NOEL ON WHISKY

Sunday, 20 February 2022

INVESTING IN WHISKY A PATHWAY TO PROFIT-PART I

Whisky: Investing in Liquid Gold

In a world fraught with economic uncertainty, investors are looking for ways to diversify their investments as a hedge against inflationary shifts. Bitcoin has skyrocketed, tech stocks have soared, housing prices are up and down depending on your location and now whisky is seeing a spike in investor interest.

Scotch whisky remains the global whisky superstar, putting all others in the shade. It is a drinks behemoth — the single most traded spirit on the planet and accounting for 75% of Scotland’s entire food and drink export revenue. The secret to Scotland’s success is its adaptability and today it is leading a move to premium whiskies. The global palate is becoming more refined and the value of the high quality Scotch single malt market is set to grow by over 11% a year to 2023.

Investing in Cask Whisky

One of the main reasons why a fine whisky cask appreciates in value is its ability to improve as it ages, unlike the average product which goes stale or simply expires, to quote from labels. In effect, when it comes to investing in whisky casks, time is your ally, much like investing on the Bourse in an identified quality stock. But when it comes to investment in a whisky cask, it may be the most important factor of all. In general, the longer you can leave it to mature, the richer you will be. The definitive word here is can. Every single cask in use, no matter its origin and handling, has a finite life, after which there will be negative Return on Investment. This facet defines the best age or time to sell your cask, as will be explained later. The cask could well be reworked and used again!

Producing whisky costs a lot, but one way distilleries capitalise on their efforts is to allow private investment. By investing in newly created whisky, the private investor can leave it to mature for as long as they like, making annual profits of 10% to 30% depending on how and where they market/sell it. Meanwhile, the distillery generates cash-flow to keep things ticking over.

Buying A Cask

If you were tempted to buy your own cask of whisky as a means to “cut out the middle man” and to obtain some bottles of whisky cheaply, stop reading here and head down to your local liquor outlet instead. Commercially available whiskies that you find in these outlets or in the online stores enjoy economies of scale that are beyond the humble cask-buyer, and the journey of buying, maturing, and bottling your own cask is not a path to cheap whisky. So now that you’re considering this for the right reasons…

Several Scottish distilleries offer cask purchase schemes and, in fact, with the huge number of new distilleries establishing and opening in the last few years, the opportunities to buy your own cask are better than they’ve been for a long time. Ardnamurchan, Glasgow, Ballindalloch, Lagg, Annandale, Lindores Abbey, Kingsbarns, and Ardnahoe are all just some examples of Scottish distilleries that have (or had) private cask purchase offerings in place for individuals. These smaller, privately owned distilleries need cash and investment up front, and so offering casks as fresh fillings to the public is a nice way for them to get the early injections of revenue they need. However, the cost and value varies tremendously. For example, both Ardnamurchan and Glasgow offered 200 litre ex-bourbon barrels for around £2,500, whereas Lagg and Ardnahoe are currently charging £6,000 for the same size barrel.

The schemes vary from distillery to distillery but, in most cases, your original buy-in purchase price will afford you somewhere between five and ten years of warehousing and a sample sent out to you once a year. Additional fees and costs apply if you want to mature the cask and keep it warehoused beyond the initial allowance, or to obtain extra samples.

According to The Whisky & Wealth Club, an organisation set up to connect investors with suitable whisky investments, investors purchased record palettes of the liquid gold in September. This boom at The Whisky & Wealth Club came as it sold 111.2 palettes of a new-make premium spirit for a total investment of over £1.8 million. This was nearly a 54% rise on its August sales.

Founded by Jay Bradley, owner of The Craft Irish Whiskey Co, The Whisky & Wealth Club is a specialised cask whisky wholesaler breaking down the barriers to entry in this ancient industry. Although it’s technically called a club, the private investors are not joining what has traditionally been an exclusive club for industry insiders. Instead, The Whisky & Wealth Club pairs private investors up with wealth advisors as a guide to suitable investment opportunities in the whisky space. Much in the same way that a financial advisor guides a retail investor on suitable investments for their SIPs. They can then choose to buy, hold, bottle or sell their premium cask whisky as an investment vehicle that suits their personal circumstances and whims.

Another reason whisky cask investing is popular is it doesn’t incur VAT or Capital Gains Tax.

How Much Does a Whisky Cask Cost?

The investment club or broker strikes a deal with the distillery for a limited edition run at a discounted price. The investor then buys a cask outright via the club. This is then stored in a secure warehouse and insured. The investor patiently waits, and when it’s time to profit from the deal, the investor should expect to enjoy returns of up to 20%.

The cost of buying a cask varies. Factors affecting price include brand, variety of cask used, distillery location, and many more. The cheapest cask you may find could be around $2000, but they can go upwards of $10,000.

One unique factor affecting taste, and thus price, is the variety of casks being used. Scotch whisky likes hand-me-downs and doesn’t respond well to being put in a brand new wooden cask. So the most common and cheapest option is for it to be birthed in a bourbon cask, often shipped from America to Scotland. A first fill is when a cask, previously used to store Bourbon, is first filled up with whisky. A refill is when that same cask is filled with whisky for a second or subsequent time. Prices for these casks tend to start around the £2,500+ ($3,350) price point. Of course, that’s not the only consideration, so prices vary wildly. A cask that has previously contained sherry may well be double that and red wine, dearer still. Then there’s the option for it to be peated, or unpeated, single, double or even triple distilled.

So many options can be overwhelming and that’s why an investment broker can keep you right. The Irish Whiskey & Wealth Club and HMRC approved Whisky Investment Partners are just two of many to choose from.

There are several exit strategies available to the investor. Whether opting to sell to a whisky brand, bottle under your own label, sell at auction, directly sell to a broker network or consider alternatives provided by the broker.

A Malt or a Blend? Exclusivity Equals Profitability

Whiskies are not created equal, the cheaper ones are blends, containing only 10% to 20% of malt. True malt whiskies are a higher class and more appealing to investors. A unique brand expression, that’s not mass-produced, gives whisky its prestige and desirability. But the true value of a whisky comes from a selection of factors; age, quality, taste, brand, rarity and exclusivity all contribute to its worth.

That doesn’t mean all blends are bad, though. Jack Daniels and Johnnie Walker are blends, but retail investors can still buy exclusive bottles from these brands that hold their value.

The Whisky & Wealth Club’s unique selling point is its access to exclusive runs from top-notch distilleries in Scotland and Ireland. An example of these exclusive runs is its release of Bunnahabhain Staoisha in September. This hailed from an esteemed Islay distillery and was limited to an undeclared number of casks. An average whisky cask has a volume of 250 litres. This produces around 385 75cl bottles. The pitch was perfectly curated and highlighted the reasons Islay whiskies in particular are set to be a very valuable commodity in the future.

Whisky Investing Algorithm

In response to this newfound demand for whisky investment options, financial analysts have gone so far as to develop the very first data modelling algorithm. This is specifically designed for investors in the whisky cask market. These analysts hail from specialist whisky investment firms where they have the knowhow and experience to make clear judgements on the market. The purpose of this algorithm is to furnish prospective investors with a set of metrics that give them unique insight into the industry.

Braeburn Whisky is another Whisky Cask Investment Specialist promising investors a fun, profitable and fulfilling ride to investing in this intrinsically appreciating asset. It has teamed up with Cask 88 to create its BC20 Whisky Cask Index. So far, this index shows the whisky cask market to have a steady annual growth of around 13%. Their recent research shows that whisky investment returns have surpassed that of the S&P 500, Bitcoin (this may now be debatable) and Gold. Despite the raging pandemic, this index continued to rise during the first six-months of 2020. Its data also shows that casks from the top three whisky distilleries offer projected returns close to 20%. Islay whiskies showed a growth rate of 16.3% YOY.

According to its data, Scotland has 22 million casks of whisky maturing in storage, giving it confidence that trades will grow in quantity and cost. Gracing the top of the Distillery Cask League Table is Laphroaig approaching 20% projected annual capital growth. This is closely followed by Bunnahabhain, Staoisha and Macallan. Malt whisky must mature for a minimum of 3 years to be called whisky, but maturation periods can run upwards of 20 years. Due to the costs to store the whisky, the more mature the product, the more expensive it will be.

In recent years the casks that have aged for over 20 years are achieving remarkable valuations. Casks aged over 45 years have sold for over £600,000. But it’s newly casked whisky (aka New Make Spirit) that younger investors are after because with time on their side, they can afford to reap big returns in the future.

The whisky maturing process takes place in the cask. Once it’s been bottled it stops maturing and that’s the age appearing on the label. This is why casked whisky over 20 years old is considered rare and the older it is, the more valuable it becomes. In 2019 a rare bottle of Macallan 1926 sold for an extravagant $1.5 million!

None of the distilleries followed by the BC20 Whisky Cask Index have shown negative returns. This is because it’s a booming and lucrative area of investment to be in.

Irish Whiskey vs Scotch Whisky

The Irish whiskey market is rebounding and is projected to grow for the next two to three decades. Scotch whisky is more established than the Irish whiskey market, with Scotch whisky being a major contributor to Scotland’s food and drink exports, accounting for 70% of them. This has a value of £4.7 billion annually to Scotland. In fact 41 bottles a second leave Scotland’s shores, making their way to 175 global markets.

Demand is growing and new brands are entering the space. In recent years (prior to the pandemic) gin popularity was exploding with new distilleries popping up all over the place. Many of these make gin because production is quick. But a lot of them will also branch into whisky production as a future income stream. So we can expect those brands to come online in the years to come.

An example of this is Greenwood Distillers, a boutique distillery hidden in a misty valley in the Scottish Highlands. This arm is called Ardross Distillery and it’s only begun producing its stylishly packaged ‘Theodore, Pictish Gin’ this year, but has big plans to branch into creating rare, exquisite and aged whiskies. It now owns some of the most unique single malts Scotland can offer and has further plans to expand through Japan, the US, France and Mexico.

Whisky: A Luxury Investment

Whisky investing is taking on a life of its own and very much up there with other favoured alternative investments such as art, rare coins and fine wine. There are a number of cask investment houses now making it easier for retail investors to jump on the whisky bandwagon, but it’s important to avoid pitfalls too. While the middlemen make the process easier, they can also cut into the profits. Nevertheless, these cask wholesalers offer discounts to limited batches and exclusive runs.

This prospering industry is not yet regulated, so it’s important to do your homework. There are trade associations that legitimate investment firms can join to protect the industry’s reputation. The Whiskey & Wealth Club works with a compliance officer to ensure that its compliance-ready for when the Financial Conduct Authority makes its mark.

Another risk is whisky going out of fashion, but as it’s so ingrained in Scottish and Irish heritage, which is spread throughout the world, that doesn’t look to be an imminent concern.

When it comes to launching a new whisky, an alternative route to branding is for the company to buy mature whisky from investors, which it then brands as its own. This is one reason for the increasing popularity of cask investing as it leads both parties to cash in on the rising demand for these new and exciting brands.

Haig Club is a single grain Scotch Whisky popularised by David Beckham in partnership with Diageo (LON:DGE) and British entrepreneur Simon Fuller. Several other celebrity endorsements quickly followed Beckham’s step into the whisky arena. Conor McGregor has his own Irish Whiskey named Proper No. Twelve, after the area of Dublin he comes from. Bob Dylan brought out a trio of whiskey blends, Metallica have their own American Bourbon named Blackened, and Matthew McConaughey also has a Bourbon called Longbranch.

In a 2020 report rare whisky surpassed classic cars on the Knight Frank luxury investments index, achieving its very own Knight Frank Rare Whisky 100 Index in the process. In the luxury investments index, whisky has risen by 564% in value during the past ten years.

Investing in Luxury Liquor Brands

For investors looking to diversify, it’s not just whisky that offers potential gains. The liquor market is taking on a life of its own.

LVMH Moet Hennessy Louis Vuitton SE, is a luxury goods conglomerate, headquartered in Paris and distributed to every corner of the planet. Its share price has grown phenomenally in the past decade generating spectacular shareholder returns.

Bernard Arnault, chairman and CEO of $LVMH is now one of only five centibillionaires in the world. (A centibillionaire is someone who has personal wealth of more than $100 billion.) He joins ranks with Elon Musk, Jeff Bezos, Mark Zuckerberg and Bill Gates.

LVMH whisky brands include Glenmorangie and Ardbeg, while some of the other luxury goods under its label include Tag Heuer, Moët & Chandon, Sephora, Louis Vuitton, Hennessy (Cognac) and more recently it acquired Tiffany.

If you’d prefer to spread your investment in luxury goods, across a selection of them, you could opt for a luxury goods ETF. One such ETF is The GLUX – Amundi S&P Global Luxury UCITS ETF – this tracks the S&P Global Luxury Index’s performance. Along with LVMH, this includes Pernod Ricard SA (EPA: RI) a French drinks giant with whisky brands that include Chivas Regal, The Glenlivet, Jameson and luxury Scotch Whisky Royal Salute, it also owns many other alcoholic beverages.

Hollywood actor Ryan Reynolds recently sold his premium gin brand to Diageo plc (LON: DGE) for $610m (£460m). In striking the deal he agrees to be the face of Aviation American gin for the next decade. Diageo is a fan of the celebrity endorsement, having previously collaborated with George Clooney and David Beckham.

Diageo is another stock that has rocketed over the past ten years. Its share price faltered in 2019 but has been gaining ground during November. Whisky is such an important part of Diageo’s portfolio, it’s committed to investing £185 million to revamp its Scotch whisky visitor offerings at distilleries around Scotland.The highlight of this is an immersive visitor experience at its Johnnie Walker, Princess Street in Edinburgh, which tells the story of the brand.

Remy Cointreau SA (EPA: RCO) creates premium spirits such as its opulent champagne cognacs. Its whisky portfolio includes Bruichladdich single malts, Port Charlotte and Octomore, as well as Westland American whiskey and Domaine des Hautes Glaces French whisky. Remy’s share price rise has been more volatile over the past decade than LVMH and Diageo, but long-term holders will still be sitting on a significant profit.

Hidden Costs

The “hidden” or extra costs – and what catch so many people out – are the costs involved once the whisky is matured and deemed ready for bottling. Nine times out of ten, the purchase price you pay at the start covers only the cask and spirit up until it’s deemed ready to bottle. For whatever happens after that, the ball is in your court, as are the expenses. In the case of Scotch, the whisky must be bottled in Scotland, and so not only do you have to pay for bottling costs (in Great British Pounds, mind you, which is unlikely to favour your particular exchange rate), you also have to ship those bottles and all that extra weight of glass. Freight costs are determined by weight, and so in the case of a cask that yields, say, 250 x 700ml bottles, you’re paying to ship roughly 330kg of goods – of which 45% is just the weight of the glass! Printing and labelling costs also have to be paid for at the Scottish end (again, in pounds), and we haven’t even come to transport costs yet.

Then, there’s the biggie of them all – the cost of the duties, excise, taxes, and import costs to bring your whisky home to your own country. Take the case of Australia. Those that forked out, say, £2,500 to buy the cask at the start (roughly $4,600AUD) will be up for an additional $11,600 in local taxes (approx), depending on the bottling ABV! (The rough indication given here was based on 250 x 700ml bottles at a strength of 58% ABV). If you don’t have access to a genuine exporter who’s registered for UK VAT and Duty and can’t export under bond, then it’s likely you’ll also be up for the costs of all the UK excise and taxes (about an extra $6,400 based on the same assumptions as above), as well as those at your local end. And the costs of engaging a Customs broker to handle your Customs clearance still haven’t added in; the cost of freight itself (varies, but can be anywhere between $3 to $7 per bottle for sea-freight, depending on your carrier and what rate you can negotiate as a small, one-off player). Next, the additional costs of having to obtain a liquor licence (for importing a commercial quantity of alcohol) and – once it arrives here – space to hoard 250 bottles! And so, as many people have found to their surprise and dismay, what started out as a fun, sentimental venture ends up being an exercise that has become unaffordable. As a single player, doing a one-off exercise with a single bottling, the economies of scale simply do not exist.

Of course, many of these issues can be ameliorated by forming a syndicate and going in as a group. One person may struggle to deal with and pay for everything, but splitting a cask and its costs between, say, 20 or 30 people is a far more manageable affair.

Conclusion

Investing in whisky and luxury liquor appears to be an interesting and potentially lucrative space to be diversifying your financial investments. Just don’t be tempted to drink away your profits!

Part 2 of this article follows.

A major portion of this post is a reprint of an article by Kirsteen Mackay on Value The Markets
https://www.valuethemarkets.com/2020/11/20/whisky-investing-in-liquid-gold

INVESTING IN WHISKY A PATHWAY TO PROFIT? PART II

ALL THAT GLITTERS MAY NOT BE GOLD: STAY AWARE

In continuation of my previous post on the same subject, imagine your very own cask of whisky….it’s the ultimate indulgence, isn’t it? When you love whisky this much, owning your cask – or investing in one – is the icing on the cake, yes? But icing can go off if you’re not careful….

There’s no denying that there’s a degree of romance involved. It’s like owning your own little piece of Scotland, not to mention that it affords great bragging rights with your mates on WhatsApp and Signal. And, if you buy a cask when it first gets filled, you also get the enjoyment of watching it mature and tasting it at various intervals along its maturation journey – almost like watching your kids grow up!

It all sounds great on the surface, and plenty of people pay for and acquire a cask with the expectation that nothing could possibly go wrong. After all, what’s the worst that could happen? In ten years’ time, you’ve got 200-350 bottles of your own whisky to drink, sell, or give away! But, for many people, it seems this end outcome causes more problems than joys. “How? Why?”

Diehards in the Scotch Malt Whisky Society regularly get emails from people who are trying to sell and off-load their cask. The circumstances are invariably the same each time: They purchased a cask 8 to 12 years ago, but found that the additional costs and expenses involved to bring their bounty home were prohibitive, and they can no longer afford (or risk) to complete the deal.

In the period from 2008 to 2014 or so, such experts were getting at least two to three emails each month from people around the world who were trying to offload their cask. Several distilleries – Springbank and Bruichladdich being two good examples – had cask purchase schemes in place for the general public in the late 1990’s and early 2000’s, and when these casks reached maturity at around 10 years of age, the purchasers discovered all the additional costs that weren’t instantly evident at the start of the process 10 years earlier. We’ll see what these costs and risks are in just a moment….

There’s a difference between owning or buying a cask of whisky and investing in one. The former implies that you’re doing it for a bit of fun, and you plan on drinking, enjoying, and sharing your spoils when you eventually decide to bottle it. Investing in a cask, on the other hand, suggests that the exercise is purely a financial affair, and you’re hoping to make a few bucks out of the deal. Both alternatives are very different prospects, so let’s look at them separately:

BUYING A CASK

As explained in Part I, if you were tempted to buy your own cask of whisky as a means to “cut out the middle man” and to obtain some bottles of whisky cheaply, stop reading here and head down to your local liquor outlet instead. Commercially available whiskies that you find in these outlets or in the online stores enjoy economies of scale that are beyond the humble cask-buyer, and the journey of buying, maturing, and bottling your own cask is not a path to cheap whisky. Get back to mother earth now.

HIDDEN COSTS

But if you’re flying this exercise solo, there are also some practical issues to deal with. It all sounds fun at the start, but it’s a very different prospect when 250 bottles suddenly lob up on your doorstep. How much of this do you really expect you’ll be able to consume yourself? How much can you afford to give away to family and friends? If you want to sell a few bottles (or a few hundred bottles) to re-coup some of your costs, how can you realistically and legally move that stock? Your close friends or the colleagues you know through your whisky circles might drop around to your house and exchange cash for a bottle, but that might account for just 30 or 40 bottles if you’re lucky. If you want (or need) to move 100, or even 200 or more bottles, then the complications and costs of acquiring a liquor licence come into the mix, and you’ve STILL got to find your market and buyers…and all at a price where you at least break even on your costs.

Some readers will be familiar with Facebook whisky groups like Dram Full ex-Australia, and plenty of other similar country-centric groups on Facebook and other Social Media forums. With Social Media forums having a combined Facebook group membership of over 100,000 people, did you think a simple ad or announcement on Facebook would easily find your market and help you shift your bottles? But joining a Facebook group and being willing to spend $200 or more on a bottle of whisky are two very different things and it seems a large proportion of those group’s members baulk at paying more than $100 for a bottle of malt when it’s sight unseen. Experience has shown that social media groups will only help one move 30-50% of your cask, if one is lucky. And they’ll want or expect discounts or other incentives, too, so the revenue you get might not be what you banked on. Moreover, if you’re inviting people from other cities and states to buy your bottles, you’ll also need to organise and handle all the packaging and posting – no small or convenient task.

So, after all that, is it really worth it? Is the work, cost, effort and expense rewarded? I guess that depends on whether you find your cask tasty and how much you’re prepared to drink or give away. But it certainly is nice to see your name on your own label.

INVESTING IN A CASK

Most of the pitfalls and additional expenses associated with investing in a cask are the same as what we’ve already outlined above. The key difference here is that the ultimate objective is to make money. That means divorcing yourself from the romance and fun of the affair, and focussing purely on ensuring every last drop of spirit is sold.

In such an instance, the easiest – and recommended – path is to simply sell the cask off once it’s reached maturity, i.e. let someone else take on the risk and hassle of bottling the spirit and selling it as a labelled product. A cask of 10 years old matured whisky is worth more than a cask of freshly-filled newmake spirit, and so the exercise simply becomes an 8 to 12 year long-term investment that relies on the capital growth of your asset. Of course, like every long-term investment, there are risks involved, and you need to consider these:

Will the whisky industry still be buoyant in 10 years’ time and will there be demand for your cask? If a bust follows the current boom, your cask might not attract the same interest or price-tag you anticipated when you first invested.

You may be obliged to pay UK duties and taxes, depending on how the transfer of ownership takes place and how the deal is negotiated. Bear in mind that excise, duty, and VAT generally increase over time, and so the taxes due in 10 years’ time will undoubtedly be more than what you can currently calculate.

Casks can get damaged. Leaks are not uncommon, and whilst it’s been a long time since a fire ripped through a Scottish warehouse, fire and loss of your cask is also an ever-present risk. Or, as many distilleries found out in 2010, so is collapse and damage of a warehouse under extreme snow! Most cask investment schemes offer insurance against such losses, up to an extent, but you’d want to check the fine print for yourself.

This is only applicable in the case of a sherried cask, but what if your cask is tainted with sulphur? If the sale of your cask at the end of its maturation relies on sending samples out to prospective buyers, you might be in trouble if those doing the sampling hold an anti-sulphur sentiment.

How reliable is the investment scheme and the distillery? Some distilleries offer schemes whereby the distillery buys the cask back from you once it’s matured, and the terms and prices of that buy-back are written into the initial contract. Beware of any investment scheme that sounds too good to be true. Remember that the end buyer of your cask – whether it’s the distillery, or a cask broker, or a whisky club such as the SMWS – has to meet all the costs associated with bottling, labelling, transporting, and selling the whisky, and it’s they that capitalise on the real or retail price of the whisky. You are effectively just a wholesaler and must accept the smaller margins. As investors in the infamous Nant Distillery found in Australia, not every investment scheme returns the dollars it originally promised. Matthew Hayden was among the losers.

Like any investment, consider what the return is and whether your money would be better placed somewhere else? You’re looking at least an 8 to 10 year wait for your return, and it’s not unreasonable to ask if your money would perform better if invested in some other fund or scheme for that same period.

Regardless of which of the above two routes you go down, remember that 10 years is a relatively long time into the future, and our crystal balls can get a bit cloudy when looking that far down the track. Your health may be a different prospect in 10 years’ time, as might your circumstances and address. If all the distillery knows about you is an email address, it’s easy for either party to lose track of one another if you re-locate or change your internet service provider. And, whilst it’s a morbid thought, if you were to accidentally die at some point, make sure someone in your family knows that a cask in a foreign land forms part of your estate!

This is what WhiskyInvestDirect posted about their Investment Scheme:

Good returns from whisky maturation have been achieved over many years, but historically only distillers and blenders could benefit. Until now, that is.

Launched in 2015, WhiskyInvestDirect changed that, by allowing private investors to buy quality whiskies at wholesale prices. Already some 3,500 users own enough to fill over 70,000 casks, that's the equivalent of 29 million bottles of maturing Scotch. Accounts range in size from £700 to £750,000.

Economies of scale mean your whisky will be stored — still in the barrel — at exceptionally low cost, in the original distiller's bonded warehouse. Its safe storage there is evidenced every month by our published audit.

You will own the whisky as it matures, and when you decide to sell, via our trading exchange, you'll receive a transparently competitive price from other users and industry bidders. To date, mature whisky bought back by the trade has realised an average annualised return of over 10% for private investors — after all costs.

Together we profit through tackling this industry's greatest problem — the large working capital requirement of financing maturing stock.

On the other hand, investment specialists at Rare Whisky 101 (RW101) have expressed “worry” over the increased number of inexperienced investors buying new make spirit.

RW101, a rare whisky indexing, valuation and brokerage firm, recently released its review, outlining performance of rare whisky on the secondary market last year.

RW101 said it has brokered a number of sales of “exceptional” casks containing old liquid, including Ardbeg, Laphroaig, The Macallan, Highland Park and Springbank. However, the company said these sales were made by “sophisticated buyers with a wealth of experience in maturing stocks”, adding that it would not advise inexperienced investors or buyers to purchase “even the most sought after of casks” due knowledge about the loss of liquid in the maturation process.

In addition, the increased incidence of inexperienced investors looking at buying into new make spirit, that is, whisky that has not aged in the barrel, is “worrying” to RW101. “Malt and grain production is at an all-time high with distilleries being worked 24/7 to get more out of every last cell of years,” the group said. “Should the current negative trend for global sales of big brand blends continue, it would not be beyond the realms of possibility that there could be a whisky loch in a few years’ time.”

In order to generate funding to increase capacity, a number of whisky distilleries offer cask investment schemes to consumers, who can purchase either entire casks or shares in casks at a time before the liquid has aged.

While RW101 concedes that buying new make spirit from distilleries where it’s not usually obtainable “may not be disastrous”, the firm said such investments “might not yield the expected results”.

“The market for older casks of quality liquid from renowned top-tier distilleries, in our opinion, will continue to go from strength to strength,” RW101 said. “However, we’re strongly advising our customers against buying new make from less desirable single malt distilleries or new make single grain. Rarity, singularity and quality, again in our opinion, are crucial factors when looking at casks.”

HIGHER GLOBAL PROFILE FOR SCOTCH

The profile of this market, in recent years, has only been raised. And for investment, the opportunities have only grown with prices collectors are willing to pay exponentially increasing. Andy Simpson of RW101 (rare whisky 101) says:”One person’s investment or collection today can be another’s drink tomorrow. Stick to limited editions, single casks, discontinued bottles and older rarities from the iconic collector’s distilleries.”

TIPS THAT WILL STAND THE TEST OF TIME

TASTE TEST

In order to understand an investment, it’s imperative that investors get to experience it for themselves. Due to the pure nature of the commodity, this is possible by conducting educational virtual tastings. Not only does this give investors the chance to understand their investment from a different perspective, it also allows them to feel part of the investment they are making – something very unique in the general investment markets, as well as in the whisky sector.

KNOW WHAT TO LOOK FOR

It is important to look for a high alcohol by volume, which means you will get longevity in the spirit so that if you do intend on ageing it, whether it be anywhere from five to 50 years, a high ABV at any stage of investment will give you the maximum opportunity for growth in the investment.

UNDERSTAND THE BRANDS

It is essential to invest in a recognised brand name that you would see in the supermarket, on a recognised website like The Whisky Exchange or Master of Malt, or that you would see in duty-free. If you are buying or investing in a recognised name, you will be able to track the growth across the years by observing the year-on-year price and inflation increases.

If you are able to get hold of a name-brand whisky from 2020 or 2021, it will probably grow quicker than other whiskies distilled the previous year due to the lack of ability and increased demand, making it highly investable whisky.”

KNOWLEDGE IS THE KEY

When choosing your investment, make sure to investigate the distillery financial reports to see how well the company is performing, and look at future plans. Something small, such as a potential rebrand, could greatly increase the cask value.

KNOW WHERE TO FIND VALUE

With increased worldwide demand for whisky, including in America where tariffs have been reduced by President Joe Biden, the value of whisky in casks will only increase; in particular, more aged whisky, along with the value of that produced in 2020 and 2021 during the global pandemic due to the closures of distilleries, which meant that there was reduced supply.

LOOK FOR SPECIAL DROPS

The growth will definitely continue and cask values will keep on increasing, especially aged, rare and unique whisky, which will continue to outperform the standard single malts and keep meeting market expectations, with 2020 and 2021 casks likely to outperform them all.

A fair portion of the article quoted below has been used by me in my post. https://www.whiskyandwisdom.com/should-you-buy-or-invest-in-a-cask-of-whisky/

Thursday, 10 February 2022

THE SEVEN BEST WHISKIES FROM AROUND THE WORLD

THE TOP SEVEN GLOBAL WHISKIES

The value of whisk(e)y has sky-rocketed over the past few years, reaching an all-time high and even becoming the go-to option for some when it comes to investing their money. I deal with this option at length at this post and its sequel at this post:

While the golden spirit has historical fame in western Europe, it is now created across the world, with new and exciting expressions continuing to evolve. Limited to about fifteen countries around WWII, as many as 87 nations/nation states deal with the manufacture or sale of whisky in the global market as of today.

AMRUT FUSION, India (£44 / $80) ABV 50%

A proper sherried malt is a beautiful thing to behold. Burgundy liquid brimming with the richness of over-ripened stone fruit, it balances aromatic intensity against structural nuance. When it comes to Indian whisky, many may turn their noses up, but be under no illusion, as there is some fantastic stuff available. This elegant bottling helped put Indian single malt on the map when it debuted in 2009. The 1948 distillery's name Amrut comes from Indian mythology, translating as "Elixir of Life" from Sanskrit. While other national distilling shops were focused on low-cost production, the entire history of Amrut has been a story of improvement, quality, and taste and it shows in their ramping accomplished over the years. Today, it remains the gold standard of the style.

Amrut Fusion is a distinct blend of Indian barley from nearby the Amrut distillery in India and peated Scottish barley, both matured and distilled separately in American oak for more than four years. Non-chill-filtered for that final touch, you get nuances of the peat with a complexity that makes it even more exciting. Dollops of fresh stone fruits like apricot and peach with honey, Chinese spices and a tickle of smoke to round things out.

NIKKA SESSIONS 2020 ABV 42%

Launched in September 2020, Nikka Sessions is set up to be a truly memorable release that will be enjoyed by everyone. As a limited release specifically for the Japanese market, the first batch of bottles surely won’t last long. Nikka Sessions comes in a stunning matte blue bottle, with flowing Japanese artwork and the title “Session” adorned across the label. This Nikka is a brand-new addition to the Nikka portfolio and it’s a ridiculously exciting blend of whisky from not only the Yoichi and Miyagikyo distilleries in Japan but also Scotland’s Ben Nevis distillery.

Three world-class spirit purveyors intertwine to create an evolutionary expression, carefully crafted by experts who have been creating world-class blends for decades. The provenance of the liquid is hard to argue with, hailing from what could be classed as three of the best distilleries in the world today. If we combine that with the fact that Nikka have been experts at creating delectable, complex and well-balanced blends for decades now, the Session ticks all the boxes.

As Nikka’s first world blended whisky, it’s fitting that it should be a marriage of spirit from Japan and Scotland, 100 years on from the marriage of Nikka founder Mastataka Taketsuru, and his Scottish wife, Rita Cowan. It’s a beautiful nod to those that made it all possible, while showcasing the company’s commitment to innovation and a thriving industry at the same time.

Aromas of fresh apples and oranges jump from the glass as a smooth and velvety palate offers stewed orchard fruits, light toffee, and a wave of freshly peated smoke. If you can’t decide between Scotch or Japanese whisky, your question was just answered.

DEANSTON 10 YO BORDEAUX RED WINE CASK FINISH 46.3% ABV

Deanston Distillery lies in the heart of central Scotland in an area with a temperate climate. The area rests in proximity to Sterling Castle, where many battles for Scottish independence were fought. The Deanston name originated from the town of Dean in the fifteen hundreds and is the only hydro-powered distillery in Scotland. The new Deanston 10 year is produced from unpeated Scottish malted barley. It is un-chill filtered at 46.3% ABV, retaining all of its natural flavour and deep character. When water is added a heavenly clouding occurs and this is exactly as it should be, crafted by nature and nurtured by time. Their Master Distiller continues to focus on the traditional methods of distilling malt whisky: Carefully selected natural ingredients; 100% unpeated Scottish barley; brewers and distillers yeast; and pure crystal water from the river Teith. American Charred bourbon cask produces a clean spirit that can be truly appreciated from the nose to the finish.

Originally released for the Travel Retail market, this 10 year old single malt from the wonderful distillery was finished in casks that had previously held red wine from the world-famous Bordeaux region of France. This wine cask finish has done wonders, imparting a full-bodied sweetness to the whisky while balancing its creamy, malty notes with splashes of damson, cherry and just a hint of dark chocolate. The nose bursts with red fruit, caramel, sniffing tobacco and malt. Some furniture polish and blood oranges followed by rhubarb. Softly spiced on pepper, some nutmeg and vanilla. Surprisingly rich and complex for such a young beast and the wine does not dominate, which is quite pleasant. Taste: The red wine is immediately and clearly there. After the first sip, it shows herbs and a bit more spicy notes overall. Pleasantly creamy on the tongue. Here again the fruity berries and pleasant sweetness. Over time, fine acidity and drier red wine notes. Some chocolate on the palate. Finish: Pleasantly dry and spicy, but still rather fruity and sweet overall.

Then comes a hefty kick as the alcohol manifests itself prominently. Pretty piquant too. Pepper, chili, cloves, nutmeg and a hint of cinnamon. But then the explosion of fruit follows: citrus and mostly red fruit. Cherries, berries and the likes. Nicely sweet. The tannine of the cask counterfoots this, but the malt never turns oaky, nor winey. This is beautiful. And bottled at its peak.

Only in the long finish does one get the first inkling of the drying effect, but it remains sweet enough to be pleasant throughout. It dies a spicy death. All in all, an excellent marriage between the soft malt of Deanston and the wine cask. Top dram.

YAMAZAKI 12 ABV 43%

Trends in the world of alcohol tend to ebb and flow, but Japanese whisky seems to be here to stay. Within the last few years, the spirit has grown considerably in popularity. Part of that might be due in position to a rarity factor (scarcity is perhaps one of the world’s best and oldest marketing tactics), but it might also be because Japanese whisky is just really good.

Each year, the Yamazaki distillery would release a new edition of their 12 Year Old Yamazaki Single Malt. While the label and box changed often, the incredible liquid inside remained the same. This whisky has now picked up more awards than one would care to count and that only goes to highlight its supreme quality. Sadly, there was no release in 2019 and 2020 as they ran shy of stock.

A Nikkei Asia Review showcased the huge sales growth Japanese whisky has experienced in the past 15 years to meet an ever-growing demand. The focus is on age-stated expressions which, according to many online retailers and stores in Japan, sell out immediately after being placed on the shelves, both real and virtual, cost no bar.

Lessons learned, the major Japanese whisky maker will not commit the mistake of running out of stock again. Since 2013, Suntory has invested over $182 million in ramping up production. Stills have been added and the company’s Ohmi Ageing Cellar has undergone a large expansion. An extra $80 million will be invested through 2020-21 to expand the Hakushu ageing facilities.

Touch wood, that situation has changed. Suntory, which owns this brand, launched an expression last May of the Yamazaki single malt. The primary market will be the USA, where Trump imposed a blanket 25% tariff on Scotch single malts and liqueurs, ramping up their prices and forcing a 20% drop in sales if the Corona virus is not factored in. As always, the new Yamazaki will feature a new and modernised look.

JJ CORRY THE FLINTLOCK BATCH 2 ABV 46%

JJ Cory is no stranger to exploration and has been sourcing some of the best Irish whisky from across the heart of the country for decades. The whiskey is named after a pistol found in the rafters of its 17th century tasting barn which was dated back to the 1790s, a time of freedom fighting in Ireland. Its label depicts this pistol in meticulous detail.

Back in the 19th century, every Irish town and village had their own flavour of Whiskey, but no brands. The Bonders bought all the booze from the distillers and sold it to consumers. When the Irish Whiskey industry almost collapsed in the 1910s, the art of bonding almost disappeared. Louise McGuane brought it back. Her company sources new make Whiskey from all around Ireland and matures is it in a special rackhouse.

Led by Louise, JJ Corry’s award-winning small batch whiskies are the result of decades of whisky know-how. The Flintlock is a statement of their Independence. The 16 year old Batch No. 1 received the accolade of Best Irish Single Malt over 13 years at the Irish Whiskey Awards 2018. It was their first small scale true Bonder’s Blend. JJ Corry provided virtually all details of its origins but for the distilleries' names.

Batch No. 2 was released in 2020 and was a blend of three hand selected casks aged 14 to 18 years. The Flintlock Batch No 2 is no exception to their way of thinking. The liquid was crafted from three single malt ex-bourbon casks, each from the same distillery from JJ Corry’s library, name unknown. Aged 14 and 18 years, each single malt was chosen based on its unique flavour profile. Under Irish law, it of course can only be labelled as a 14 year old whiskey.

The magic happened when the two were married together to produce a 46% ABV dreamland spirit. On the flip side, there has been a £50 or so hike in price between Batches 1 or 2, which might put a lot of people off but there is real quality here and a bright ongoing future for the team, with the sources being chosen and the tastes being produced from bonding them.

They did create a Batch 3 whiskey as well, a marriage of six hand-selected Irish Single Malt casks. Each cask was chosen based on its unique flavour and attributes. Varying in age (the youngest is 15 years old), they first blended to develop a vatting which perfectly represents their juicy fruit house style, before marrying the flavours in a Moscatel Sherry Bitt, to harmonise and impart complexity, giving the whiskey a rich, grapelike and floral character. Though cheaper than the Batch 2 variety, it does not appeal as much to the cognoscenti.

GLENMORANGIE SIGNET 46% ABV

Owned by LVMH, one immediately conjures up steep prices for this bespoke distillery’s products. The process at Glenmorangie for the Signet starts with mashing unpeated barley with water from the distillery’s Tarlogie Springs. Although there is no smoke, once a year some chocolate malt is added to the mash for use in the firm’s leading Signet brand – another of the distillery’s many innovations.

Fermentation is long, while distillation takes place in the tallest stills in Scotland, all of which retain the same long-necked design of the pair which were brought from John Taylor’s gin distillery in 1887. This extra height allows a long interaction to take place between alcohol vapour and copper and, while the new make is decidedly high-toned (the cut points here are quite high), there is still a little note of cereal, adding a dry counterpoint.

The vast majority of Glenmorangie’s make is aged in ex-American oak casks, many of which have been made to the distillery’s exacting specifications: slow-growth American white oak from north-facing slopes in Missouri, which is then air-dried. The firm’s Astar bottling uses 100% of these ‘bespoke’ casks.

The casks are only used twice, with the second-fill casks all ageing in damp ‘dunnage’ warehouses to increase oxidative-driven flavours. As the whisky matures, it picks up more lush fruits, some honey and mint, as well as notes of vanilla, crème brûlee and, in the oldest expressions, chocolate.

When enjoying a cup of coffee, the notion of Signet first came to the Director and Masterblender at Glenmorangie, Dr Bill Lumsden. The idea of spiralling mocha flavours could not be forgotten. It would take years to bring this unprecedented whisky to life. But in its tiramisu tones and melting chocolate, you can taste most delicious imaginings.

Signet begins with a precious chocolate malt spirit, made just once a year from one batch in Glenmorangie’s giraffe-high stills. Its espresso-like intensity fills the Distillery with aromas more familiar in an Italian coffee bar. Over the years, its power is tempered with rare and treasured casks. Bourbon for creaminess. Sherry for sweetness. The spice of virgin charred oak. All balanced by some of the oldest whisky we own. The result? A velvet explosion of flavour. Bursts of bitter mocha, sizzling spice and waves of dark chocolate, mellowed by smooth butterscotch. Whisky, from beyond this world.

MACALLAN SHERRY OAK 12 YO 40-43% ABV

Macallan is an excellent example of the significance of size on whisky character. It is a large producer certainly, but its spirit stills are small (3,900 litres). This is a major contributing factor to the rich and oily nature of its new make.

A firm belief in the fusion of the oily, heavy, new make style and ex-Sherry casks saw Macallan, under Edrington’s governance, become the first distillery to craft so-called ‘bespoke’ casks. To create the range, they work closely with fully integrated 'tree to finished seasoned cask' companies in Spain to identify oak trees in the forests of northern Spain, fell the trees, saw and air dry the oak staves before shipping them to the south for further air-drying to reduce the moisture even further. Select Jerez-based cooper Tevasa specifies the length and nature of drying, type of coopering, the liquid used for seasoning (oloroso) and the duration of that process. The casks are then seasoned for 18 months before making their journey to Scotland to be filled with The Macallan 'new make' spirit.

Even with an extremely tight (i.e. small) cut there is little time for copper to do its lightening job on spirit vapour in tiny stills the lyne arms of which are acutely angled. The opposite applies to maturation, however, where the balance between large and small is more fully revealed.

No colour adjustment takes place at Macallan, meaning that each vatting needs to not only replicate the previous one in terms of aroma and taste, but must hit the same hue, despite every cask having a different tint. It is this understanding that makes colour an indicator of character.

For a distillery which has become synonymous with the growth of single malt, it is worth remembering that Macallan had always been an important malt for blending. It wasn’t until the early 1980s, faced with a downturn in the market for fillings, that Macallan decided to focus more strongly on the then new single malt category.

The Macallan Sherry Oak 12 Years Old forms part of their Sherry Oak range (12-40 YO) which features a series of single malt whiskies matured exclusively in hand-picked sherry seasoned oak casks from Jerez for richness and complexity. A matured character, the 12 Years Old delivers rich wood spice and dried fruits and a natural rich gold colour.

When matured exclusively in Oloroso sherry seasoned oak casks, the rich, fruity and full bodied ‘new make’ spirit is transformed into a classic single malt. Once filled, the maturing spirit remains undisturbed in the same casks for 12 years and is brought together in this rich and complex whisky characterised by spice and dried fruit and a natural rich golden colour.

Once filled, the maturing spirit remains undisturbed in the same casks for the necessary number of years it needs to be worthy of its destined Macallan expression. It is these oak casks that make the greatest contribution to the quality, natural colour and distinctive aromas and flavours which lie at the heart of The Macallan single malt.

Monday, 31 January 2022

2024 TO SEE FIRST GRAIN DISTILLERY IN A DECADE IN SCOTLAND

NEW GRAIN DISTILLERY IN SCOTLAND

Planning for the construction of St Boswells Distillery, Scotland’s first grain distillery in a decade, has been approved to start later this year.

Building plans have been permitted for Scotland’s lowest-carbon grain distillery, according to Jackson Distillers, which will be located in Charlesfield Industrial Estate, Boswell, near Melrose in the Scottish borders. It will be only the second whisky distillery in the area in over 180 years after the ‘Borders Distillery’ was built in 2018. This is another significant step forward in the process to create the Scottish borders’ first major grain distillery.

Trevor Jackson, founder and CEO of Jackson Distillers, said: “We have had great support for our proposals from local stakeholders across the region and have worked closely with Scottish Borders Council to ensure we created plans that fit into the landscape, present climate change mitigation opportunities and support the local community.”

The new development will boast the latest distilling technology, designed to reduce carbon emissions and maximise recycling with its zero waste landfill. It will produce 20 million litres of pure alcohol a year to use in Scotch whisky blending, and as a neutral spirit for both gin and vodka.

The site will source local cereals from the surrounding area of Tweed Valley, and process them into a spirit with renewable energy. Cereals, once spent, will be passed to the adjacent anaerobic digestion plant, where they will be converted into methane, with the remaining material being used as soil conditioner for the crops. The approved planning application will facilitate a £46m (US$62m) investment in the local economy, creating approximately 200 construction jobs, along with 20 permanent jobs, which will support the rural community.

Construction for St Boswells Distillery, scheduled to start late this year, is expected to last 18 months, with the distillery producing spirits by 2024. They will be seen as part of a Blended Scotch whisky only after maturation for three years.

ARTIST'S RENDERING OF THE DISTILLERY COMPLEX

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PLANS SUBMITTED FOR NEW HIGHLANDS DISTILLERY

MIDFEARN DISTILLERY TO COME UP IN THE HIGHLANDS

A malt whisky distillery has been proposed for a site on a Highlands estate on the Dornoch Firth.

Outline plans for the site on Midfearn Estate at Easter Fearn, three miles south east of the village of Ardgay, where whisky was first produced more than 200 years ago, have been submitted with Highland Council.

Midfearn Distillery Company Ltd requires a public consultation on its proposal. The Proposal of Application Notice has been submitted to Highland Council’s planning department, with a public consultation launched letting the local community comment on the proposals. This included an initial face-to-face consultation event held at Edderton Village Hall on 1 December 2021 and a virtual consultation on 20 January this year.

The site is believed to be where a local businessman, George Ross, produced whisky in 1798. Midfearn Estate already provides electricity from wind and hydro power projects and this energy source forms an important element of the distillery’s development.

The 5260-hectare (~13,000-acre) Midfearn Estate has been in the Brooke family since 1893. The current owner, Charlie Brooke, felt that the new distillery would be an "important development in providing employment and economic benefit to the wider community". He added: “This is a family business that will build and grow this enterprise on a beautiful site within the Dornoch Firth National Scenic Area and we look forward to working with the local community to return whisky-making to Easter Fearn.”

There are currently 47 whisky distilleries spread across the Highlands and Scottish islands, according to Visit Scotland. Dornoch Firth is on the east coast of the Highlands, and has miles of white sand beaches. It’s also known for its local lore, which says that fairies once crossed the Firth on cockle shells and were seen building a fairy bridge of gold from shore to shore.

Sunday, 30 January 2022

UPDATE ON THE EDEN MILL DISTILLERY

EDEN MILL SOLD TO PRIVATE EQUITY FIRM INVERLEITH

Fife-based gin and whisky distiller Eden Mill has been bought by the private equity firm Inverleith LLP. The deal for a majority stake in the company will see a new distillery built on the Eden Campus at St Andrews University. It will include a visitor centre, shop and restaurant when it opens by 2023. The new owners, who have not disclosed the purchase price, said the investment would allow Eden Mill to expand distribution in the UK and abroad.

Eden Mill's current distillery in St Andrews is working to full capacity.

Established in 2012 by Tony Kelly and Paul Miller, Eden Mill produces award-winning gins including Forager, Golden Lore and Rosa Rosa as well as its Original and Heritage brands. It switched over to distilling single malt whisky in 2015. In 2018 Eden Mill released the first Single Malt whisky to be distilled in St Andrews in over 150 years. The First Bottling was sold at auction and broke the world record for a first release, at £7,100. The launch is the first of five limited edition single malt whiskies and the company is looking to expand in markets such as China and India.

Paul Miller will continue to lead the business as its managing director, heading a new senior executive team. A newly-formed board of directors will also be put in place.

Inverleith LLP invests in consumer brand companies in the premium food and drink, health and wellness, and lifestyle sectors. It is a former majority stakeholder The Scotch Malt Whisky Society.