind, let’s follow some of those 2025 barrels. Fast forward four years from now. It’s 2029, those barrels are sold, and the “liquid”—a slang term industry insiders sometimes use for whiskey in the barrel—is bottled. Any remaining unsold four-year old 2025 vintage barrels could see their price increase. Ben Bornstein, Founder of Prospero Spirits Funds, put it succinctly: as the liquid is bottled and sold, supply decreases, which generally increases remaining supply value due to both scarcity and market supply and demand.

Laddered Portfolios

Institutional-size whiskey investors recognize the scarcity factor of unsold barrels means potentially realizing even more profit by not selling and holding back on some barrels.

That’s why these investors often create what fixed income investors might call a laddered portfolio, kind of a yield curve for whiskey. It’s the portfolio management strategy Prospero Spirits Funds follows. The Funds maintain a laddered portfolio of new-fill to aged liquid across bourbon, rye, Irish whiskey, and Scotch. This structure stabilizes returns, reduces volatility, and optimizes the likelihood of higher IRRs for each fund’s investors. At any given time, each fund may hold hundreds or thousands of barrels across varying production years.

And if barrels don’t sell or appreciate in value as much as desired, investors can just hold onto them. Not only may market demand shift, but the other key aging times for bottling—six years, eight years, 10-years, and 12-years—are still on the horizon, giving ample opportunity for more profitable exits. During aging, the only additional cost is the modest per barrel carry fee for insurance, space, and, in some states, taxes.

Distilling it Down

Here’s where aging and bottling can cause a shortage of whiskey from any given year. If I am a brand manager and need four-year old whiskey to put in my bottles to get those on store shelves, I’m going to pay up to get it. I know that if my bottle isn’t on that store shelf, my worthy competitor will happily take my space.

Distillers dialed back production in 2025 significantly. As the U.S. Treasury Monthly Distilled Spirits Report through June 2025 details, overall whiskey production is down 28.3% over the same six month period of 2024. No doubt, there will be fewer barrels of 2025 whiskey produced.

Brand managers planning their 2029 bottling may well find themselves writing bigger checks to secure the four-year old whiskey they need. Recall those millions of gallons of backlogged five-year, six-year, and older whiskey quietly aging in rickhouses? It’s of no help.

However, investors controlling 2025 barrels can look to a potentially tidy gain upon exit.

Breaking Down The Chains Of Whiskey Supply

Since distillers control whiskey supply in large degree, shrewd whiskey investors are careful to understand its many parts. It only takes around five days to turn grain into new-fill whiskey, so distillers can run stills 24/7 or idle them fairly quickly, depending on demand and where they see the market heading. It’s a powerful supply switch that influences future barrel value. Moreover, the industry is incentivized to try to self-control production so there isn’t a glut, Covid production years aside.

The Seven Whiskey Giants

Two categories of whiskey producers dominate the market. First are big whiskey manufacturers producing for their own labels, the Production Distillers. Consumers may not realize it, but many of the brands on the local spirits store shelf are from just seven of the largest production distillers. For example, Brown-Forman (NYSE: BF.B) which produces Old Forester and Jack Daniels, among other brands, is one of these.

Others include Sazerac (Buffalo Trace, Eagle Rare), Suntory Global (Jim Beam, Basil Hayden, Laphroaig, Yamazaki), Diageo (NYSE: DEO) (Johnnie Walker, Bulleit, Lagavulin), Heaven Hill (Heaven Hill, Elijah Craig, Rittenhouse), Campari (CPR.MI) (Wild Turkey, Wilderness Trail), and Pernod Ricard (RI.PA) (Glenlivet, Chivas Regal, Rabbit Hole). Those are just a few of the labels each of these are behind. Pernod Ricard, for example, offers over 200 brands across an array of spirits.

This is a huge business.

Taking Out A Contract

Second are large Contract Distillers like MGP Ingredients (NASDAQ: MGPI), predominantly producing bulk whiskey for third-party brands who do not have their own distilleries. In industry terms, these downstream industry participants are referred to as non-distilling producers, or NDPs. Contract distillers will produce as much whiskey as NDPs contract for—but may also produce barrels for their own reserves.

There are some hybrid distillers who both contract and have their own brand labels. (Note MPG’s recent acquisition of Lux Row Distillers expanded the company into the brand market.) Contracted whiskey gets paid for in advance, but for these distillers’ own brands and reserves, four years (or longer) is a long time. They can’t just sit around twiddling their thumbs waiting to generate cash flow after laying out millions of dollars in production costs. As any first year MBA student with a business calculator running an internal rate of return can see, those economics don’t work very well.

Whiskey may just be a mix of grain, water, and yeast, but as Mike Sikorski, the Chief Financial Officer of Lofted Spirits, one of the nation’s largest custom contract distillers, trenchantly observed “the most expensive ingredient in whiskey is time.”

It Takes Time

Funding sources for that expensive ingredient come from brokers, whiskey investment representatives like Wealth and Whiskey Club, private equity whiskey funds like Cordillera Investment Partners and Prospero Spirits Funds. Banks used to be a funding source, but are far less willing lenders these days. The sales literally get distillers cash on the barrel in the same year they make the whiskey, providing necessary operating funds to make whiskey the next year. Distillers would rather have cash than whiskey.

Crafty Distillers

Spoiler alert for craft whiskey imbibers. Behind the fancy eye-catching labelling on that bottle of bonded single-barrel craft distilled whiskey you so cherish, more than likely the liquid was sourced from a contract distiller. Remember those NDPs? Whiskey business insiders know that many craft brands source their liquid.

This has proven to be a good business model for the industry. For a while, consumers increasingly expressed willingness to pay up for premium spirits. The number of craft spirit producers grew to oblige, making craft whiskeys and bourbons big drivers in these spirits’ production. At its peak by August 2024, there were 3,069 active craft spirits producers, a 39% increase from 2019 reports the American Craft Spirits Association.

By The Case Study

Here’s the way that most of the craft distiller market works. Let’s say you and I want to start our own premium whiskey brand but have neither the capital to build a distillery nor years to wait for the whiskey to age before bottling it. It’s better to buy than build, so we raise or borrow some money, go to a contract distiller, purchase a bulk amount of whiskey with the mash bill we want, potentially finish it with a flavor profile to our liking, then bottle, label, and sell it.

The California-based premium whiskey company, JacksonMcCrea is a fine example. A recent entry into the increasingly popular rye whiskey space, it was founded in 2020 by two successful Black businesswomen, Sheila Jackson and Natasha McCrea. Finding women enjoyed sipping a smoother drink with a complex flavor profile of caramel, smoke, vanilla, and spice, they source their whiskey from a Tennessee distillery then finish it in California Syrah wine barrels to add those flavor notes their target market likes. It’s working. Jackson McCrea is now available in Total Wine stores across California and ships to most states.

Whiskey Waterfall

In a waterfall effect, the growth in craft distillers drove growth in contract distillers. In a tour around Bardstown Bourbon Company’s bright and spacious distillery which is owned by Lofted Spirits, Sikorski spoke about how consumer interest in craft whiskey contributed to the company’s growth. In 2016, it was producing 25,000 barrels. By 2024, it had the capacity to produce 190,000 barrels—over 75 million gallons of whiskey made with 60 different mash bill recipes to meet their own (Lofted Spirits produces some award winning whiskies for its own labels, Bardstown Bourbon and Green River Whiskey) and others’ unique flavor profile needs.

But between Covid easing and consumers switching to lower price point spirits, premium craft case sales began to decline. 2024 closed with 1.3 million fewer cases sold than just a couple of years prior. Declining sales meant fewer contracts and Lofted’s contract production, well, contracted, as did production at all other contract distillers—even forcing some to close their doors.

Banking On It

The slump in craft whiskey sales had another effect on supply, albeit certainly unintended. By August 2025, over 787 active craft producers shuttered operations or sought restructuring under Chapter 11 bankruptcy.

Since these non-distilling producers often financed barrel purchases with bank loans collateralized by those barrels, the market found itself flooded with barrels as banks tried to convert their loan collateral into cash. As with any distressed sale, prices fell. Coveted barrels of 3-year and 4-year whiskey valued at $3,000 and $4,000 respectively only a couple of years prior were now at bargain basement prices of around $1,000—sometimes even less.

Look at these economics through the brand manager’s lens. As noted, the average barrel can fill around 225 standard-750 ML bottles. Dividing the cost of the barrel by the number of bottles it can fill gives the fill-cost basis per bottle. For example, buying a 4-year whiskey at $4,000 a barrel means a basis of $17.77 per bottle. The same barrel at $1,000 cuts the basis to $4.44. Margin per bottle jumps, incentivizing brand managers to buy barrels and bottle the whiskey.

Gain Through Pain

The bank’s pain is the investor’s gain. Investors buying up these marked-down barrels with profitable fill-cost bases are finding brand managers at the ready. In fact, some investors who were able to buy barrels at $1,000 have already executed turn-around trades at $1,200 for a handsome 20% return.

Mashing It Up

But wait. There’s more. (I did say this market was nuanced and complex). Recall those mash bills and yeasts critical to fermentation and flavor?

Whiskey mash bills directly affect barrel exit prices; investors have to know the whiskey mash bills of the barrels they are investing in. Some mash bill recipes are fairly generic, kept simple so non-distilling producers can easily finish it to their liking. These barrels, fairly commoditized, can be sold more readily in the market. On the other hand, very specific mash bill recipes for unique, singular flavor profiles find buyers harder to come by.

Made In The U$A

As noted, there are laws and regulations for whiskey. These affect supply, but the most overarching supply impact is that by law American Whiskey can only be made in the U.S. It’s a built-in scarcity factor. Not only can’t the market, domestic or international, be flooded by cheap foreign knock offs, but worldwide demand can only be met by U.S. producers. “Made in the U.S.A.” on the label adds a value all on its own.

For the whiskey investor, all this is more quantifiably good news. Back in 2020, after the first trade and tariff disputes were resolved, exports of U.S. whiskey jumped 41% over the next three years, from $846 million to $1,398 million—a record level. With the spirit industry generating over 1.7 million jobs in the U.S. and 45 states exporting spirits, there is a strong incentive to resume the zero reciprocal tariff policy.

Buy the Barrel

If the investment opportunity in whiskey is motivating you, brokers such as CaskX, Barrel Global, and Mark Littler Ltd offer retail barrel buyers the ability to source barrels from one or more distillers. It can be a fun vanity investment to make a few bucks on when you have these brokers resell your barrel.

Some distillers, such as Angel’s Envy or Jack Daniels, offer barrel programs where you buy a barrel and take delivery in bottles, which can be engraved or custom labeled. It’s a nice way to have a “private label” for yourself or a gift for clients or employees.

Professional Whiskey Investment Managers

But if you are interested in being a serious investor in this asset class, turn to the approach professional investors such as Family Offices, Wealth Advisors, or Registered Investment Advisors (RIA) to ultra-high-net worth clients use. They invest with professional whiskey investment managers that specifically target this space.

These whiskey market professionals, brokers or private equity funds, bring an abundance of expertise to the table, a comprehensive understanding of every facet of the marketplace. With capital to buy at scale, they bring purchasing power advantage, sometimes commanding discounts to general market prices as great as 30%. Combined with tracking pricing on blocks of barrels at various vintages, they have the ability to ensure the best possible purchase prices and most profitable exits.

It goes beyond buying and selling barrels. Relationships with contract distillers and selective top-tier distilleries bring critical access to new-fill whiskey or aged whiskey. They follow mash bills (down to which brands need which recipes), know which NDPs and distillers need ready-to-bottle liquid, provide production oversight of barrels, gallons, and liters to track supply against likely demand, as well as offer barrel management, including insurance and rickhouse storage costs, in addition to many other of the whiskey industry’s price drivers.

This is not a market for amateurs or dabblers.

Capital Call

Banks, feeling burned in the whiskey space, have tightened up on their lending significantly, creating a capital vacuum. Markets abhor a vacuum, particularly in this capital intensive industry which depends so heavily on year-to-year fresh infusions. The bell of opportunity is ringing loud and clear.

Enter two new investment funds to answer the capital call. After several years of careful planning and establishing strong relationships with top distillers, Chicago-based Prospero Capital Management launched Prospero Spirit Funds this year. Drawing on his 30+ year Wall Street and private equity investment experience, founder Ben Bornstein saw the opportunity to take advantage of the disruption many whiskey brands are currently experiencing. Plus, he adds, “People drink whiskey in good times and bad!”

Prospero offers five funds—Bourbon, Rye, Irish whiskey, Scotch, and Collectible Spirits. Investors can diversify their holdings proportionately between the funds. With quarterly valuations to set the funds’ net asset values (NAV), investors know what their fund holdings are worth, a decided benefit for RIAs, Wealth Advisors, and others with client reporting requirements.

Additionally, the fund offers some distillers an equity participation when the whiskey is sold or the opportunity to buy the whiskey back. Distillers not only get up front cash selling the new-fill whiskey to the fund—but also may profit on an exit. “We offer distilleries a true partnership approach to participate in the upside of their product, creating a win-win for both fund investors and whiskey makers alike,” said Ben.

Moreover, Prospero’s unique barrel renting program, teasingly described as an “Airbnb” for whiskey, offers its investors a leveraged benefit and distillers a cut in production costs. Everybody wins. Take a new-fill barrel of whiskey priced at $500. A large part of that price, often $200 or more, is the physical barrel cost. That wood is a big capital outlay, the single most costly piece of the total barrel asset, points out Wally Dant, President of Log Still Distillery in Gethsemane, Kentucky.

Under the program, the fund controls the physical barrel, renting or leasing the wood provided to the distiller. Spreading the barrel’s cost over the years to the whiskey’s maturity while the whiskey inside continues to appreciate provides leverage, designed to boost fund investor returns.

From the distillers perspective, Wally notes Log Still participates in the program because he can avoid both the costly physical barrel purchase and dealing with its disposal—which is an entirely different market. With that off his already busy plate, his time and capital free up to focus on improving production and brand portfolio build-out.

An entrant into a new whiskey market niche is the Whiskey and Wealth Club. Building a solid reputation over the last decade investing in the Scotch, Irish, and Australian whisky markets, they are launching ASM Capital Partners to invest in American Single Malt Whiskey. Standards for American Single Malt became effective in 2025 and, like all American whiskey, must be produced in the United States and aged in oak barrels, but this single-grain spirit can only be distilled from 100% malted barley. ASM seeks to get ahead of the pack to supply that juice which they believe will be an in-demand spirit for bottlers eager to capitalize on the new designation.

Straight Up

Perhaps the best summary of the future of whiskey comes from Chris Ecken, the CFO of Castle & Key.

He put it simply: “There is a lot of money to be made in the next few years.”

Cheers to that.