How to Invest in Whiskey Casks – 5 Key Steps to Understanding the World of Cask Whiskey Investment

How to Invest in Whiskey Casks – 5 Key Steps to Understanding the World of Cask Whiskey Investment

Investing in cask whiskey is a fantastic idea if you’re looking to place your money in a tangible asset in times of economic woe. But not every cask whiskey investment company has all their ducks in a row, or will deliver for you as they should. So here’s what you need to know…

Whiskey has a history for growing in value while the liquid matures.

Briefly, here’s why:

• It’s an appreciating asset;
• It’s great for diversifying your portfolio;
• In many jurisdictions it’s not subject to capital gains tax when you sell; 
• And the main kicker of whisky cask investment is that the longer you keep your whiskey in its cask, the greater its potential to escalate in resalable value. 

Especially if you’ve bought a cask that’s part of a limited edition, which means its rising demand will push up its resale price. 

Plus, after a decent period of maturation, whiskey is famous for its refined taste and improved characteristics the longer it’s aged. 

However…

…There are risks when you just go with ‘just any’ provider on the market, especially given that no one can accurately predict market volatility in the long term, and the proclivity for bad actors to attempt to trade in counterfeit bottles – which, as far as we’re concerned, is an outrage. 

Importantly, there are also companies out there who may not store your whiskey casks in the correct way. 

So it’s vital that the company you’re investing through understands the importance of location, temperature and humidity when it comes to storing cask whiskey so as to safeguard the value of every single cask under their wing.

 Therefore, you need a broker who understands the industry impeccably, to ensure that you receive the experience and potential returns that you were initially hoping for. 

So let’s get stuck into the key principles you need to understand so that you’re armed with all the knowledge you need before embarking on your whiskey investment odyssey. 

 

1. Do your own due diligence on the cask whiskey investment company you’re partnering with  

 

When you’re thinking about how to invest in whiskey casks, you must be certain you’re investing through a company that’s got all their ducks in a row. How can you trust being guided by a company if that company doesn’t even know how to guide themselves? This is a thunderously booming industry. And it’s unregulated. What does this mean for you? It’s simple. If you choose the wrong company, you may be investing in your future disappointment.

So, step 1, think: is this cask whiskey company HMRC registered – in other words, does the nation’s government know they exist, and has that company therefore adhered to the strict rules and regulations that comes with government-approved compliance. 

It works like this: if a cask company is WOWGR registered – WOWGR standing for ‘Warehousekeepers and Owners of Warehouse Goods Regulation’ – then you know that this company is playing by the rules, and they’ll have a WOWGR certificate to prove it.

So, if the cask whiskey company you’ve chosen is WOWGR registered, breathe a sigh of relief and move two squares forward on the Monopoly board.

Also, and this is such a biggie – but it is so, so misunderstood in the world of cask whiskey – what is the cask company you’ve chosen saying about Delivery Orders, as a subject generally. Does the company, for example, insist on you receiving a Delivery Order with every cask purchase you make? 

Yes?

That’s not good. 

The rules have changed. 

Watch this video here for more background. You don’t need – DO NOT need – a Delivery Order. 

 

Any company telling you otherwise is woefully out of date. So avoid them with a barge pole. Also, when researching cask whiskey companies to invest in, think: what kind of distilleries are they sourcing their whiskey from? 

What you want is to invest with a company that specifically focuses on working with premium distilleries – not just any distillery. Quality, reputation, craftsmanship, attention to detail: these are the critical criteria that make up all the casks from the best distilleries. 

The better a distillery’s brand recognition and expertise when it comes to the whiskey-making process, the more likely that quality will be reflected in the casks you’re investing in. It makes sense to buy as much quality as you can afford. The greater the brand recognition, the greater the positive impact on your casks. 

If you want a premium investment, it makes sense to start off your investment journey with premium casks, as the best whiskey brokers will tell you. However, nuance is key. You definitely do not want to buy casks from the world’s most commercial distilleries, as your investment can’t be fully maximised that way. 

You want to buy casks from premium distilleries that have the potential to rise in value. You don’t want to buy at the top of the market, in any industry you’re investing in. Meanwhile, when it comes to asking questions such as, ‘How much is a cask of whiskey?, you need to make sure you go with a firm that’s transparent with you from the off about how much you’ll pay for a pallet of casks. If the company you’re discussing your investment with isn’t transparent on price, walk away. 

Quick tip: ask the broker you’re speaking to about the cost of storage and insurance for your casks. At the best cask companies, both of these factors should be included in the overall price, as well as direct confirmation from the company you’ve chosen that your casks will be kept securely in bonded warehouses.

2. Planning and mapping out your whiskey investment journey 

 

It’s important to be clear from the outset what your overall goals are with whiskey investing. Talk to your Account Manager about what outcome you’re looking for. Explain your aims and together explore which types of casks from which specific markets best fit your investment aims and preferences. 

The selection of casks you’ll purchase will be a direct reflection of what kinds of returns and exit strategies you’re aiming for. Your aim should be to buy the right casks for you, at the right price, at the right time, and with the right investment strategy tailored specifically for you, your life goals and your individual needs. 

With the right cask whiskey investment firm, you need to be in the driving seat. 

For example, if you think Bourbon is the right whiskey choice for you to invest in, it’s vital you work with a broker who knows the market, and who can explain outright that: 

 

• Bourbon is experiencing its most significant boom in 50 years, at levels not seen since 1972; 
• The market was recently valued at $61.21 billion and growing;
• US sales are up by nearly 13% year-on-year. 

In other words, does your broker know their onions? (or Bourbon!). If so, and Bourbon whiskey is your bag, then together you can plan exactly how you want your cask whiskey journey to develop, when you want to enter, and your plans for exiting out.  

But what if you want to mix things up a little, with some cask whiskey investment mix-and-match? 

Good thinking.

The best cask whiskey firms will have those markets cornered, too…

3. Investing in whiskey casks from different whiskey markets 

 

All whiskey markets are different, so how long you want to hold your cask for depends on the growth of that specific industry. Take the Scotch market, for example. 

As your Account Manager can explain:

 

• Scotch is the world’s number one internationally traded spirit, holding a dominant position in the global market;
• Over £4 billion worth of Scotch is exported internationally each year, 
• With an astonishing 53 bottles shipped from Scotland to around 180 markets every second,
• Totaling over 1.6 billion bottles annually. 

 

In other words, demand in the world of Scotch casks is huge, and is projected to reach $7.89 billion by the end of 2027 – so make sure you choose a company that knows which casks from which distilleries you could choose, to capitalise on the market at a time that’s just right for you. 

 

Frequently with cask investing, diversification – be it Scotch, Irish whiskey, bourbon or Canadian whisky – is key. Though Scotch is a market that’s barrelling upwards, it is wise generally when investing to reduce your exposure to one market alone. By entering different markets simultaneously, you have a buffer in one market against another.

Also, the more you diversify, the more likely you are to find new opportunities, as well as expand your network and knowledge. 

Diversification gives you the flexibility to exit and reenter different markets at different times, based on your overall objectives  — with many of our clients being huge fans of the Irish cask whiskey market, in particular. 

And it’s easy to see why:

 

• Irish whiskey is making a remarkable comeback;
• Sales in the US alone rose by 16% annually. 
• It’s the world’s fastest-growing spirits category in over a decade. 

So while your initial preference may be to work with a cask company in the arena of Scotch casks, a good cask firm will also be able to provide you with access to limited edition, rare casks in Irish whiskey, Bourbon and Canadian whisky as well.

4. Understanding the process of purchasing and holding     

 

The beauty of cask whiskey investing is that once you’ve purchased your selection of casks, you know that your casks are now being stored in secured bonded warehouses. 

And you have the peace of mind that comes from knowing that even in the face of an economic downturn, whiskey as a secondary asset has the potential for impressive returns – because whiskey isn’t tied directly to the traditional financial markets.

Unlike shares, your investment is physical — it’s not a digital concept like a stock on the FTSE-100, but a real asset purchased by many of our clients to hedge against inflation. 

Our clients know that cask whiskey is a full turnkey investment. It’s a case of ‘hands off, while you hold’, with your investment tied up as the whiskey matures and looks to increase in value year-on-year. 

What’s more, there’s also the calm that comes from knowing that a firm with proper storage protocols will ensure that the maturation process can be optimised. 

This, in turn, minimises the risks of contamination from the casks’ surrounding environment, and prevents your casks from oxidising more than they should, ultimately delivering a higher quality whiskey for the moment you decide to exit….

5. Choosing the right exit strategy for you

 

For every kind of whisky casks investment, we have multiple exit strategies available to our clients to ensure that you can maximise your returns. First up, there’s…

 

• The option to sell your aged whiskey casks on to an array of brands via a well-connected broker.

 

At the last count, there were more than 500 whiskey brands available to whiskey drinkers worldwide. By way of contrast, there are only 225 distilleries in the UK – 40 in England, 145 in Scotland, and 40 in Ireland. 

The fact that there are more than twice as many whiskey brands as there are whiskey distilleries presents you with a unique selling opportunity. The moment you decide to exit your cask whiskey investment, you will now have a selection of matured whiskey casks that those brands who don’t own their own distilleries may be clamouring to purchase from you, so that they can bottle your whiskey to sell as their own. 

That’s why we have a team of very experienced and knowledgeable cask brokers who are able to facilitate this process seamlessly on your behalf, to make sure that you receive the greatest returns possible from your sale.

Equally, some distilleries you’ve purchased your casks from often wish to buy back the casks that they sold to you once those casks have matured for a significant period of time. 

This is why, when you purchase your casks with us, we factor a 20–year storage cost as well as insurance for that duration into the final price you pay Whiskey & Wealth Club upon purchase. That way, your investment is covered for the entire lifecycle of your investment, until you decide to exit.

• You also have the opportunity to sell your casks on the open market at the best market price.

There are a variety of options available to you. You can sell your casks to:

i) Independent bottlers: This provides you with immediate cashflow as independent bottlers are able to make fast purchasing decisions without being slowed down by corporate and bureaucratic decisionmaking. If they want your casks, they’ll buy them (as opposed to larger entities which may take longer to process their transaction). This option also comes with an added bonus – independent bottlers sometimes may be prepared to pay a premium for your whiskey if your mature casks fit their specific needs. 

ii) Whiskey collectors and private buyers: Private collectors also may be willing to pay you a premium for your whiskey, more so given that your whiskey casks will have been well-cared for during their maturation period. Similarly, if a collector has identified your casks as those they’re interested in, this can lead to a quicker sale. It also feels satisfying to know that your casks are being sold to dedicated collectors who appreciate the special nature and character of the whiskey within your casks.

iii) Auction sites: When you sell via auction, you now have access to an international market, which translates as a broader market of potential buyers for your casks, preferably creating a sense of competition between your prospective purchasers and driving up the price. At an auction, you can sell quickly, on a set date, with confidence in the fairness of the transaction.

iv) Open market sites: In this scenario, you’ll have access to a wide variety of purchasers, and the greater your audience, often the higher the price you can command. This is a transparent process where you can also sell at a fixed price or at a price agreed during a private negotiation.

It’s a rapid way to exit the market.

• And then of course we offer our buyback facility.

This involves Whiskey & Wealth Club reaching out to our network of 200,000 people and a roster of 4,000 past clients, to offer them the chance to purchase your matured whiskey. For example, it’s not difficult to see the allure of buying a 10-year matured whiskey if you’re a client whose investment goals are to sell at Year 20. By purchasing directly from you, they’re able to fast-track their own investment – and you’ll have been able to benefit from the steep capital appreciation made from buying that whiskey at a far lower price. 

You’ll have bought at the very start of the curve and watched its value potentially climb as steeply as possible, while your purchaser at Year 10 will be purchasing casks from you with an established age statement and a distinctive and complex taste. In other words, you’ll be passing on the baton to your purchaser when you’re ready at a potentially higher price than you initially bought your cask for due to the fact that the lower-priced New Make Sprit you originally purchased is now a fully fledged mature whiskey.

Better still, our network is comprised of investors with a multitude of different aims, and as intermediaries we’re able to re-purchase your casks from you to sell onto our other clients within 48 hours. 

Ultimately, when investing in cask whisky, how you invest and when you exit in the world of whiskey cask investment comes down to personal preference. To roadmap your cask whiskey journey, call one of our Account Managers on 020 3129 1639. Invest in cask whisky today.