If you are tempted to take up one of the seductive offers being touted by some of those self-styled whisky brokers who usually peddle their wares by slipping promotional leaflets into your favourite magazine, you should consider all the implications. The Scotch Whisky Association (SWA), which is mainly interested in arguing the whisky industry's case for lower taxes and more help to promote exports, has just taken the unprecedented step of putting out a circular on the subject of retail investing.
The SWA makes it clear that it is not in the business of offering advice on whether whisky could prove a good investment. But it does say the only certainty about owning a cask of scotch is that it will lose roughly 2 per cent of its contents each year through evaporation.
It also points out that most blenders contract with distillers years ahead of time for the specific whiskies they will require for their blends, and that distillers often exchange whiskies for blending purposes, either by direct agreement or through long-established brokers.
But most distilleries refuse outright to sell casks of their whisky to third parties. There are one or two which do, but there is no marketplace where named whiskies are bought and sold. Nor is there any guarantee that anyone will want to buy back any whisky you have invested in, and you will certainly have to pay storage charges and insurance on casks, which must be kept in a bonded warehouse.
If you decide to bottle the whisky, you will first have to pay duty on it at the going rate, and even today that could add something like pounds 2,500 plus VAT to a 250-litre cask of whisky at the typical strength of 60 per cent alcohol.
There could well be a problem finding a bottler, especially if you try to recoup your investment by bottling the whisky for sale under its brand name. Whatever the quality, there is always the question of trade marks and labels, which distilleries take very seriously indeed, and the distillery could sue for breach of its trade mark. At best you may end up drinking your whisky or giving it to friends, rather than getting your money back.
Some of the methods used to market investment whiskies are also open to question. One advertiser has been quoting a particular writer on whisky as saying that a return of up to 18 per cent a year was possible. At best this was a theoretical possibility, but it has been reproduced as an established fact; the original and often-quoted article was published five years ago.
Another vendor purports to have a malt whisky called Grand Tully for sale, although the original Grand Tully distillery closed in 1910, and any stocks which survived would be rare indeed by now. Some advertisers are wine and spirit merchants with UK premises but others are based outside the UK in unlikely places that are beyond the reach of the Personal Investment Authority.
At the very least, anyone buying whisky in the cask is advised to shop around, to be certain to find out whether the whisky they are offered is a named malt, a grain or a blend, and to insist on getting a receipt which confirms the price, the quantity and quality of the contents, and the cask numbers and where they are stored. Sellers should be asked to supply a delivery order instructing the warehouse to hold the stock until the purchaser requires it; the delivery order should be passed to the storage warehouse immediately. Even then, remember that a delivery order or receipt is not a document of title.
If you are still not discouraged from investing in your cask, first write to the SWA at 20, Atholl Crescent, Edinburgh EH3 8HF for a list of its members who are whisky brokers.Reuse content