Is cask whisky really a safe investment?
At one time, most distilleries offered private customers the chance to own a cask of whisky. It was a link with whisky's origins as a spirit made by farmers for their local communities. These days the private casks may be few and far between, but there is still considerable demand. Let's face it, owning your own cask of whisky gives you a lovely fuzzy warm feeling. No surprise then that Whisky Magazine regularly gets letters asking 'how can I buy a cask?' Well, the answer is, with a very few exceptions, you can't.
Distillers have either stopped the practise because of the huge amount of paperwork or been scared off by the activities of fraudsters in the late 1990s. One of the few firms to continue with the practise is Bruichladdich, but even it is stopping the offer next year (full details on www.bruichladdich.com). The La Résérve-Murray McDavid team have years of experience and impeccable credentials as brokers, at one stage selling casks of Macallan, Glenfarclas, Ardbeg and Springbank.
"We were virtually the only ones selling to private individuals in the early 90s," recalls Simon Coughlin. "We've done the same with Bruichladdich, allowing people to be part of this inaugural year. We won't be doing it again this year (2002) because frankly we'll need all the stock."
Isle of Arran saw cask investment as a way of generating much-needed cash in its early days, though new MD Andrew Kettles has little time for the notion. "I'm not an advocate of firms selling to private individuals. The reasons for doing it would either be to get rid of stock or, as in Arran's case, to raise cash to lay down stock with the long-term aim of bottling our brand at 10 years. What has happened is that the investors will have a 10-year-old Arran before we do. In this way you can easily lose control of your own brand. It's easy with hindsight to say it was a mistake, but at the time there weren't many other options. Selling your stock to any individual is a dangerous road to go down."
Damaging a brand is bad enough, but much worse can happen. Any business which combines a premium product and private capital will attract con artists. Arran itself was swindled in the 90s along with many private investors who believed that buying a cask would guarantee them a hefty return when their whisky matured. The activities of whisky scammers appears to have diminished in recent times, following a number of successful prosecutions by the Serious Fraud Office and the relentless investigations of journalist Jim Budd, but what happened is a sobering reminder of the potential perils of 'investing' in a cask of malt.
When you buy a cask of whisky you are making an investment in pleasure. It is not a way to make millions. The price of whisky fluctuates depending on whether the industry is in surplus or not. The best any investor can expect is to be able to bottle his whisky for roughly half the retail price, while the chances of selling a single cask on the open market is extremely unlikely. The distillery which made the whisky may wish to buy it back, but only if it has oversold and needs mature stocks. Even then the price will hardly buy you an island in the Caribbean. The notion that whisky appreciates in value by a set amount every year is fantasy.
That however was the line spun by Cavendish/Hamilton Spirit Management, the directors of which were jailed in 2000 after a swindle which netted them £6.2m. Most of the other firms operating similar scams were closed down by the SFO in the late 90s though some have moved abroad. The activities of Glen Stewart International is worthy of close scrutiny, while Australian-based firm Gleneagles Spirit Management is still active. It sells casks sourced from the Speyside Distillery and from the Tasmania Distillery Co Pty. Like Isle of Arran, Tasmania is a new venture which is trying to raise cash by selling casks of new make to investors - though potential investors should be aware this is not an opportunity to make a significant return.
Also technically active is Grandtully Distillery, part of a web of firms linked to Cavendish/Hamilton Spirit. Investors were offered new fillings of spirit from 'Grandtully Distillery', which had actually been sourced from the Speyside Distillery. This shows how distillers can easily become embroiled in these fraudulent activities. There is no suggestion that Speyside did anything illegal and it still sells a yearly tranche of whisky to private individuals. Burn Stewart was also conned into selling casks of new make for around £300 each to Cavendish, which would then sell the spirit on to its customers for up to £1,000, telling them it would increase in value by at least 18% every year.There are other more basic considerations should you still wish to lay down a cask.
Can you guarantee when it was distilled? Is your precious investment in first-fill, second-fill or a knackered third-fill barrel that should have been turned into garden furniture? "Investors don't really understand the difficulties they could get into," says Kettles. "They forget they have to pay duty and VAT, don't consider how they get it bottled and the fact that at the end of the process they are likely to be left with 50 cases of malt. If you want to invest in whisky don't buy a cask, invest in the company. And we welcome investors."