Some useful guidance for those new to whisky investment

Welcome to the world of whisky investment! Whether you're a whisky enthusiast looking to turn your passion into profit or an investor seeking a unique opportunity, this guide will help you navigate the intricacies of whisky cask and bottle investment. While we'll touch on both, we'll focus more on cask investment due to its complexity.

Understanding the Terminology

Before diving in, let's familiarise ourselves with some key terms:

  • Cask - A wooden barrel used for ageing whisky. Common types include ex-bourbon and sherry casks, each imparting distinct flavours to the spirit.

  • ABV (Alcohol By Volume) - The percentage of alcohol in a given volume of liquid. For whisky, this typically ranges from 40% to 60%.

  • Regauge - A regauge is essentially a sampling of your cask to determine it’s health. We look at the total volume of whisky and the strength. This is an essential activity that should take place across the lifetime of your cask. Aquitio will highlight when your cask is due a regauge.

  • RLA (Regauged Litre of Alcohol) - The amount of pure alcohol in a cask, measured periodically with the regauge.

  • OLA (Original Litre of Alcohol) - The amount of pure alcohol initially filled into the cask. Essentially the same as RLA but explicitly taken upon filling.

  • Agents - Agents or brokers are common in the industry and help facilitate purchasing and selling requirements of investors.

The Journey from Distillation to Cask

Whisky production begins with distillation. Here's a brief overview:

  1. Malting: Barley is soaked in water and allowed to germinate, developing enzymes that convert starches to sugars.

  2. Mashing: The malted barley is ground and mixed with hot water to extract the sugars.

  3. Fermentation: Yeast is added to the liquid (now called "wort"), converting sugars to alcohol.

  4. Distillation: The fermented liquid is heated in copper stills. The alcohol vapour is collected and condensed, resulting in a clear spirit called "new make."

  5. Cask Filling: The new make, typically around 63.5% ABV, is filled into oak casks for maturation.

The Art of Maturation

Once filled, casks are stored in warehouses where the beneficial properties of ageing begins. During this process, several key factors come into play:

  • Angel's Share - As whisky matures, a small percentage evaporates through the wood each year. This loss, known as the "Angel's Share," typically accounts for 1-4% of volume annually. It also causes a gradual decrease in ABV. We typically assume a 2% loss, but regauges can help us refine these estimates.

  • ABV Degradation - There is also a gradual reduction in ABV over time. We assume 0.5% loss per year on this basis. The key thing to remember here is that the cask has to remain above 40% to be considered scotch whisky.

Managing: Taking control of your portfolio

For bottle owners, the experience is very visceral and real, if not tempting at times. Your asset is physically something you can readily view in your portfolio. For casks the story’s a little less tangible. On purchase, you’ll be issued some documentation certifying you as the owner and you might get an annual gift from the broker. But in essence, there’s little to no experience to endure and it can at times feel a bit too distant. That’s how we have felt in our early years as investors, ultimately it’s why we created Aquitio. To make the process far more tangible and to make the management and monitoring of your casks that much easier.

Bottling: Turning Liquid into Gold

When the time comes to realise your investment, you’ve two options. The first is to sell to a distillery, broker or bottler. The second is to bottle the whisky yourself.

If you are considering bottling. Key factors include:

  • Age Statement: Generally, older whiskies command higher prices. However, balance this with the increasing loss due to the Angel's Share.

  • Cask Strength vs. Dilution: Cask strength whiskies (bottled at the ABV in the cask) are often more valuable but yield fewer bottles. Diluting to a lower ABV (typically 40-46%) increases the number of bottles but may reduce the price per bottle. This is a decision very much influenced by the cask, it’s health and demand.

  • Single Cask vs. Small Batch: Decide whether to bottle your entire cask as a single cask release or combine it with other casks for a small batch release.

  • Packaging and Presentation: High-quality packaging can significantly increase the perceived value of your whisky.

At Vintaga, we’re not experts when it comes to bottling. But we do work with businesses of whom we trust their judgement. If you’re not getting the help you need from your agent, get in-touch.

Finding Buyers for Your Whisky

Potential buyers for your whisky cask or bottles include:

  • Independent Bottlers: Companies that purchase casks to bottle under their own labels.

  • Blenders: Businesses looking for specific flavour profiles to include in their blended whiskies.

  • Other Investors: Some investors prefer to purchase mature casks rather than waiting for new-fill casks to age.

  • Private Collectors: Enthusiasts who appreciate unique or rare whiskies.

How to Get Started in Whisky Investment

Whisky investment is an investment into a luxury asset market. That in itself carries risk to counter the clear reward potential. Though at Vintaga, we don’t try act as investment advisors, please ensure any monies you do invest are done so responsibly and are affordable.

  1. Research: Familiarise yourself with different distilleries, their reputations, and market trends.

  2. Choose a Reputable Broker: Look for established cask brokers with good track records and transparent practices.

  3. Verify Authenticity: Ensure you receive proper ownership documentation for any cask you purchase.

  4. Consider Costs: Factor in storage fees, insurance, and potential tax implications in your jurisdiction.

  5. Diversify: Consider investing in multiple casks or a mix of casks and bottles to spread risk.

  6. Be Patient: Whisky investment is typically a long-term strategy. Be prepared to wait several years to see significant returns.

Conclusion

Whisky investment can be a rewarding venture, both financially and in terms of the knowledge and appreciation you'll gain for this historic spirit. Remember, like any investment, it carries risks. Always invest responsibly and within your means.