Cask Whisky – An alternative asset-backed investment that increases wealth!

Whisky Investment the Future

The world’s lust for luxury goods has never been stronger when seeing nations like India and China and their palate for the finest wines; it is apparent that the same is happening with Whisky. China has had a particular fondness for Wine from the Bordeaux region of France, and likewise, these emerging nations have developed a taste for Scotch Whisky. Along with the USD 1 Billion Scotch Whisky Market in the United States, Scotch will be challenging China for a share of its soon to be USD 3 Billion Whisky industry.

Due to volatility in the financial markets over the last couple of years, businesses and investors have changed their strategy choosing to increase their foothold in asset-backed investments. Investing in assets gives investors valuable goods that can be sold or traded should markets fail.

Making Whisky is both expensive and labour intensive; while the product matures, the value increases but is not moneymaking until it reaches an age where consumers wish to buy. Distillers have to wait for five to ten years before it becomes profitable. This is where the investor steps in to help the distillers. Scotch cannot be identified as Whisky until it has matured for three years, and even then, you wouldn’t be queuing up to drink the Whisky. Therefore distilleries make Cask Whisky available to the private investor to raise capital to cover costs in the early years of maturity. Whisky is always in demand, and this allows distilleries and independent bottlers to buy Casks from the investor to bottle or to keep in storage for a few more years. There is big money to be made with Whisky, and in most cases, this comes from aged Whisky. 90% of all Scotch Whisky Casks are bottled before they reach 12 years of age and used for Single Malt or Blended Whiskies. People can invest directly from the distillery or through a broker. Purchasing through the broker has many benefits; we buy in large quantities, giving our customers a reduced price due to our buying power. The longer you keep it, the more appealing it will be to buyers. If you make sure you service your Cask every five years and then more frequent as it ages, the price will generally increase more rapidly the longer you keep it, keeping its service history with the Cask until it is bottled.

Scotch Whisky has become increasingly popular in Asia, with China, India, Singapore and Japan heading the drive, purchasing more bottles than any other. Scotland’s distilleries can’t keep up with the demand as 42 bottles are exported out of the UK every second. There are currently around 22 million casks sitting in bonded warehouses across Scotland, and still, this is not enough. The demand for Whisky is that great emerging nations such as Australia, Germany, India and Taiwan are looking to fill the void. Some of these new distilleries have already won awards and are rising in popularity. However, none of these whiskies are as prestigious as Scotch. Scottish Whisky is now exported to 200 markets worldwide, which shows the popularity of this fine spirit.

Exit Strategy

Owners may wish to sell their casks to private investors and collectors, selling at a whisky auction, back to the distillery, or a brand. Whisky is in demand, and bottlers or blenders always want to buy good quality Whisky. As the customer owns the asset, they can choose when they want to sell; if the price isn’t to the customers’ expectations, the Cask can stay in storage by paying a small insurance and storage fee until they can demand a greater price.

Return on Investment

When investing, people always want to know the return on investment. Unfortunately, there is no fixed return, and it is impossible to work out the return on investment until you have sold your Cask. What separates this investment is an asset that increases in value as it ages. It will rise moderately in the early years, increasing in value as it matures, once it reaches eight years and beyond. When sold, you should expect the spirit to have risen by 10-15% per year on the initial investment. Casks can easily sell for double the amount and more on what the customer initially paid for the asset over ten years. By buying six to ten barrels, customers can get a very healthy return upon cashing in on their investment. Casks can be picked up anywhere from around GBP 2,200, USD 3,000, EUR 2,600, THB 100,000, AUD 4,200, NZD 4,400, CAD 3,800 and can go up to USD 200,000 – 1.5 million for top branded mature Casks. If you buy new pour Casks, you buy in at a lower price than a mature Cask.

Further Expenses

Some Casks come with storage and insurance built into the Cask price, and others charge annually or upfront; this cost is usually around £50 -£100 per year and a further £50 for a regauge every five years. These costs can vary but are all essential for the upkeep of your investment. If you wish to bottle the Cask, this is very expensive; we recommend that this investment be purchased to sell at a greater price in the future and leave for the experts.

Security

Whisky is huge business in the UK, equating to 21% of all food and beverage exports. Tax is worth a lot of money to HMRC, and they will always collect their taxes. For this purpose alone, Whisky is a highly regulated business, and if a Cask were to go missing, HMRC would come down extremely hard on the Warehouse, massive fines are placed on the warehouses, much more than the Casks are worth.

VAT and Capital Gains Tax-Exempt

As maturing Whisky identifies as a perishable good, there is no tax or VAT to pay on investment returns as long as the Cask sells whiles still in the Bonded Warehouse. So when you are ready to sell your Cask 5-10 years after your initial investment, owners receive the total amount depending on any small sales commissions arranged with the reseller.

Conclusion

If you are looking for an investment backed by a physical asset, you should really consider Cask Whisky. This medium to long term investment is VAT and capital gains tax-exempt. The customer physically owns the Whisky; it is time-dependent. The global demand for Whisky surpasses supply. The minimum investment is around £4,200 compared with other investments; this has a low entry point. If the customer isn’t happy with their Cask’s offer, they can always keep it longer. Casks are secured in a highly regulated and strictly governed UK bonded warehouse.

To begin your Cask Whisky Investment venture, please contact James Gamble at JAG-BA on +66 (0) 868 239 704 or james@jag-ba.com to arrange a meeting.

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