"We have managed to secure some unique casks of whisky from a superb distillery, [Redacted], at 25 per cent less than the price the distillery sells them for. They are first-fill virgin oak with beautiful peated whisky. Prices start from £3,800. Releases from our independent bottler, [Redacted], have received marks of 89 and 90 out of 100 from [Redacted], a respected reviewer at [Redacted]. Yours truly, etc."

Thus read an unsolicited email I received from a cask investment company. Seeing the name of a Scottish distillery founded in the past decade, I decided to do a few sums. But first, it’s important to point out that the reference to the company’s independent bottling has no bearing on the cask being sold. That’s ‘strike one’.

Next, there’s the claim about the price. I guess they mean £3,800 is less than what the distillery charges if selling directly to a punter as part of its ‘cask club’ or equivalent. Many new distilleries charge upwards of £5,000 per cask when selling in this manner, but those prices usually include a decade of storage and insurance, ‘visitation rights’, and other benefits such as yearly samples and free tours. These are rarely pitched as investments and are geared towards individuals, friends, or clubs looking for a shared experience. The price includes a ‘faff’ fee for the distillery’s time looking after the customer. It’s not at all comparable, so let’s call that ‘strike two’.

What do we know? Well, a ‘virgin’ oak cask is a good sign, as this has intrinsic value. New oak barrels can sell for £210–£330 each, they’re scarce, have good maturation potential, and can be reused or resold. We also know it’s a peated single malt – another plus as peated spirit carries a premium and is currently in somewhat short supply. If trends continue, this could make ‘our’ cask more valuable in the future.

Unfortunately, there’s a lot more we don’t know. Can we use the distillery name when the cask is bottled? What’s the cask’s capacity, fill level, and the ABV? £3,800 for a full 500-litre butt is a very different proposition than the same price for a half-empty octave! We also don’t know how old the whisky is, or whether it’s actually new-make spirit. Neither do we know if it’s being sold on the basis of OLA (original litres of alcohol, when filled) or RLA (re-gauged litres of alcohol), or where it’s being stored. Will the seller notify the warehouse of the sale and arrange for the buyer to be set up with an account? HMRC’s Excise Notice 197 is quite clear on this requirement, yet I still receive messages regularly from concerned cask buyers saying the warehouse storing their cask won’t speak to them, as they’re not the registered owner. But we’ll assume these questions are answered to our satisfaction.

Now let’s follow the money. If we assume the cask is a 200-litre barrel filled three years ago (it’s referred to as whisky) at 63.5% ABV, with average losses for a Scottish warehouse (2 per cent bulk and 0.5% ABV per year), the cask likely now contains 188 litres at 62.5% ABV. If we use Mark Littler’s handy cask bottling calculator, we discover that if we were to bottle it now the cask will yield 269 bottles (70cl) at cask strength, with fees of £760 (VAT on purchase price), £3,723 in duty, £744 in VAT on duty, £700 in transport fees, and around £3,223 of bottling fees (for a relatively cheap label and bottle). This gives us a total bottled price of £12,950 or £48.14 per bottle.

Let’s say we manage to sell the cask for the 15 per cent return advertised by many cask investment companies. With no other costs, assuming no losses, and following the sums above, we reach a per-bottle cost of £50. Then there’s distributor and retailer margin (both 30 per cent) and VAT, giving an RRP of £102. That’s way beyond the market value of a three-year-old, even if we assume a commercial buyer can reduce costs and reclaim VAT.

I think the seller has inflated the cask’s price by around 50 per cent. If purchased for £1,900, the same sums give us an RRP of £80 – still high, but closer to reality, especially if we waited a few years before bottling. This napkin maths suggests the seller has already skimmed the short- to medium-term earnings – making this a deal better left on the table. That’s strike three, cask investment company. You’re out.