MIDAS SHARE TIPS: Fancy a dram in your investment portfolio? Try whisky firm Artisanal Spirits Company – it can only improve with age
Taste of success: Single cask whisky is becoming more popular
In the early 1980s, Pip Hills, an Edinburgh-based entrepreneur, would shake off the strains of urban life with regular visits to a friend in rural Aberdeenshire.
On one occasion, a local farmer approached and offered him a wee dram of whisky – from a lemonade bottle.
The whisky was single cask from a nearby distillery and Hills was hooked.
In 1983, he and 12 friends formed the Scotch Malt Whisky Society so they could buy and enjoy individual casks of whisky.
The society expanded steadily and listed on AIM in June this year as the Artisanal Spirits Company, with 29,000 members and strong ambitions for growth.
Having floated at £1.12, the shares have drifted back to 83p. This reflects neither recent performance nor future prospects, and the stock should recover as boss David Ridley delivers against his strategy.
Back in the 1980s, blended whisky was the norm and distilleries were closing down. Today, premium whisky is increasingly popular, there are at least 100 distilleries in Scotland and another 40 or so in development.
Single cask whisky takes premiumisation to a new level. While single malt comes from a specific distillery and tends to be around 40 per cent proof, single cask comes from individual barrels and can be 55 to 60 per cent proof.
Each batch has its own unique flavour and there are just 250 bottles per cask.
Designed to appeal to discerning spirit lovers, the market has been growing by leaps and bounds in recent years. And the Artisanal Spirits Company is a leader in the field.
Ridley, a veteran of the drinks industry, has driven growth in Europe, Japan, Australia and China, as well as America, the largest Scotch whisky market. Expansion in the US was constrained by tariffs under Donald Trump, but these have been suspended and recovery has been swift.
Ridley has also spent recent years building up the Scotch Malt Whisky Society’s inventory. The group now owns 14,000 casks, which at current sales rates would provide members with whisky for the next 26 years.
Recently too, the Society has begun to buy whisky straight from the still, putting the spirit into casks and allowing it to mature before selling bottles to members. The process takes time, but profit margins are substantially higher.
Members are also offered single cask whisky from Japan and America, as well as more unusual locations such as India and Scandinavia. There is even the odd cask cognac, rum or gin.
Membership costs around £65 a year and most members buy at least seven bottles of whisky a year, with prices averaging £75, though some ultra-special examples can cost up to £1,500. First-half figures, released last week, were encouraging, with sales of £7.9million, up 20 per cent year on year.
Brokers expect revenues of £17.5million for 2021, rising to more than £21million next year. The group is loss-making, as cash is ploughed back into the business, but it should become profitable from next year. Ridley has also just launched a new offshoot, JG Thomson, which will sell special malt whiskies online and in selected off-licences.
Midas verdict: The Artisanal Spirits Company has had a lacklustre debut on AIM, but this seems undeserved. Enthusiasm for premium spirits is increasing, Ridley has plenty of plans for growth and the company is an expert in e-commerce too. At 83p, the shares are a buy – investors gain half-price membership to the Society too, a type of dividend in kind.
Traded on: AIM Ticker: ART Contact: artisanal-spirits.com or 0131 555 6588