5 Reasons to Invest in Whiskey Casks? (+ 8 Factors to Consider)

Why should you consider investing in whiskey casks? And, what’s the best way to do it?

To start with, the finest whiskeys deliver many of the same portfolio benefits as fine wine. Whiskey casks have grown in value by 12-15% annually for the past 15 years.   

The advantage of whiskey casks is that they improve with age, have more liquidity than bottles, and deliver bulk value. 

Let’s go deeper. 

In this article, we’ll explore the market trends, reasons why you should invest in whiskey casks and factors to consider before investing. We’ll also look at the best whiskeys for cask investment. 

Besides, you’ll find out how you can invest in exclusive casks through Vinovest.

Cask Whiskey Market Trends

Whisky accounts for around 20% of all the UK’s food and beverage exports, and is the most traded spirit in the world. 

Scotch whisky exports, for instance, were around $5.5 billion in 2021. Scottish distilleries are struggling to keep up with the surge in demand while inflation drives up prices (and potentially, the future returns from whiskey investment.)

As whiskey bottle sales grow, so do the sales of casks. This has pushed up cask prices, especially those of renowned distillery brands.

In the first half of 2020, $8.3 million (double that of 2019) worth of cask whisky was sold by the wholesaler Whiskey Wealth Club. 

Also, the BC20 Whisky Cask Index grew by 14.36% in 2021, while the overall scotch whiskey cask market grew by 13.12%.

And, in recent years, whiskey cask investment has delivered substantial returns compared to the S&P 500, bitcoin, and even gold. 

Let’s look at this in more detail.

Why Should You Invest in Whiskey Casks? (5 Compelling Reasons)

Investing in whiskey casks has several benefits:

1. Aging and Long-term Return Potential
2. Stable Alternative Investment
3. Capital Gains Tax Exemption
4. Available at a Range of Price Points
5. Investing in Whiskey Casks is Now Easier than Ever

1. Aging and Long-Term Return Potential

One of the main reasons why a fine whiskey cask appreciates in value is its ageability. 

While bottling halts the spirit’s maturation, a cask whisky continues to age, increasing the spirit’s value over time. 

So, a whiskey cask from a reputed distillery would typically double in value every five years as the spirit matures in the cask. In fact, a 1988 Macallan Scotch cask bought for $6,275 in the same year was recently sold at a Whisky Hammer auction event for a whopping $1.3 million.  

Though you can earn returns within two to three years of owning a young cask whisky, storing it longer increases its value. So, a younger whiskey cask is more affordable and will offer you higher rates of returns — if you have the patience to wait! 

Whiskey Wealth Club estimates that a cask of non-branded single malt Scotch whisky would deliver an ROI of 161.9% over 10 years or 10.11% of annualized returns.  

And, according to the BC20 Whisky Cask Index, if you’d invested around $123,000 in whisky casks in 2018, they would have appreciated to over $221,000 by mid-2021. 

2. Stable Alternative Investment    

According to the Knight Frank Index, rare whisky was the best-performing collectible of the last decade. 

Whiskey casks have also proven to be worthy contenders to the rare whisky bottle and other investment commodities. 

They have a low correlation with traditional markets and have historically increased by 12-15% in value every year. For instance, a Macallan Single Malt whisky cask worth $3,865 and Tobomery bought for $1,812 in 1994 sold for an astounding $271,785 in 2021.

This makes cask whiskey an effective portfolio diversification tool.

3. Capital Gains Tax Exemption

Cask whiskey usually has a lifespan of about 50 years since it’s prone to evaporation and is classified as a ‘wasting asset.’ This exempts casks from capital gains tax (CGT).

Also, whisky casks bought as gifts (under trust) from an estate do not incur inheritance tax (IHT).

But note that the wholesale sale of whiskey (up to 200 gallons) is subject to excise duty and VAT in Ireland, but whiskies held under bond are exempt from these taxes. Also, higher quantities (more than 200 gallons) cannot be sold without a wholesale license. 

4. Available at a Range of Price Points

Depending on your budget, you can buy cask whiskey at different price levels. The price of a whiskey cask could range anywhere between $1,000 to around $20 million. 

Yes – it is more expensive than bottles. 

But, keep in mind that a 53-gallon barrel is equivalent to 266 bottles. More bang for your buck!

The price range depends on the type of high-end whiskey you choose. 

Due to higher demand, Scottish whisky brands are usually more expensive than Bourbon, for instance. While typical Bourbon casks cost $1,700 to $4,100, a Scotch whisky cask can set you back about $2,400 to $8,100. Some of the most premium Scotch whiskies (like the Macallan Scotch whisky cask) can even reach upwards of $200,000.

5. Investing in Whiskey Casks is Now Easier than Buying Bottles

The whisky cask trade is a convenient way for distilleries to compensate for the lack of retail sales between distillations. This also allows them to clear up storage space and profit when investors buy their young cask whiskey.  

This makes the whisky cask trade a win-win situation for both distillers and investors.  

Also, the cask market is still in its early stages, facing comparatively less competition than whisky bottle trading. 

Next, let’s look at what makes cask whiskey investment more lucrative than bottled whiskey.

Cask whisky and bottled whisky differ in terms of returns, ease of storage, liquidity, and more.

• Higher Returns: Bottles can give you short-term returns, but they’re unlikely to appreciate substantially. Once bottled, the whiskey will not mature further. Casks offer more stable ROI and return between 12-15% on average as the whiskey inside matures and appreciates in value.
• Guaranteed Authenticity: The chance of buying a fake bottle of whiskey is higher as a rare bottle can be forged. On the other hand, casks bought through a reliable whiskey investment company like Vinovest guarantee authenticity.
• Hassle-free Storage: Compared to a rare bottle, a cask is easier to store as it’s typically stored in secure, climate-controlled government bonded warehouse facilities. 
• Greater Liquidity: When you decide to sell your cask, you’ll have many options – you could blend it, bottle it, or leave it for prolonged aging.
• Offers Bulk Value: Suppose you invest in a 53-gallon cask of whiskey for $1,500. Each cask would hold around 266 bottles. And, each bottle would be worth around $6. It would have plenty of scope to appreciate in value before you sell it.

So, which are the best whiskeys for cask investment?

Of the different types of whiskey, single malt Scotch whisky, bourbon and Irish whiskey are quite popular among investors, especially those from distilleries classified “A” (like Macallan or Bowmore.)  

But before you take the plunge, you must keep some pointers in mind.

Factors to Consider When You Invest in Whiskey Casks

These are some of the most crucial factors to keep in mind when investing in whiskey casks:

1. Age and Volume of the Cask
2. Historical Performance
3. Security
4. Regulations
5. Exit Strategy
6. Taxes
7. A Proper Delivery Order
8. Background Check of Whiskey Investment Companies

1. Age and Volume of the Cask

Age refers to the period the whiskey stays in the cask. 

Most whiskeys require at least 8 to 10 years to develop a nuanced flavor profile (which is enhanced by the cask - usually American or European oak). This replaces the tangy, metallic notes characteristic of the young spirit. 

Distilleries often recommend a specific day for bottling your whiskey, so you will know the ideal maturation period.

The volume of a cask refers to its capacity and can range from 200 to 400 bottles. Higher-capacity casks usually fetch higher prices.

2. Historical Performance

Investors should always check the historical performance of the whiskey distillery and the returns from similar whiskies in the long term. Before you invest in whiskey casks, research the distillery, its reputation, and the historical value appreciation of its casks. 

3. Economic Issues and Policy Changes

Though whisky cask trade and investing in casks is easier than ever, it includes some possible risks:

• Global conflicts like war affecting whiskey supply and demand
• Possibility of a warehouse accident, like a fire 
• Change in rules and regulations that mandate investors to obtain new licenses and pay extra fees to sell their casks

Considering these whisky investment risks, investors should opt for a whisky investment platform like Vinovest that offers you a legally binding certificate of whisky cask ownership. Such cask whiskey investment companies also offer a safe storage space, and full insurance in case of accidents and thefts.

4. Regulations

You should adhere to the regulations laid down by the whiskey’s country of origin. For instance: 

• In the UK, the HMRC (Her Majesty’s Revenue and Customs) regulates the wholesale buying and selling of cask whiskey.
• Companies providing wholesale whiskey brokering must hold a WOWGR license with the HMRC.
• The SWA (Scotch Whisky Association) amended its regulations, allowing distillers to use a variety of casks for whiskey maturation in addition to oak. 
• The Federal Standards of Identity for Distilled Spirits in the US mandates using a new, charred oak cask for Bourbon maturation.   

5. Exit Strategy 

Once you invest in whiskey casks, there are multiple exit strategies to liquidate your whisky investment while shoring up your gains. These include: 

• Selling your mature whiskey to established and upcoming distilleries that bottle and sell matured spirits. 
• Selling to other private investors or collectors since they prefer buying whiskey matured for 5 to 10 years.
• Selling to other private investors who want to buy casks aged for ten years or more. 
• Bottling and labeling the cask whiskey to sell as bottles to retail buyers. 

6. Taxes

Though whiskey casks are exempt from capital gains tax (CGT), most whiskey-distilling countries impose other high taxes on the spirit.   

For example, to buy an American Bourbon, Scottish whisky, or Irish whiskey cask, you must be aware of the local sales and excise taxes of those specific regions. And international whiskey cask investors must also account for local jurisdictions’ customs expenses. 

If you’re a private investor, you’ll also need a wholesale license to sell less than 200 gallons of whiskey.  

7. A Proper Delivery Order 

A delivery order (DO) is the document a bonded warehouse uses to update the owner’s details of the casks in their warehouses. You’ll need the document only during a change of ownership. 

But without a delivery order, you can’t legally claim the whisky cask ownership since a DO has significant legal merit over other similar documents like an ‘ownership certificate.’   

In the absence of a delivery order, you don’t actually own the casks you buy and are more likely to lose your investment if the cask investment company goes broke.  

8. Background Check of Whiskey Investment Companies

Though whisky cask investment is a lucrative venture, beware of whisky investment companies promising unbelievably high returns. For instance:

• Many firms quote profit figures (like 564% returns) from the Knight Frank Rare Whisky Index. But the Knight Frank Index isn’t an indication of whiskey casks’ return potential as it covers price variation of rare whiskey bottles and not casks.  
• Some firms promise unrealistic short-term returns. But, just keep in mind that cask whiskey investment is a rewarding, long-term play.

Besides, the UK Financial Conduct Authority doesn’t regulate whisky cask investment, leaving space for scammers to thrive. Some fraudulent whiskey enterprises include Grandtully, Nant Whisky, the Napier Spirit Company, Cavendish/Hamilton Spirit Management, and so on.

As a potential whiskey cask investor, you must conduct necessary background checks on any investment platform before engaging their services.  

But, not to worry!

Here’s the easiest and most reliable way to start an investment in rare whiskey casks:

Invest in Exclusive Whiskey Casks with Vinovest

Vinovest is an AI-driven platform that lets you invest in the world’s rarest whiskey casks. You won’t have to deal with intermediaries and can gain solid returns.

In addition to this:

• There are no middlemen involved - so be assured that Vinovest passes on the savings to you.
• Your rare whisky cask would be fully insured, authenticated, and stored in secure, bonded warehouses.
• Each year, you’ll get a sample from your oak cask.
• You can plan an in-person visit to view your whiskey cask.
• You can have Vinovest sell your cask when it reaches maturity.
• Or, you could have your whiskey bottled and delivered to you!

In short, you should invest in whiskey casks for portfolio diversification, and for stable and sustainable returns. With the advent of secure whisky investment platforms like Vinovest, now even retail investors can try their hand at cask investment.

Simply reserve a cask or speak to an expert to start investing in world-class whiskey casks!