Cask Investment Guide

"Top Luxury Investment" - Knight Frank

"Top Luxury Investment" - Knight Frank

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WHISKY ON THE RISE

Whisky, according to the recent Knight Frank Wealth Report, is 2019's top performing luxury investment. With an increase of 40% on rare bottle values in the last 12 months, it far outstripped the more established alternative assets such as art, wine and cars.

Data collected by Rare Whisky 101 suggests the four-year growth from December 2014 in rare whisky has increased over 160%, compared to just 2.47% for the FTSE 100.

The same report by Rare Whisky 101 claimed via the BBC that they had performed a controlled test of 55 rare bottles, of which over a third were fakes.
Maturing cask whisky offers many more benefits than bottled whisky, including the ability for Scotch to continue ageing. The ability to fake maturing casks is negated by the HMRC's stringent controls, creating a much more secure investment vehicle.

WHISKY ON THE RISE

MARKET ANAYLSIS

As whisky demand soars, so have the numbers of new distilleries where cask sales are seen as a fantastic source of early revenue. Often, un-aged casks of new-make spirit can cost in excess of £6000. Our starting price for casks is below £1,500 for three-year-old whisky.

There are currently over 20 million casks of liquid gold maturing in Scottish bonded warehouses, accounting for 20% of the United Kingdom’s entire food and drinks exports. Whisky in general is also becoming increasingly popular, with the market for Single Malts booming – sales last year hit £1.2 billion.

In the last 2 years, over thirty new distilleries have been founded, and several closed distilleries including the legendary Port Ellen and Brora are being restored to full working condition. Scotch Whisky is exported to 180 markets worldwide. In 2017 alone, exports of Scotch rose 9% to a record £4.36 billion; in 2018 it hit £4.7 billion. In the first half of 2018, the value of exports was over 10% greater than in 2017.

A decade of growth
From the period 2007-2018 Scotch whisky exports have increased from £2.8Bn to £4.7Bn.

MARKET ANAYLSIS

BEHIND THE WOOD

A cask is an oak container not exceeding 700 litres. Typically, casks are much smaller, and they’re named differently depending on their size and origin. A barrel for example, commonly used in the production of bourbon before being shipped over to Scotland, is around 200 litres in size. The largest typical cask in use is known as a butt, and in most cases these have been used in the production of sherry. The cask is the main defining factor in the entire style of a whisky, with many people arguing that as much as 80% of the whisky’s flavour is derived from the wood. Others believe the individual character of a whisky is defined by the distillery, including local geography, the water source, and the production process. Either way, the cask buying selection process offers a multitude of options!

Whisky is most typically compared with wine when discussed as an investment. The two share similarities, but only so far. Whereas wines tend to have a drinking window, whisky will not. In fact, whisky bottled today will outlive us all if unopened.

With each passing year, the price, scarcity and desirability increases. The diversity of whisky also sets it apart from other alternative assets, where only the pinnacle of each subject is worthy of investment. Any respectable scotch whisky will appreciate in time. Over the last decade, whisky has averaged around 9% appreciation per annum.

BEHIND THE WOOD

PAST & FUTURE PERFORMANCE

The last whisky 'crisis' was during the 1970s and 80s and was characterised by over-production and stagnant growth in the market, creating what was known as a 'whisky loch'. With this in mind, distillers today are much more cautious with their predictions.

PAST & FUTURE PERFORMANCE

SECURITY & PROTECTION

Casks of Scotch are by law stored in HMRC approved warehouses in Scotland, commonly at the distillery they were distilled. Records of every cask must be kept and movement from the warehouse is licensed. As part of this process, each cask has a unique paper trail known as a delivery order.

A NOTE ON FRACTIONAL OWNERSHIP

At Cask Trade we only sell entire casks. We strongly believe purchasing a portion heightens the risk of the investment. Should you wish to purchase a cask as a group we will require one main holder.

EXIT STRATEGY

Selling your cask and successfully liquidating your assets has previously been a minefield. Two options exist selling the cask onto another investor looking to continue the casks maturation or sell into the trade for bottling and finally consumption.

The difficulty in doing either of these is accessing either of those two potential buyers. At Cask Trade, we have devised a unique solution. We’ve created a marketplace in which private cask owners, independent bottlers and larger drinks companies can view and purchase casks that would previously be difficult to sell with little transparency.

Our team of whisky lovers, industry professionals and collectors are able to guide you as to when your casks are at their optimal maturity and even aid in enhancing their desirability and value. Importantly the cask is owned by you solely, it will be at your discretion when it is sold or indeed bottled.

Where we are TODAY
Our team of whisky lovers, industry professionals and collectors are able to guide you as to when your casks are at their optimal maturity and even aid in enhancing their desirability and value. Importantly the cask is owned by you solely, it will be at your discretion when it is sold or indeed bottled.

FREQUENTLY ASKED QUESTIONS

Can I visit my cask?
Yes, but it’s not always easy. Visiting your maturing cask is a fantastic experience, but unfortunately some warehouses are not set up to allow visitors. However, if visiting your cask is a priority, we are more than happy to move the cask to a more suitable location; we will simply pass on the fee for doing so.

Can I request samples?
You may request samples of your whisky from Cask Trade. Due to the intricate nature of extracting maturing whisky from bonded warehouses, in which casks are often physically difficult to access, you will be charged for extraction, and duty will be charged based on the ABV. However, it often takes over a month for samples to be delivered, and we cannot guarantee the cask won’t have been sold.

How long should I keep my cask for?
Whisky matures at different rates based on a number of factors from wood type to distillery character. We believe 3 years is a good minimum, unless the cask is of some age. If you’re unsure and want our opinion on your particular cask, please do get in touch.

Are there any other fees?
Other fees that need to be considered are storage, usually around £30 per annum, insurance (this depends on value, approximately £3.50p per £1,000 cost) and costs associated to movement or re-racking of the whisky. Notes and guidance on re-racking, bottling etc can be found here (link).
We would love to share our passion and knowledge with you, please feel free to arrange to visit us in our London office.

DOWNLOAD THIS GUIDE

You can also download a longer version of this guide (PDF, about 16MB)