Buying a cask of whisky
First up a disclaimer:
This is not a complete guide to buying a cask of whisky, you should do your own research. I have put together the information I learned, a lot of which I could not find online. What was online, I found from reading small print, distillery websites and the UK government website! The rest I got from phoning people. I am not going to go into great detail about the money matters, if you are just reading this out of interest it doesn't matter, if you are genuinely looking into cask purchase you should look them up yourself and not trust any blog on that matter.
The cask:
The casks are from £1k up to £300k and anything in between. The "popular" brands and the matured stuff (casks which are ready to bottle imminently) are expensive! Far to expensive for what I wanted and I'd imagine the latter, not really what an investor wants as they are already at a very high value. I wanted something young where I could get samples every year and enjoy comparing them to one another. The investor process looked to me to be put it in any old cask, leave it a few years and sell it on. I actually wanted to end up with a good whisky at the end of the process. So are you an investor or someone who is interested in whisky and the whole process? I am not an investor so I was on the hunt for new make or something that maybe wasn't even whisky yet. I was told new make carried an extra slight risk with possible leakages (although it apparently is not very common at all) so maybe something a few years old would be best for me.
Where to buy:
Basically it looked like there were two choices, from a distillery or from a broker. The distilleries which offer it, often have big downloadable files giving you all the information you need including the money maters. Buying from a distillery looked like a really nice process, you will get to pick which cask you want and they should be first fill. They will tell you when its being filled so you can go along, have a dram or two and sometimes a meal. However, you do pay for this, from the prices I saw the distilleries who do it were asking at least £1k more than you would pay through a broker - is it worth it? Well that is up to you. To me is wasn't worth it, especially since I was on my own and not in a consortium. So going through a broker it was.
Which broker to use:
The first thing you realise when looking at brokers is most of them are there to facilitate the investment market and know very little about whisky. (One of them quoted me £8k for new make!!!) All the ones I spoke to were quite clearly sales people, which can be slightly off putting but I had to ignore the sales flannel and get the information out of them that I wanted and find out what they knew. I wanted to deal with someone who understood what I wanted to do - which was not just to make a few quid at the end of it. I wanted someone who knew their whisky - so a few test question were devised to see what they knew. This process got me down to about three brokers. Two one man bands and Whisky Broker. Whisky Broker are the biggest on this side of the whisky industry and I had no problem with them at all but I wanted something smaller, more personal. The owner of a company rang me on a Saturday afternoon and talked to me for an hour and asked me to save his number in case I wanted to speak to him again - this was a good sign in my opinion. So after speaking to him for over two hours over the next ten days or so, numerous emails going back and forward, I had decided who I wanted to use.
Storage and Insurance:
This is a much bigger subject than you might think. Storage is normally between 30p and £1 per week and this covers "basic warehouse insurance" which basically covers you for fire and theft. It does not cover leakage or the value of your whisky going up, so its not particularly thorough. The other things can be added on but I was told by all the people I spoke to it was not worth doing if you only had one cask. Since leakages are rare and it was only one cask, basic insurance was OK for me.
It is also interesting to know, most of these independently owned casks are stored at Whisky Broker and some at Tomatin Distillery.
Now the important stuff - If you buy a cask of whisky you do not technically own it. The only people who can own/trade alcohol under bond must have a wowgr certificate. (Wowgr stands for Warehouse keepers and owners of warehoused goods regulations. The certificate allows businesses to move goods without paying duty from one bonded warehouse to another) So what this means is, anything you do with your cask must be done through your broker. (e.g. If you want to buy more, sell it etc) This really worried me at first - however I was told by two brokers they have an understanding with the warehouse owners that if they cease trading for any reason their customers will show their cask certificates and be able to transfer the ownership to another broker. After thinking about this for a bit, I thought...it is the established way of doing things and it has been done this way for many years. So, find a company you think you can trust and someone you can deal with as you will most likely be dealing with them for the life of the cask.
If you buy from a distillery, your price will most likely have ten years storage included in your price. I would spend about £250 for ten years storage for the cask I wanted.
Governments Cut:
Since whisky is considered wasting chattel (has a life expectancy of less than fifty years) you do not pay capital gains tax on any profit (if you make any) unless it is over £6k per trade. There is no vat on whisky unless it comes out of the bonded warehouse - e.g. it is bottled. I have kept this section brief as I'm not qualified to advise on the matter, this is what I understood from the HMRC website.
Samples:
Obviously you'll want to taste the whisky you have bought. Samples will cost you £50 - £70 plus the governments cut. Of course, you are not paying for the whisky itself, cause its yours. Still sounds expensive though doesn't it! But if you bare in mind these people have to go find your cask, dig it out, take your sample, put it in a bottle, package it up, do all the paperwork and send it off, its not that bad really is it. And this is something I would only be doing once a year (and that is quite a lot apparently), so its not a huge cost in the grand scheme of things. Its also the main reason I am doing all this. You can get any size sample you want but it is a minimum of 200ml. I'm thinking I will get a full bottle if I can so I have enough to share and compare with each other in the years to come.
Finishing:
There are not many whiskies these days spend their whole life in the same cask and more importantly, if you have bought from a broker that cask is potentially coming from Chivas, Diageo etc Although you might be lucky, there is a good chance the cask wont be up to much. So you want to change things, well there are options!
1st up - Do nothing. Obviously you will be getting your samples without colouring and apparently a good rule of thumb to see how much affect the cask is having - just look at the colour of your whisky. Simple.
Split it: Split the whisky in half and finish it in different casks. Leaving half in the original cask and half in a sherry quarter cask sounded interesting. Having two bottles that originated from the same cask and finished in different casks sounds great! Obviously if you did do this, it would double your storage costs.
Finish it: Or double maturation if you will, move the whole lot into a fresh cask.
Most places will move your whisky from cask to cask for £70 - £80 plus vat plus the cost of the cask. Your broker will be able to find most types of casks for you. I got prices for the ones I was interested in. Fresh ex-bourbon casks will set you back around £220. Sherry casks range from £500 up to £1200 depending on the size you want. You own all the casks you buy. You can go an collect them, re-use them or even in some cases sell them on. If you buy through a distillery, they will often keep the cask you use.
Exit:
At some point you are going to have to do something with your whisky, It cant stay in there forever, so what can you do?
Sell the cask the way it is: You have had your samples and you might make a profit. If this was purely an investment this is what you would do when the time is right. If you sell to a broker and they choose to bottle it, some of them give you a free bottle, which is nice. If not, you send your certificate in, they send you money, job done.
You bottle the whole thing yourself: You should be budgeting around £5.5k for this. It does look fun, you pick your bottles, your labels, abv - everything. But the obvious downside - around two hundred bottles of whisky are about to turn up on your door step, what are you going to do with them all? You can give them away to friends, family etc but even if you are that generous and you know that many people its still a lot of work! To sell them, you need licenced premises. If you have commercial premises its not actually that difficult to get a licence. But its still a faff.
Auction: There are a few cask auctions coming through now and id guess that side of things is going to grow as people have casks which they can not afford to bottle. While it might be a novelty at the moment and possibly a way of getting a decent price for your cask. I think this will become the last resort for some people who have no where else to turn with their cask. (Maybe it is bad quality, maybe it is about to drop below 40%abv etc)
Auction: There are a few cask auctions coming through now and id guess that side of things is going to grow as people have casks which they can not afford to bottle. While it might be a novelty at the moment and possibly a way of getting a decent price for your cask. I think this will become the last resort for some people who have no where else to turn with their cask. (Maybe it is bad quality, maybe it is about to drop below 40%abv etc)
Bottle some, sell some: You could bottle x amount for yourself and sell the rest on to a independent bottler, this seems to be the best of both worlds. Although your cost per bottle will be high due to the low quantities. In my opinion this option could change if the whisky industry did take a down turn so be prepared to use any of the above options....or wait.
All of these things must be done through your broker.
Buying through a distillery really limits what you can do at the end. Most will make you sign a contract so your only exit is to bottle it for yourself. No option to sell the cask, no option to sell the bottles!
Is it a terrible idea?
Many "experts" on social media will tell you it is a terrible idea - two hundred bottles sitting in your garage, hidden costs - all that type of stuff. However, if you understand all those things, they are not huge problems as long as you keep your options open. Iv had the odd terrible idea which has dropped me in "hot water" but hey why not.....just make sure you have done your research. Understand what you are doing at every step and It will be an enjoyable experience. You only live once and all that type of stuff!
What did I do and what do I plan to do:
I signed up to cask broker email thingys where they send you a list of the casks they have and the prices. I watched these emails for a few months, read everything I could then decided what I wanted. I found the person I wanted to buy with and bought one.
I bought through Jake - The Whisky Baron, he is a nice bloke, honest and knowledgeable. He understood what I wanted to do.
To minimise the risk of leakage I bought something that was three years old. I would like to think If it was going to leak it would of by now. It was my first time at all this so I wanted to keep costs low - I spent less than £1.5k on my cask. It came from Dalmunach Distillery, a new-ish Chivas distillery in Speyside. Chivas know what they are doing so I was OK with that and there is not a huge amount of choice in young whisky anyway. It is currently sitting in Tomatins warehouse where I'm paying less than fifty pence per week to store it. It is about to turn four years old, when I will order a sample and I will be able to tell properly if the cask is doing it much good or not. If it seems to be going well it will be left alone. If not, it will either be put into a fresh ex-bourbon cask or split, half stays in the original cask and half in a sherry quarter cask. I haven't totally decided what I will do just yet. But doing something should hopefully make my cask/casks stand out from the people who have simply invested and left their whisky in tired out casks. I hope It will make it more appealing to a bottler. At the end, I hope I will be able to bottle x amount and sell x amount to Jake who is also an independent bottler. If this is not possible for any reason, I have kept my options open. Once empty, I plan to go up and get the original cask, which I think will be passed its best anyway. Any other casks I use will be sold or re-used by me as they will of only had five or so years use. Of course this is all subject to change but they are my plans at the moment.
 |
| www.thewhiskybaron.co.uk |
So there you have it, I have enjoyed the process so far and I will enjoy the whisky when I get it.
Do your own research...and lots of it!
@WhiskynStuff
:)
