A Wise Investment?

I've long been fascinated with the idea of buying a cask. In concept it's a solid deal - buy a cask full of new-make spirit at today's prices and when it is ready you'll have more whisky than you can shake a stick at.

Bruichladdich, Kilchoman, Isle of Arran, and Tullibardine are distilleries that currently offer casks to the public. BenRiach is not a pro-active seller of casks, but do sell a limited number of casks to private individuals.

(This story is about buying casks directly from a distillery. There are independent bottlers and brokers who may offer to sell you a cask, but I do not address them here).

It's easy to see why the smaller distilleries make such offers: It's a way for a new distillery to get a quick infusion of cash. Imagine waiting 10 years before you saw a penny of income from your product - 10 years is a long time to wait to see cash flow from a distillation - but that's exactly what many distilleries face, unless they are producing for one of the blends. And many of the independents have effectively been shut out of that market.

Kilchoman, the newest (and smallest) Islay distillery is counting on tourism, gift shop sales and cask pre-sales for income at this point in the game.

Anthony Wills, director of Kilchoman tells me:

The cask offer is a way of generating income in the early years before we start bottling and also is a way of generating interest in Kilchoman and a bit of fun for those who buy casks.

We aren't selling it as an investment opportunity but because of the uniqueness of the distillery and the limited production we are hoping to build demand for a single malt malt that isn't available everywhere and that the casks will be worth considerably in excess of the purchase price when the malt is mature.

Residents of Europe can get a slightly better deal, while here in America the weak dollar makes it less attractive - but the math could still work out in your favor...

Let's take a look at what you might spend. For comparison sake, the costs are for a bourbon cask full of new-make spirit:

• Bruichladdich £820.00
• Isle of Arran £750.00
• Kilchoman £995.00
• Tullibardine £790.00

Keep in mind you are basically purchasing a future - which is why the cost is so low - on the downside, you need to wait an awful long time for it to mature. Legally it will be at least three years before you can bottle your whisky, but most people who buy a cask are in it for the long haul - and will wait a full 10 years or more.

But that's just the initial cost, and there are a number of other costs you'll incur before all is said and done...

Here is a model calculation from Isle of Arran based on a 46% bottling in 70 cl bottles. (Please keep in mind that in order to import to the U.S. 75 cl bottles must be used - resulting in a reduction in the number of bottles):

Bourbon Cask (includes 5 years storage & insurance).....£750
Further 5 years storage & insurance...............................£100
Bottling (£20 x 29 cases of 12 bottles estimated)............£580
Duty (on 112.50 litres of pure alcohol).....................£2,200.50
Removal charge, transport to bottler, documents.............£100
Subtotal.................................................................£3730.50
VAT........................................................................£652.84
Total....................................................................£4,383.34

In $USD...............................................................$8,284.15

That comes out to about $24 per bottle when all is said and done, YET that does not include the cost of shipping to your home - which could be substantial, especially on this side of the Atlantic.

Some distilleries will allow you to "exchange" - sell some of your whisky back to offset a good portion of your cost - i.e., you might sell back 20 cases and end up with 10 cases of whisky with minimum or no additional outlay. Some distilleries may offer to buy the entire cask back at market prices. All distilleries will demand a right of first refusal - that is, you must offer to sell back to the distillery before attempting to sell your cask to a third party.

Investment Potential?

Recently, I've come across a few people who look at the purchase of a cask as a financial investment. Their plan? Buy the whisky now and once it matures, bottle and sell it.

I don't think this is a wise plan.

First of all, there's the sad truth that not every cask is worth bottling - and that potentially includes the cask you purchase. There is no guarantee that your cask - and make no mistake you are buying a specific cask - will be worth bottling.

Distilleries tend to bottle only those single casks that are outstanding - and they have thousands of casks to select from - you have...one

But let's say your cask turns out to be amazing. Why would any one buy a bottle from you? How would you market it? Do you have a distribution network?

I won't buy a whisky from a guy off the street and neither would you - especially when I can buy one  directly from the distillery or from a well-known independent distiller.

BUT let's just say you get past all of that - you probably can not legally sell it on the open market.

Every country has laws governing the sale of alcohol - and in the US we have Federal, State, and sometimes local, laws governing the sale of liquor. Bruichladdich won't even accept an cask order from someone who is a resident of a "Liquor Control State" (AL, ID, IA, ME, MI, MS, MT, MD, NH, NC, OH, OR, PA, VT, VA, WA & WV). Are you going to be able to avoid the wrath of the Federal  (and your State's) Government to sell your privately labeled stuff? Good Luck!

Mark Reynier of Bruichladdich:

You are right - this should not be considered as an out and out investment alone - but more as a way to obtain a personal supply of single cask whisky and "participate" with the distillery.

Things to consider

David Williamson of the SWA cautions that cask purchaser consider the decision carefully:

The SWA is not in a position to offer advice on the purchase or sale of casks of Scotch Whisky but it is important that potential investors understand the nature of the market before making decisions.  If purchasing a cask, for example, it should be remembered that whilst the cask matures in a warehouse, there will be annual storage and insurance charges, and evaporation will reduce the volume of spirit in the cask. Bottling small quantities of whisky can be expensive, and of course there will also be UK excise duty and VAT to pay.

If purchasing a cask with the intention of reselling it at a profit, it should be emphasised that such investment is highly speculative and should not be entered into lightly.   As you will be aware, by way of example of the factors to take into account, most distillers lay down their requirements years in advance, there is no officially recognised list of buying and selling prices for whisky of different ages and types, and no organised 'whisky exchange'.

Billy Walker of BenRiach tells me:

There is not huge interest in the broking market for a single cask parcel, because of the high costs transporting only one cask. If the intention of the buyer is to bottle out and sell on, it is unlikely that he can achieve a realistic commercial price: there will be a significant premium attaching to bottling charges, label costs (including art-work and origination), and transport charges.

This has to be a fun, emotional investment:  the purchase price is likely to be high and the broking market has little enthusiasm for single cask parcels.

My advice? Find a few friends you think you'll still like in 10 years and split the cost of a cask. Then eagerly look forward to the day YOUR whisky shows up. You can even visit your cask on its birthday like the Bruichladdies.

For more information:

• BenRiach
• Bruichladdich
• Isle of Arran
• Kilchoman
• Tullibardine
• Scotch Whisky Association - Personal Investment in Scotch Whisky
  

Comments

[Jack Oswald]

There's another pitfall. I've thought about buying a cask and discussed with several key industry people. Their advice. Don't! Who knows, it may leak. You may not have a great cask and it could even be nearly empty. That would not be a happy thought!

[MaltManMike]

Great story. A friend of a friend that runs a liquor shop in Calgary apparently bought a fully aged cask of Glenfiddich 40 last year, had them bottle and package it with his name on it, then brought the bottles back here and sold for a couple hundred bucks a bottle. Completely sold out in no time. It wasn't a blind purchase, he got to taste and choose his favourite cask. Definitely more expensive, but you'll have a great idea about what you're getting.

Mike.

ps. My math says that your subtotal should be 3730.50.

[Kevin Erskine]

Right you are Mike.
I changed some numbers based on new info after righting the story - and never updated the sub-total!

[Ronald]

You forget to tell that 1/3 of the casks gives good to great Whisky 2/3 is not so good or even bad whisky.
Who can give you the garantee that you bought a good cask? You might be so unlucky to buy a cask with no taste no colour and than?
Ok you had fun for years having a cask but after 10 years what to do drink it with Coca Cola??
and finaly if it leaks? you only have the Cola left to drink....

ps complements for the great article

[boon teck]

my guess... for leaks.. that should be handled by the insurance. (beyond the angel's share)

[Laddie Teun]

Your absolutly right!
it's not for investment
but it is great fun!
believe me, i know

[Mark Alston]

My mate and I contemplated buying a cask of Bruichladdich, but the quality issue is dissuading us. Classy stuff like Bruichladdich 10 year old (increasingly difficult find in the U.K.)is made using a combination of bourbon and sherry casks(and huge expertise, I shouldn't wonder). Would a single bourbon cask be a disappointment? The single vallinch casks tasted at the distillery did not beat the 10 year old. Best to search out the children of the 10 year old from 'the laddie' and other distilleries and spend your brass on them!

[Brian]

The subject of purchasing casks came up recently at a tasting and I couldn't help but put on my risk consultant hat. Single barrel Scotch is a minor market share, and often has pitfalls such as a persistence of brettanomyces into the distillate.
Buying a cask isn't an investment, nor is it like homebrewing as a way to save money on your malt habit. It's an emotional decision that is more like birthing a child or buying a sportscar. Each of those places the heart's preference in front of the mind or the pocketbook.
I commend the distilleries for making this an option rather than relying on the independent bottlers to take single casks off the hands of the blenders. Just don't fool yourself into thinking that you're buying a cask that will magically turn into the bottle of your favorite Scotch. That's what the distilleries are hoping you'll think is what happen and they'll gladly cash your check as you presume that's what'll happen.

[Ian Buxton]

This is absolutely NOT an "investment" and you should run a mile if anyone tells you it is. There was a notorious scam a few years ago, with people ending up in jail - which is one of the reasons the larger companies don't do this. (They are also protecting their brand identities and frankly don't want the bother of the extra paperwork).

Many people get a real shock when they see the true cost after the Government has grabbed the duty (gotta pay for those wars somehow) and, consider this, you may love Glen Gloaming or whatever - but do you actually want to end up with around 350 bottles of the stuff?

But I have to admit I have bought a cask of Bruichladdich, shortly after they re-opened, partly for the emotional thrill of the thing and partly it will mature around the date of a very big birthday. It still gives me a buzz when I go and see it (Kevin, can you post the picture you took?).

Mind you, the Dutch guys who own a cask just along from mine decorate it with streamers and send birthday cards.
That is getting silly!

Ian

[Nick]

I'm surprised at the Glenfiddich story - I didn't think they sold their casks on as single malts.

[Kevin Erskine]

Nick,
You are right.
According to all sources William Grant & Sons will never sell a cask of any of their single malts (Glenfiddich, Balvenie, and Kininvie) without adding at least 1% of one of the other single malts - to prevent it from being sold as a "single malt" by an independent bottler.

[Ian Buxton]

Re Glenfiddich, they WON'T sell you a cask of new make (even with 1% blending of another malt) and they WON'T sell you a single cask for your own private bottling. What they will do, to a few special people and under strict control, is sell you a mature cask, generally of older and very expensive whisky, which they select (OK, you get to go along but be in no doubt, if they're not happy it ain't leaving the building); they bottle; they label, albeit with your co-branding and which is sold as super-premium Glenfiddich. That's probably the basis of the Calgary story.
So it's out of the reach of almost all of us!

[Glenn WIlliam]

Gents,
I see a lot of conjecture here without much to back it up.

Is it true only 1/3 of a cask is worth bottling?

Is it true that a leaky cask isn't covered by insurance?

The idea of buying a single cask is very exciting! But the fact that single malt is carefully blended from several casks is very sobering.

If the distilleries are suggesting we pay first and then wait a decade for a liquor which may be barely worth drinking, then I should think (idyllic illusions aside) that the smart money is spent at the liquor store on bottles you can trust to be good.

[Phillip Stallwood]

I have a hogshead of Glenrothes 19 year old in bond in scotland - can anyone advise me as to how much it is worth in bond and anyone interested in purchasing it ? My email address is phillip@stallwood.org

[Bob Elliott]

Does anyone have any information on purchasing a cask of bourbon? If so email Bob Elliott at bekd70@yahoo.com