Whiskey Business: What Is a Whiskey Cask Investment, and Is It Lucrative?

Whiskey Business: What Is a Whiskey Cask Investment, and Is It Lucrative?

Barrel for barrel, nothing beats a whiskey cask investment. Here's why cask whiskey could be the biggest alternative asset of the year.

Whiskey Business: What Is a Whiskey Cask Investment, and Is It Lucrative?
Guy Ovadia

Published Mar 18, 2022Updated Aug 8, 2022

Whiskey

Whiskey

Getting Started

Getting Started

Balanced Investing

Balanced Investing

As the stock market flatlines and new asset classes like cryptocurrency remain volatile, investors who are abandoning the traditional market are flocking toward physical assets with more intrinsic value. 

For investors, whiskey casks are a lucrative opportunity to buy a tangible asset that will gain intrinsic value within a relatively short timespan.

While investing in spirits isn't new, many investors are thinking bigger than just a bottle or a case. They're looking to capitalize on rising global demand for Scotch and Bourbon with a whiskey cask investment.

The BC20 Whisky Cask Index found that since 2018, whisky cask investments performed better than the S&P 500, gold, and even Bitcoin. So here's why a whiskey cask investment could be the best market hedge in 2022 and beyond.

What is a whisky cask investment?

While the best entry point to whiskey for most retail investors is purchasing bottles with high-end labels, more bullish investors have turned to whiskey casks. Because whiskey is required to age for at least three years, distilleries often endure prolonged periods without an injection of funds from retail sales. As a way to make ends meet and clear up storage space, distilleries often sell their immature whiskey casks to investors. Wholesaling of whiskey casks is now a common way for distilleries to fill the gaps between distillations.

For investors, whiskey casks are a lucrative opportunity to buy a tangible asset that will gain intrinsic value within a relatively short timespan. While the legal age requirement for most whiskies is a minimum of two to three years, many whiskey casks can potentially appreciate in perpetuity because the liquid only gets better and more expensive over time.

Although all barreled whiskey is almost certain to see long-term appreciation, the best-performing whiskey investments are Scotch and Bourbon.

Whisky cask investment returns

Secondly, the emerging global demand for Bourbon whiskey has made Bourbon barrels one of the most lucrative spirit investment opportunities. According to whiskey cask investment platform CaskX, the average bourbon cask appreciated by over 13% every year since 2010. Since most Bourbon barrels are significantly cheaper than Scotch casks, and the market for Bourbon is growing faster than ever before, Bourbon cask investments could be more lucrative considering long-term market projections.

When it comes to getting the best return on your whiskey cask investment, the focus should be on Scotch and Bourbon. First off, the market for Scotch whisky has already experienced a period of unprecedented growth. While it's important to watch out for scams and misleading investment opportunities, Scotch is the most established whiskey variety with popular products across all calibers of price and quality. While Scotch investments are usually more expensive, and registering with Her Majesty's Royal Customs can be complicated, the desirability of Scotch whisky makes the value of the casks most likely to appreciate.

Whiskey cask investment cost

While whiskey cask investments often perform better than many traditional assets, the significant overhead poses a barrier to entry for smaller investors. Whisky casks can range anywhere from just over $1,000 at the cheapest to up to $200,000 for the most luxurious Macallan Scotch casks. That said, the typical entry price for an unmatured investment-grade whiskey cask is approximately $4,000. The main caveat to this is that these price ranges vary once you narrow down the options to either Bourbon or Scotch.

Scotch casks tend to be more expensive than Bourbon because the former is more established and in higher demand than the latter. On the one hand, Scotch casks range anywhere from $2,600 to upwards of $8,000. Higher demand translates to higher prices but also means the investment has a more certain return horizon. On the other hand, demand for Bourbon is growing but most brands haven't achieved the level of provenance that established Scotches have. Although the prices for a Bourbon whiskey cask generally start at $1,800 and can exceed $4,000, barreled bourbon prices can go lower or higher depending on several factors.

Risks of cask whiskey investing

Aside from the inherent differences between investing in Bourbon casks vs Scotch casks, the main factors that impact the price of a particular whiskey cask are the original distillery, age, volume, and local taxes. Whiskey from distilleries with provenance or strong reputations tend to be more sought after and expensive than ones from less established distillers. While casks from lesser-known distilleries are usually cheaper and have a higher potential for growth, they're riskier to invest in.

Age and volume of whiskey cask

Two of the most important traits of a whiskey cask are its age and volume. Volume just means how much whiskey is in the cask measured either by the liter or bottle. Volume ranges significantly—anywhere from 200 to 400 bottles—so investors need to take note of this metric. Next, age is mostly referring to how long the whiskey has been in the cask, and the age of a whisky is strongly correlated with price. Additionally, distilleries usually have a recommended bottling date, which is a helpful metric for investors to project the ideal duration of the investment for maximum returns.

Taxes on whiskey

Most countries with prolific whiskey distilling regions impose significant taxes on whiskey among other alcoholic beverages. While it is common practice for distilleries to include tax in the price of wholesale whiskeys, like cases and barrels, it is important to be familiar with how this expense will impact your investment. For instance, if an American investor is looking to buy casks of Scotch whisky, Irish whiskey, or Japanese whisky, they should be familiar with local sales and excise taxes in each region. Additionally, international whiskey cask investors must account for customs expenses imposed by local jurisdictions.

Emerging whiskey markets

Emerging whiskey markets

Will Asian whiskeys reach Scotch prestige levels?

How can I invest in cask whiskey?

Although investing in whiskey casks is easier, faster, and more convenient than ever before, most cask investing schemes are not open to retail investors. While some cask whiskey investing opportunities will advertise as open to all, this is risky because they're often misleading at best or elaborate ponzi scams at worst. One of the best and least risky ways for retail investors to profit from growing demand is by investing in whiskey stocks

Although it's recommended that retail investors stay away from investing directly in whiskey casks, the space is bursting with opportunities for accredited investors to get a whiskey cask in their portfolio. If you're an accredited investor and think you can benefit from exposure to whiskey casks, the best way to get there is with an alternative investment platform like CaskX

Investing in whiskey casks is more accessible than ever on CaskX, a barreled spirit investing platform that lets qualified investors buy casks of unaged Bourbon and Scotch and stores them for up to ten years. CaskX's advisors help investors form a strategy according to their risk tolerance, desired investment horizon, and overall budget. Then, CaskX helps investors time the market over the life of the investment to achieve the greatest possible returns.

caskx
CaskX

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