Have you ever wondered about investing in a cask and marrying your love for whisky with an interesting potential investment? This has become increasingly popular, so I decided to look into the technicalities of cask investment. How does it work, what are the risks and costs involved and, of course, what to do with all that whisky once it is ready?
First of all, the disclaimer.
I am not qualified to give financial advice, so if you are interested in investing you should seek detailed advice from an expert. I’d also like to point out that I am not retained or paid by Cask 88 or any other cask supplier, and neither have I invested in them.
I wanted to talk to professionals, and Sam Laing, Head of Content at Cask 88, and Carl, their Head of Sales, both kindly offered to answer a few questions and to help draw a better picture of what is involved in cask investment and how they, as an example, support their clients through the process, from the initial investment to hopefully realising a profit at sale in the future.
Do you need a clear plan from the beginning, or can these decisions be left for later?
Everyone has their own priorities when it comes to cask buying, but in most cases, whisky is a slow-moving enough product that you don’t have to have made all your decisions at the point of purchase. The whisky will happily wait in the cask while you decide when the best time to bottle is, whether you want to sell it and to whom; and there’s plenty of time to decide on the form your bottles will take if you want to bottle your whisky.
What does Cask 88 offer?
Cask 88 handles storage and insurance of the cask. We can also help when it comes to design, labelling, bottling, etc. People who are looking to create interesting bottles have access to our in-house design team, and the client can be as independent or reliant on our services as they like. Through our own independent bottlings, we are gaining more expertise and experience, which we happily pass on to the client. Our slogan is ‘From Cask to Glass’.
As for transfers and international shipping of bottles, this is something we at Cask 88 ask our clients to take responsibility for, due to the great variety of local laws and restrictions.
How do I choose the cask?
We aim to get the broadest selection of casks that we can, so that people can be united with their first choice. If it’s not available, we make recommendations for other casks that might be similar – or interesting to the client in other ways.
By joining the Cask 88 mailing list, for example, you will receive updates on new casks, and the sales team will reach out personally if a cask comes in that they know you are already interested in.
When it comes to the bottling, the decision making can be daunting, especially for new buyers. How do you really know when the whisky is ready to be bottled?
We advise clients when a good time to bottle might be, based on our knowledge of the cask, but ultimately this is always their decision. Samples from the cask can be obtained for a small fee, although we advise that samples should not be taken too frequently. Realistically, once per year at most.
So, who should take the leap? Clearly anyone can invest, but do you even need to like whisky?
We certainly see a lot of people (and friend groups) who are interested in whisky for investment – it’s become quite trendy among tangible investments. Many of our customers have chosen whisky because of their own personal love of it. It’s nice to see people who are keen to put their money into a product that they themselves are enthusiastic about.
That said, we are also delighted that we attract people who are looking to play a more active role in the life of their very own whisky – people who have an event they want to celebrate with a unique whisky, a personal bar they want to stock, or who want to try their hand at independent bottling.
How much will it cost?
(Here’s a quick breakdown given to me by Carl, Head of Sales at Cask 88)
At Cask 88, the storage and insurance are free for new clients for the first three years from purchase. This can be extended for £65 per year thereafter. All casks are stored under bond in Scotland within an HMRC government-regulated warehouse.
Cask samples are available at the cost of £50, plus postage and packaging, and they recommend what is referred to as an ‘analytical sample’ per annum, which is 100ml. However, larger samples can be taken from each cask.
Cask re-gauge (medical check-up of the whisky) costs £100, but there is no need for this service until the spirit reaches a more mature age, i.e., ten-plus years, and at this point a re-gauge every couple of years is advised.
When selling a cask through the Cask 88 auction platform, we’ll take a small seller’s and buyer’s fee from each listing, but otherwise, the costs are the same as when purchasing a cask from us via a member of the sales team.
At the moment, bottling starts at approximately £5 per bottle, which includes standard 70cl glass, stopper and foil, basic SWA-compliant label and transport packaging. Any design or embellishment above this will be more and will be quoted on submission of a full brief. You can have your own labels designed and printed, but please note that these will require full approval by Cask 88 and the bottling hall to ensure they adhere to SWA rules.
Before committing to an entire cask for bottling purposes, I would advise all clients to ensure they are fully aware of the rules and costs related to importation of alcohol in the destination country, which the client will be liable to pay. Currently in the UK there is a duty payment of £28.74 per pure litre of alcohol. To put this into the context of a standard 70cl bottle, the duty payment would be between £8 and £13 + tax per bottle, dependent on the ABV percentage.
Sam’s final tip to the first-time buyer is not to make it all about the money.
Though it’s not compulsory, the whole process is much more fun if you’re keen on whisky and want to get involved in the process of maturation, sampling, re-racking etc. If you just know a few distilleries, take a gamble on a new one that you’ve not encountered before. There are so many distilleries in Scotland, and the spotlight of fame is not equally shared between them all. You can find a beautiful cask of amazing liquid for a very decent price if you’re ready to experiment with an open mind!
Inka’s Thoughts on Cask Investment
As Sam mentions, an advantage to buying a cask is that most decisions won’t have to be made at the time of purchase.
Global demand in scotch whisky is high and there is a generation of new drinkers (increasingly female) driving future growth. There have been times when whisky has gone out of fashion in one country or another, but you could always bottle and keep them stored until things change or sell to another market. There are many countries with growing interest in scotch whisky such as China, India and Latin America. So the generic market looks good.
Also, you don’t have to pay duty until the liquid is being bottled, and neither is there capital gains tax on your profits as whisky is considered a wasting asset due to the possible evaporation (so the angels get it rather than the tax man!)
The numbers may look complicated, but the initial investment is typically around £6,000 to £10,000, depending on the cask, age and the distillery. For that you’d expect to get approximately 230 bottles, allowing for the potential angel’s share, which is inevitable given the natural evaporation and subsequent loss of spirit that occurs during maturation in the cask.
As a rule of thumb, I would take the amount of the initial investment and double it. That should give you an idea of the overall fees, once you include taxes, bottling, transport and other extras. In reality, it will probably be a little under that, but some of the costs (such as tax) are variable, and you will always have the angel’s share to consider.
Younger, new distilleries often release a small number of casks annually for investors, although most cask buying happens through a cask trading company. The distillery will fill your chosen cask with their new make, and after three years of maturation, you can decide at what point you would like to bottle your whisky. It is good to check if there are any limits on how long they’ll store the cask as some only include up to ten years of warehouse storage. Obviously, if you choose to go direct with a distillery, your choices will limited to that specific distillery’s products. Sometimes they may have a range of cask types available, or you can choose either peated or unpeated spirit.
If buying through a company like Cask 88, you can choose casks that have already been maturing for a length of time, allowing you to bottle at a much later date, or alternatively take action on it much sooner. They also have access to a wider range of casks, allowing you to invest in more than one cask.
The distillery will also keep the cask once you have had your whisky bottled, while a cask trader will often allow you to keep the cask once empty, creating another form of income possibility as you can sell the cask back to a distillery, refill it, and so on.
It’s an exciting concept and certainly a way for you to spice up your investment portfolio. Some knowledge of whisky is clearly invaluable in helping you to choose the right cask to invest in, and it can be a fun as well as a rewarding venture. The Scotch Whisky Industry Review by Alan Gray showed average annual returns of between 8% and 9% for whisky casks in the last decade. However, that can be very hit and miss. Unlike many other investment classes, there is a series of key decisions for you to make when investing in whisky, from the initial choice of cask, through to the timing of when to bottle it – should you wait a further year until those sherry notes are more pronounced, or is it perfect now?
Most providers allow you to sample your cask annually (depending on the age of the spirit), which can be an exciting moment as you taste how the whisky is developing. They will also offer their input on how the taste is maturing, although the final choice on bottling is always yours alone. Even the design of the bottles and the labelling is a choice that can impact significantly on the viability of your investment.
My view is if you have the money, it is a much more involved and fun investment compared to stocks, for example, but equally it’s a bit scarier as a result! Mind you, choose a whisky you love, and even if it turns out not to be your best investment, you can always make it into a unique gift for a special occasion…
A Peated On the Sauce Again 2032 release anyone?
Have you ever considered of getting your own cask? Which distillery would you choose?