The Spirited Funds/ETFMG Whiskey and Spirits ETF (NYSEARCA: WSKY) is approaching its first anniversary on Oct. 12. In terms of performance, it has been an impressive start for this highly focused exchange traded fund as highlighted by a year-to-date gain of over 25%.
WSKY tries to reflect the performance of the Spirited Funds/ETFMG Whiskey & Spirits Index, which is comprised of companies that are whiskey and/or spirit distilleries, breweries, and vintners and related luxury goods companies engaged in the sale of whiskey or the production and sale of mixers for use with premium spirits.
The U.S. is a major exporter of American whiskey with the spirit being popular in major ex-US markets, such as Australia, Germany and the U.K. Popular brands both here and abroad include Jack Daniels, Jim Beam, Crown Royal and Jameson.
WSKY reflects the global nature of the whiskey business as the ETF features exposure to 13 countries, including both developed and emerging markets. The U.K., France and the U.S. combine for about two-thirds of the ETF’s geographic exposure.
Diageo is the largest holding in the ETF, commanding about 18% of the fund’s weight. The ETF allocates almost 87% of its weight to distillers with the rest of the lineup split among brewers, soft drink makers and apparel producers. Craft spirits are also seen as a catalyst for the whiskey industry.
“Demand has been building for more than a decade. As of August 2016, there were 1,315 active craft distillers active in the U.S., according to the American Craft Spirits Association. Ten years ago, there were just over three dozen. This renaissance has attracted plenty of new customers. Sales of bourbon, Tennessee whiskey and rye whiskey reached $3.1 billion last year, up around 8% from 2015, according to the Distilled Spirits Council,” reports Fortune.
International demand is integral to the whiskey investment thesis.
“India is the leading whiskey consumer and secures the largest share of the whiskey market in APAC. Countries like China, Japan, Australia, India, South Korea, Vietnam, Taiwan, and others are the key contributors to the market,” according to Technavio.
For more information on market segment plays, visit our sector ETFs category.