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Owning your own cask of Whisky as an investment or for a hobby has been a tradition undertaken by both enthusiasts and shrewd investors for decades but as an independent bottler I have always viewed it has a huge risk to anyone new to the trade. With that in mind I’ve compiled a six tips for those wishing to purchase casks of Scotch.
Please note I am an independent bottler is my points are very bias.
1. Owning your own Whisky cask is only a good idea if you have a clear idea of why you are owning a cask and how you will end the relationship with the cask.
How you will end the relationship with the cask?
When it comes to finally bottling the cask you will need to be aware of the additional fees that lie therein, such as the VAT and duty payable per bottle, the bottling fee charged by the bottling agent and the cost of delivery to you. You might also have to consider your own label and a host of other legal issues to do with branding and meeting the SWA guidelines.
Suppose I bought a young cask for £3,000.00, which is perfectly reasonable depending on the quality of spirit; for £3k you are very limited in what you can get, more than likely it will be Speyside under 6 years old and the likely abv 58?V or higher
With the above assumption, my yield could be 300 bottles at cask strength
This would work at £10.00, which looks a bargain right…Well no.
That £10.00 bottle of single cask, single malt. Needs duty (hence the desire for a UK duty freeze/lowering) - @ 58% this would work at £11.67. But then you need to add VAT to your duty – so £14.00. Now my £10.00 Whisky is costing me £24.00. So my cask will actually cost me an additional £4,200.00, £7,200.00 based just on liquid.
2. Yes, you could reduce the strength to reduce the duty and increase the yield but then you have the other problem with owning a cask – literally what are you going to do with over 300 bottles of Whisky…? Some would argue that this is a nice problem but for a private fan this could be a case of the cat that got the cream…
On top of the price you need to consider the delivery of the 300 bottles, how much you are being charged for the glass bottles, the printed labels and the label application so you can see how these things spiral.
So the cost of glass, corks, seals and delivery for my 300 bottles will be around £1,000.00 at least. So my 300 bottles of Whisky is now costing me £8,200.00.
Making it £27.00 for my under 6 year old Single Malt, Single cask Speyside Bourbon Hogshead.
3. What happens if your cask leaks or pops? Unfortunately, casks leak and you can sometimes be unfortunate enough to only find this out years later and worse still with a bad leak the abv plummets too and if the abv goes below 40% you can no longer call the Spirit Whisky. There are over 20 million casks of Scotch maturing in Scotland and your little Hogshead is not going to get special treatment unless you have paid for that in which case even the warehouse might not accept liability for a bad leak so your 20 year old Macallan Butt has leaked there is very little you can do accept try and bottle what is left.
4. Who is selling the cask and when was it last checked? HMRC manages the ownership of warehouses and cask owners but if you are buying the cask from a private seller or other party have you done the relevant due diligence, can they prove that they own the cask that you are buying and if so how? You could check with the warehouse where the cask is stored and check the sellers track history but you should definitely check when the cask was last re-gauaged, which is a measure of what is in the cask at a specific date. Re-gauges are vital reports that reveal a cask’s content and warehouses have various methods of carrying them out. Cask’s lose about 2% through evaporation each year so checking their content is extremely important because anything could impact this from a leaky cask, to a cask not being fully filled or a cask filled at higher ABV which may not lose alcohol strength as quick as a lower abv filled cask.
5. Who owns the casks? Will you own the cask and carry the responsibility for it or is someone else in fact in ownership of the cask and they manage the ownership for you. This is an important consideration as someone that manages ownership is not necessarily accepting liability for leaks but instead charging a management fee for carrying out your requests to the warehouse such as requesting a regauge, re-racking or if the warehouse is charging rent are the owners then charging you an additional fee on top of this?
6. Is the spirit in good condition? Buying a cask without sampling it can a tricky proposition especially if it is a rare cask with multiple interested buyers. I would always recommend sampling Whisky before you buy it as you may stumble upon the reason it's being sold is because its not very good. Alternatively, you may find the cask has been really inactive because it's been used multiple times, as is common, so in order to nurture the spirit you need to rerack into a fresh cask which will have an additional cost.
Alternatively, you may think it wiser never to go through the bottling stage and instead sell it to a company that will continue to manage its maturation or sell it to a company that is aware of the costs and will be bottle under their ownership. In which case, this tends to be the easiest way to resolve your relationship with the cask but the issue with this approach is that you need to identify a suitable buyer and your spirit has to be of good enough quality that someone would want to buy it!
Unfortunately, and I take no pleasure from this, I have been in the position of having received emails and speaking to people that have over-paid with their Whisky or have been left with an abundance of relatively young spirit which has nothing outstanding to say about it, which is altogether a bit of nightmare scenario.
It is genuinely great when I speak to Whisky clubs and groups of friends that have casks that they bottle together with a view to sharing together as they are well aware of the risks and costs. More so if there are more people involved so the risk is spread if the cask turns out to be poor or mediocre compared to others.
If you are looking to turn your hobby or love of Whisky into a side business you might find our next blog on collecting bottles more helpful than this cautionary tale.