About Whisky Investments
Over a decade ago, whisky was primarily used for drinking enjoyment. However, as more whisky lovers entered this field, market demand significantly increased. Coupled with the strong purchasing power of collectors from mainland China, and the frequent appearance of rare whiskies at auction houses with record-breaking prices, whisky gradually evolved into another eye-catching investment product.
There are two main ways to invest in whisky:
1. Buying bottled whisky, such as limited editions
2. Buying whole casks of whisky
In recent years, interest in whisky investment has grown significantly in the Asian market, particularly in Hong Kong, Singapore, Taiwan, China, and Japan. To help everyone clearly understand the differences between these two investment approaches, we will dive into comparing the characteristics of bottle and cask investments, helping you in making the most suitable investment decision for yourself.
What is Bottle Investment?
Investing in whisky bottles can be a viable option for some investors.
Key points about bottle investment:
- Bottled whisky stops maturing, unlike cask whisky
- Value doesn’t inherently increase with time
- Appreciation depends on rarity and collector demand
What are the pros of investing in whisky bottles?
Wealth of Historical Information
There are certainly advantages to whisky bottle investment. Firstly, buyers can easily find the historical prices of bottles sold at auction and their initial retail prices online, providing a wealth of information to guide their bottle selection. A useful resource for historical prices at auction for whisky bottles is the Whisky Hunter website.
No Storage Costs
Whisky in bottles also offers the benefit of no storage expenses. While warehouse storage fees are frequently required for barrels, this is not the case with bottles because you can store your whisky collection at home, unless you have hundreds of bottles, in which case administration and storage issues may arise.
Tangible Asset
Finally, bottles are a more tangible asset. They can be viewed and touched at any given time, and if the investment goals or decisions change, open and enjoy!
What are the cons of a whisky bottle investment?
Market Challenges
The main challenge in whisky bottle investment is identifying valuable bottles. High demand for desirable bottles can make acquisition difficult. The bottle market, not the broader whisky market, solely determines bottle values, meaning cask trends may not impact bottle prices.
Limited Release Transparency
Limited releases may lack transparency. Many bottles marketed as limited editions may not be as rare as implied. Some ‘limited releases’ have included up to 500,000 bottles. Even high-quality whisky from desirable distillers can lose value if too many bottles are available, reducing overall desirability.
Collectibility Factors
However, even limited releases with only a few hundred bottles worldwide may not be investable if the whisky type or brand lacks collectibility. Determining investment potential requires in-depth knowledge of the bottle market.
Accessibility Issues
Finally, obtaining access to high-quality bottles can be challenging. When rare bottles are released for sale, they can be very hard to buy. A good history of buying through a particular retailer or having a relationship with a particular brand will almost always be needed. Many of the rarest bottles will be sold on allocation.
What is Cask Investment?
Another option for investing in whisky as an alternative asset is to purchase a full cask and keep it for a while to let the whisky age and develop in the barrel.
The maturation process increases the value of liquid with time, meaning unlike bottles, a cask’s value is linked to both the cask marketplace and the natural appreciation of the liquid.
Check out the process of buying a whisky cask and download our Beyond the Cask Guide to learn everything you should know about cask ownership.
Advantages of Cask Investment
Tax Benefits in the UK
One significant advantage of whisky cask investment is its favourable tax treatment. In the UK, the sale of whisky casks is currently exempt from capital gains tax. This is because, despite increasing in value as it ages, whisky is classified as a wasting asset due to evaporation over time. However, investors outside the UK should consult local tax regulations for applicable rules.
Hassle-Free Storage
Investors need not worry about storage logistics. Whisky casks have to be stored in secure bonded warehouses in Scotland according to UK law under HMRC monitoring. While there is an annual fee for this service, it’s generally modest, often around £50 per year, keeping additional expenses to a minimum.
Engaging Investment Experience
Owning a whisky cask offers a unique, hands-on investment experience. As a tangible asset, investors can track the whisky’s development by sampling it at various stages of maturation. This aspect is particularly appealing to whisky enthusiasts, allowing them to witness the evolution of their investment over time.
Growth Potential
While past performance doesn’t guarantee future results, whisky cask investment has shown promising returns historically. The liquid’s natural appreciation and market demand have enhanced its performance as an alternative asset. However, it’s crucial to consider long-term potential rather than focusing solely on short-term market fluctuations.
Challenges of investing in casks
Deciding to invest in any alternate asset must be a considered process. If you are thinking about starting your cask ownership journey, it is important you research the potential cons or risks associated with alternate investments.
Market fluctuations
As with all investment markets, no one can predict what will happen. There can be market fluctuations that may increase or decrease the value of your cask. These fluctuations don’t just impact cask value but may also impact the demand for your cask.
For example, if you own a cask from a lost distillery (closed distillery), this may boost the demand for the cask as it is rarer and therefore higher in value. On the other hand, if you have bought a cask of liquid that is relatively common on the market, this may negatively impact the desirability of your whisky, making it harder to sell.
Liquid loss
The fact that cask whisky is a physical asset can be a pro in many ways. However, it also means it could become damaged in rare situations. It is possible that the cask can leak and that loss of liquid is not covered by insurance. Another consideration is natural liquid loss over time, called the angels share. While every cask experiences this, you can risk losing too much liquid through evaporation without proper management and informed advice.Check out Angel’s share in whisky maturation and what you should do to keep your cask in good condition.
Historic data
Cask transactions were primarily industry trades in the past, making it very difficult to track the value changes of whisky casks over time, with only a limited index of cask sales available for reference. However, as the whisky cask investment market matures and data increases, Cask Trade has now sold over 3,000 casks, allowing us to provide you with more of our historical cask transaction data for reference.
Professionalism and Due Diligence
As cask whisky investment gains popularity, more sellers are entering the market to offer whisky casks. With an increasing number of companies joining the cask trading market, some may sell casks at inflated prices. Therefore, we recommend careful research and choosing a trustworthy company.
How do I decide which investment option is best for me?
Choosing the best whisky investment method requires careful consideration of multiple factors, including your personal financial situation, investment goals, risk tolerance, and expected investment timeframe, as well as your confidence on the future whisky and spirits market.
If you are more interested in cask investment, you can simplify the entire process through the guidance of professional cask specialist such as Cask Trade.
We can provide recommendations that not only help you choose the right cask but also offer valuable insights into market trends and potentials.
However, regardless of which investment method you choose, in-depth market research and continuous learning are recommended.
We suggest that you:
- Learn basic whisky knowledge, such as the distillation process, whisky styles, etc.
- Research the market performance and future prospects of different whisky brands and distilleries
- Stay updated on the latest whisky market information and liquor tax policies in different markets.
- Consider seeking advice from professional cask company
Read more to understand the complete process of buying investment casks
or independent bottling and how to sell your cask, to make informed investment decisions in the future.
Ready to explore whisky investment opportunities?
Our teams in Hong Kong and London are ready to help you.
Speak to our experienced team to explore your whisky investment options.
