As Cask Whisky increases in popularity, with seasoned investors and newcomers, it has led to a surge in interest; however, this has unfortunately come with a darker side. There is misleading marketing, inflated prices and a lack of regulation in parts of the industry, which has painted whisky investment in a bad light.
We have heard of investors drawn in by the promise of guaranteed profits, only to discover that they bought into a scheme with no real ownership, no clear exit, or overpriced and underwhelming casks. When it sounds too good to be true, it usually is.
This article explores the red flags that every investor should look out for when considering whisky investments and how Cask Trade is doing things differently.
The Red Flags
Red Flag #1: Unrealistic Return Promises
One of the most common red flags in whisky cask investment is the promise of guaranteed high returns. It’s not unusual to see brokers or sales agents advertising figures like ‘30% annual ROI’ or ‘guaranteed returns within 3 years’.
If you see promises like this coupled with a sense of urgency, it’s time to do some more research. In reality, legitimate returns are driven by complex factors like:
- Age of spirit - Generally the older the whisky, the higher value it has, but this takes time and patience.
- Distillery reputation - Historic distilleries tend to appreciate in value more consistently.
- Market demand - Investor returns are subject to global consumer trends at the time of sale.
- Cask size and type - A sherry butt may mature whisky differently than a bourbon barrel, which in turn impacts flavour and desirability.
It’s also important to take into consideration The Angel’s Share - in every portion of whisky, a share of the liquid will naturally evaporate, affecting your return. On average, expect 2-3% per annum in volume loss, over a 10-year period, which could equate to 20%+ less whisky by volume. While the process enhances the complexity of the whisky’s flavour, it also means that projected profits should factor in a natural loss.
Cask Trade sets itself apart by providing realistic return expectations for whisky investment and explaining the dynamics upfront.
Red Flag #2: Lack of Full Cask Ownership
Our second red flag is related to the selling of ‘fractional’ ownership. This is where investors are advised that they own part of a cask, but receive no legal documentation or transfer of title. In many cases this means:
- No legal rights to the cask
- No ability to bottle, sell or transfer independently
- Complete reliance on a third party to facilitate an exit (if one exists)
This ultimately means that there’s confusion about ownership, making it difficult to verify, let alone whether it is insured, maturing correctly, or if it’s even appreciating in value.
Whisky investment with a company like Cask Trade means every investor receives a full receipt of paid invoice, clear documentation (location, volume, ABV and certificate of ownership), and full transfer of title for ownership of the real asset.
Legitimate cask ownership is proven through the receipt of paid invoice, which legally confirms that a change of ownership has taken place. Delivery Orders can also be given upon request, if clients wish to have the cask registered under their own name at a given warehouse.
Red Flag #3: No Access To Storage Details
Another red flag is when a broker or firm refuses to provide clear details about where your cask is stored. Vague answers probably mean that the cask doesn’t exist, or it’s not being stored in an official HMRC-regulated bonded warehouse.
Storage is important in influencing the flavours of the finished product. How it matures affects the quality of the spirit and ultimately its market value. Conditions like temperature fluctuations, airflow and humidity all impact the whisky taste.
At Cask Trade, we have our own HMRC-regulated warehouse, meaning it’s:
- Protected from duty until bottling or export.
- Insured and tracked with a full audit trail.
- Held under strict environmental controls for optimal maturation.
- You can also come and see your cask in person and have a tasting on-site.
Red Flag #4: Overpriced Casks
Investors can also fall foul of overpriced casks. You may find that some brokers apply huge markups, especially on entry-level casks, leaving investors locked into overpriced assets.
One process for determining a cask’s current worth is to do a regauge, which will cover off volume of liquid remaining, ABV, and regauged litres of alcohol.
At Cask Trade, every cask listed is openly priced and benchmarked against live market data, allowing buyers to make informed, evidence-based decisions when it comes to their whisky investments.
Red Flag #5: No Realistic Exit Strategy
As a future consideration, exit strategies are often overlooked. But knowing how and when you can exit is actually the most crucial part of owning a cask. Some companies will lure you in with all the initial promises, but then provide no clear pathway to sell the cask when the time is right, this can be costly.
There are three key dangers of no exit plan:
- Limited liquidity - without proper access to the cask marketplace, selling your cask can be slow and uncertain
- Reliance on the broker - If the company that sold you the cask is the only route to resale, you may be at their mercy for pricing and timelines.
- Bottling complications - Without guidance you could get unexpected costs, taxes or compliance hurdles.
What should you expect when looking at whisky Investment exits? The provider should give multiple exit routes, including:
- Should offer resale to other investors or independent bottlers.
- Bottling for retail or personal use (duty and tax explained upfront)
- Give information on auction platforms (like Cask Trade’s Auction Your Cask platform)
The Cask Trade Advantage
At Cask Trade we believe in giving you the best service possible throughout your whole investment journey. So whether you're just starting out, or you're ten years into your investment journey, you’ll receive an unparalleled service from our team of experts. Our founder explains our mission best:
Get in touch with our expert team for guidance, full transparency, end-to-end support, and a live trading platform here.
