SHINY THING$ 0176 ✨

If you’re under the age of 60, in any startup or tech-adjacent space, and you’re on social media in any capacity, you’ve probably heard/read/watched someone talk about the dramatic decrease in alcohol consumption amongst Gen Z.

There are two ways to interpret this data...

Around half of Gen Z (currently age 13 to 28) are under the legal US drinking age, so naturally, the data will support less consumption.

At the same time however, younger generations are increasingly health conscious and have less disposable income, both of which would contribute to avoiding vices that affect physical and financial well being. 

One thing thats not up for debate, however, is that fact that Gen Z’s investing habits have changed dramatically. Access to information, mobile-first brokerage accounts, and more choices the likes of derivatives, prediction markets, and crypto have created an entirely new generation of active investors. 

The fact that many have turned into gambling addicts as a result of the constant access is also part of the story, but thats a newsletter for another time…

Point being, optionality has been placed into the hands of the next generation of spenders and investors. They start younger, think longer, and invest in what they know. 

That leads us to the case of our next IPO on Rally:

Barrels of whisky, as an investment. 

As a userbase, Rally is pretty well diversified. But almost half of our investing community fall in the 19-35 age window — the “sober generation,” who also tend to invest actively in alternative assets. 

So will they buy equity in liquor? 

They still love a good backstory, and we’re betting that this story is compelling enough for them to see the potential, even if its the actual physical product isn’t their cup of tea (or whisky).

The Story…

Karuizawa’s been one of the most respected names in Japan for seven decades, and some of their oldest original bottles have been setting world record prices at auction over the last decade.

But in the late 90’s and early 2000s in Japan, the appetite for whisky and the concept of “whisky investing” wasn’t anywhere near what it is today. 

On top of that, it was the tail-end of a recession and no one was spending money on off-trend liquor. 

So Karuizawa, one of the most storied distilleries in Japan, closed their factory… 

And as is often the case for innovators, timing couldn’t have been worse. 

In 2014, when Jim Murray’s Whisky Bible guide, possibly the most influential yearly publication in the whisky world, named Yamazaki’s Sherry Cask 2013 its whisky of the year— a first for a Japanese distillery. That was all it took for the US market to take notice, and it set off a seismic shift in the way the world saw Japanese spirits, and the biggest boom in the history of whisky prices. 

$100 bottles started going for thousands. Karuizawa bottles from the earliest vintages were being bought up for 5 and 6 figures at auction, seeing 10x returns over relatively short periods in the last 2010s.

So in 2022, a local entrepreneur, Shigeru Totsuka, bought the shuttered Karuizawa and started a revival not far from the original distillery. He recreated the layout as closely as possible, down to using the same water source and still design, and the same master distiller and as many of the original faces as the 1955-founded version of Karuizawa, and they started barreling up whisky.

The approach Totsuka is taking is long-term. No young liquid has been bottled and sold, and the sherry casks containing the revival pours are sitting undisturbed. We acquired five casks for Rally investors (expected to yield over 300 bottles per cask) including 2 of the original “test casks” — the total Rally lot now represents 5 of the first pours of this new extremely limited collectible whisky.

Each cask holds around 300 bottles, which we can choose to bottle and sell as a limited run Owner’s Edition upon maturation. In the meantime we can do distillery visits in Japan, get sample liquid for investors, and if the market is right we can sell the casks in full before they mature. 

This is one of the first times anyone has ever been able to buy actual casks direct from Japan… and in a world where everything is disposable, and A.I. is taking over, and the soul has been drained out everything that once triggered deep emotion, Karuizawa is focused on how it used to be.

The small team is in Japan at the base of Mount Asama, a stone’s throw from where the Karuizawa story began, making an insanely small amount of great whisky under a legendary label. That’s the story and that got us involved. But it’s the quality and collectibility of the liquid is what made the acquisition decision easy. 

Are 19 year olds going to invest in the Karuizawa barrels? 

Well they aren’t buying homes so they definitely have some extra money… but we’ll find out later this month when pre-sale opens in our next two IPOs: the 2022 “test batch” sister casks, and 2023 inaugural casks, on Rally.

Kanpai, and see you next week…