Doing Your Due Diligence – As a Potential Cask Owner

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We live in an unpredictable world right now. With Covid-19 still raging in many parts of the world, the global economy is facing a huge challenge. International travels come to a halt and some people realised the spare cash could potentially go into a proper investment. 

At the same time, alternative investments such as whisky casks, watches and fine art are on the rise. The reason is quite apparent – the stocks and property markets are too volatile to venture into without high risks.

Unfortunately, the weak economy also gives rise to scammers looking to make quick bucks. If you are in the market shopping for Scotch whisky casks as a potential alternative investment, here are some of the things that you can do. Doing your due diligence to check the companies offering whisky casks is vital to protect your investments. Do note that the below apply only to the UK and Scotch whisky casks.

Ask for the company’s WOWGR 

All companies in Scotland that have the permission to hold goods in duty suspension in a bonded warehouse have a document called a WOWGR. HMRC (Her Majesty’s Revenue and Customs) gives out the WOWGR and all companies need to have this license in order to trade in duty suspension.

In order to apply for a WOWGR, a company needs to present the following information to HMRC:
– A business plan, including evidence of a commercial need for a WOWGR
– Details of trading partners and the due diligence on said partners
– Types of trading products
– Clear evidence on who is undertaking the movements of these products
– Cash flows
– Insurances
– Published Accounts
– Profit and losses

Officers from HMRC will also visit the place of the business to conduct a detailed interview before approval. After issuing the WOWGR, HMRC also expects the company to inform the officer-in-charge if there is any major changes (such as a change in trading partners) to update the WOWGR. The stringent checks put in place by HMRC provide a layer of protection by screening the company and ensuring that they are a proper legal entity.

Request for the company’s VAT & EORI number

The UK VAT number is similar to Singapore’s GST number. It is essentially a unique ID that HMRC provides to businesses when they register for VAT. In the UK, the VAT numbers are nine digits long and may or may not have the prefix “GB”.

It is also important for companies who offers to bottle your casks and ship them out to you to have the EORI (Economic Operator Registration and Identification) number. Without the EORI, the company will not be able to ship them out as duty-suspended goods. Therefore, if you are planning to bottle your cask eventually, make sure that you check for both the VAT and EORI numbers.

When you ask for a VAT number, you should also check that the VAT number is valid. The UK government provides a system to check for the validity of the number. If the company has a valid VAT number, the system will show the validity together with the registered business address.

The EORI number can also be checked. The UK government provides this website for everyone to check for the validity of the EORI number.

Check for the company’s AWRS number 

AWRS is known as the “Alcohol Wholesaler Registration Scheme” in the UK. Any business that want to sell alcohol must apply for AWRS. Without the approval, the business is illegal and will face penalties from HMRC.

A company needs to apply for AWRS if all of the following apply:
– the business sells, or arranges the sale of alcohol, and has an establishment in the UK
– the sales are made at, or after, the point where excise duty is due
– any sales to other businesses are made for onward sale or supply

You need to take note that AWRS is only needed by companies that sell bottles. Therefore, if a cask broker firm trade only casks and not bottles, they will not need to have AWRS. To find out if they need an AWRS, you can go to their website and find out if they also trade bottles. As long as they trade bottles of alcohol, you can be sure that the business will need a AWRS.

Once you obtained the number of the company’s AWRS, you can check for its validity at this website. It is provided by the UK government and will help you to verify that the AWRS is valid.

Similar to the WOWGR, the business must inform HMRC of any changes to the company’s details as soon as possible. Important changes such as a change in partners, directors, trading name, VAT number and contact details must be notified no later than 14 days from the date of change.

Read up on the company

The next crucial thing to do is to research the company that you want to buy the whisky cask from. It is important that you know who they are, what they specialise in, and how they can help you to achieve your investment targets.

Search for their website and social media pages to see what they regularly do. Look out for any reviews that they may have online. You can also drop an email or a call to the company to see their responses to your questions.

Ultimately, you will need to trust the company when you finally part with your cash to buy a whisky cask.

Look for the annual financial returns

To look at the annual financial returns of a company, head over to Companies House, a website in the UK which records all the registrations AND annual returns of a company registered in the UK. As long as the company is registered in the UK, you will find it there.

A financially healthy company faces lesser risks of bankruptcy, collapse or foreclosure in a weak economy. Buying a whisky cask with a healthy company also safeguard your investment as the process can take longer than you think to sort out. If a company collapse before you receive the Certificate of Title of the cask you bought, it may be tricky for you to prove that the cask belongs to you. 

Conclusion

We hope that the article is helpful to everyone, especially those of you who are considering to buy a whisky cask as an alternative investment. If you would like to read more, you can read up on Excise Notice 196. It is a section of UK’s law regarding the excise goods and has comprehensive information on all of the above points discussed. Should you have any further questions on any of the above points, or wish to ask for more information about whisky casks, please contact us at sales@spiritscastle.sg and we will get back to you as soon as possible. 

Whisky Cask Investment – What You Need To Know

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Casks sitting on Pallets

Personal investment in Scotch whisky cask is not for everyone. It satisfies unique investment needs for individuals looking for alternatives. Cask investment also requires more research than the regular stocks and property markets. For individuals keen on whisky casks investment, there are key points that they should be aware of.

Scotch Whisky Association (SWA) published a note about investing in Scotch Whisky casks in June 2020, sharing various pointers on what investors should know. We decided to summarise the points here for our readers.

The Scotch Whisky Market

Scotch whisky exports rose drastically through the last 10 years, and currently, stands in excess of £4.9 billion. While we may be familiar with single malts or even single cask whiskies, most of these exports are blended Scotch whiskies. The export of blended whisky created the whisky cask market. Blenders sought contracts with various distilleries in Scotland to buy whisky in advance for their blends. Whisky casks are, therefore, mostly traded within the industry. Sometimes, distillers and blenders even trade casks without having money changing hands.

However, some distilleries, especially the younger ones, also sell whisky casks to individuals and Scotch whisky brokers. Most distilleries would have, in the contract, basic requirements on a buy-back scheme or bottling scheme. Other companies work with Scotch whisky brokers like us. They sell casks to brokers who then either sell the casks onwards or bottle the whisky as independent bottlers. Individuals and other companies can buy casks from brokers for bottling or investment purposes.

Key Areas To Look At Before Buying A Cask

Whisky Cask

There are various key areas that you should look at when considering the various whisky casks brokers. Below are eight points which you should be aware of before committing your money to a whisky cask.

Indications of Likely Returns

Most whisky brokers will not tell you a definite figure of likely returns because investing in whiskies is similar to other commodities. The value of a cask rise and fall as a result of supply and demand. When potential investors ask about likely returns, experienced whisky brokers can share a value, but will always add the disclaimer that it is not definite as nobody knows for sure, how the market will be in 10 years time.

Ask The Right Questions

Buying and owning a cask of whisky is not hard, but potential investors must be careful to ask the right questions. How much is the warehousing fees? Is there insurance for your cask? How much does the broker charge to measure (re-gauge) the contents of your casks? What are the fees for moving the cask under bond from one warehouse to another? What is their commission structure? These are but, some questions that a potential buyer should ask.

Know Your Whisky

A practical key point is to know your whisky. A potential buyer of a whisky cask must know the difference between a Scotch Malt Whisky and a Scotch Grain Whisky. The information on the cask list should have the name of the distillery (where the whisky is produced), the year of distillation, the alcohol percentage and the litres of alcohol in the cask. It should also, ideally, let you know if the cask is re-gauged previously. When you purchase a cask, the seller must tell you the cask number too. The same information must also be in the contract and the cask ownership certificate. You can read more about how to choose a whisky cask here.

Available Whisky Cask Services

As a potential investor, you also want to know if the broker that you are working with is able to help you make changes to the whisky that you bought. For example, if you buy a bourbon cask of whisky and wish to turn the whisky into a sherry bomb, can the broker help you to re-rack into a first-fill sherry cask? The information is crucial because you may become stuck with an underperforming cask without the means to change it. It could potentially lead to a downplay of the cask’s actual value if you do not have the means to change the cask before selling.

Limitations of Cask Disposal

It is crucial for a potential buyer to know how you can sell the cask in future. Some sellers, especially distilleries, only allow the whisky cask to be bottled for personal purposes. Hence, if you are not planning on bottling any whisky cask, you need to ask if there are any limitations of cask disposal.

Restrictions on the name of the distillery

As more and more independent bottlers and private owners come onboard the whisky industry, some distilleries are restricting the use of their names on private bottles. Therefore, if you are planning on bottling the whisky, check if there is a contractual limitation on the use of the name. For example, many Clynelish casks are not allowed to use the name of the distillery. The same apply to Highland Park and Macallan distillery. One easy way to know is to look at the name of the distillery in the cask list. If it is not listed as the name of the distillery, you can’t use the distillery name. A good example would be Macallan distillery. Most of the independent bottling of Macallan casks are labelled as Speyside Single Malt, or Highland Single Malt.

Cost of Bottling

Equally important is the cost of bottling the whisky if you are keen to do that. Find out in advance the cost of bottling so that you know what you need to pay further down the line. It is also wise to check the timeline for bottling so that you know how early to trigger the bottling discussion when the cask is ready.

A potential bottler should also check if the broker is willing to help you source for a freight forwarder that can ship your bottles of whisky to your destination in future. Otherwise, there could be potential issues in transportation after bottling your whiskies.

Contract and Cask Ownership Certificate

Finally, the biggest pointer for a potential buyer is to know if you will be given a contract and a cask ownership certificate. If the answer is no, you can look for another broker. It is crucial to have both so that you know that your cask investment is well taken care of. The ownership certificate also clearly states that the cask is yours. Without both documents, you cannot prove that you are the owner of the cask.

Conclusion

Always choose a reputable Scotch whisky broker who can help you with everything that you need. Be wary of those who promise a guaranteed return on your investments. Finally, do your homework. If you know what you are buying, you make it harder for others to cheat you.

Choosing The Right Whisky Cask For Sales

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Since the launch of our cask ownership program, we have quite a few clients asking us this question, “How do I choose the right whisky cask?” The answer to this question varies from client to client, depending on their needs. In our second article of the series, let us look at choosing the right whisky cask for sales in future.

How to look for a right whisky cask for investments

In a volatile market, more investors are turning to whisky casks as a means of investments. Due to the rising popularity, the whisky cask market moves swiftly and decisively. As an investor, what should you look out for when you buy a cask?

Long-Term or Short-Term Investments

Do I want to sell the whisky cask in the short term or hold for longer?

For a start, an investor should look at his ultimate aim for buying a whisky cask. Is that for long-term or short-term investments? We would define long-term investments as 3 to 5 years or more, and short-term investments in 1 to 2 years. While cask prices do appreciate over time due to the whisky maturation, investors should not be looking at gaining a significant ROI if they intend to sell the cask in less than a year.

Short-term appreciation is also much lower than long-term appreciation, which means the investor must not expect a high ROI. What he can look forward to is a slow but steady increase of his original investment if he keeps investing.

Types of casks

An investor should also look at the type of casks that he invests in. He needs to buy the casks types popular with independent bottlers to sell the cask when he is ready. Spirits Castle can make recommendations by using what we know of the market at the point of purchase, but we cannot guarantee that the information stays relevant when you are ready to sell. Therefore, we would highly encourage you to do your research to find out the whisky cask types that you should buy.

Whisky Distillery

Getting to know the whisky distillery and the type of distillate they produce is crucial. It affects your decision in buying the right whisky cask for investments based on demand. Usually, independent bottlers look for different distilleries in their bottlings but there are some distilleries that are more sought after than others. Investors usually do not ask to taste the whisky as they are not planning on bottling the whisky, so buying the right cask depends on your ability to know the distilleries well. While we can make recommendations, we would still encourage you to find out more on your own.

Age of Cask

Age is all that matters, or does it?

Most whisky drinkers know that age of whisky matters to some and not to others. In whisky cask trade, the age influences the price of the cask directly. For investors looking for short-term investments, it is not always the case that you must buy a higher age cask to gain ROI. Buying a younger cask can still earn you a reasonable ROI as long as you are not looking for a 200% price increase in 1 year. A higher age cask is unlikely to earn you 200% price increase too, just in case you are wondering. The right whisky cask to buy is one that can potentially make you what you aim for.

To Conclude

Knowing your end goal is just as vital as knowing the whisky that you are buying. Spirits Castle provides recommendations and nuggets of information to help you select, but the ultimate decision lies with you. Just like other kinds of investments, a certain level of risk is involved. We encourage you to find out as much information as you can from the materials we will send you at the beginning and from your research.

Knowing How to Choose Suitable Whisky Casks For Bottling

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Since the launch of our cask ownership program, we have quite a few clients asking us this question, “How do I choose a suitable whisky cask?” The answer to this question varies from client to client. In part one of our two-part articles, let us provide some pointers for buyers looking to buy a suitable whisky cask for bottling.

The Suitable Whisky Cask for Bottling (Individuals)

For a cask owner who looks forward to bottling the whisky in the future, whisky preference is the utmost important factor. A whisky bottler must like what he is bottling, especially if he is an individual.

Your Personal Preferences

“I want to bottle the cask after 10 years, what should I buy?”

As an individual looking to bottle your own cask of whisky, the first question to ask is “What do I like?” You will be drinking the whisky, gifting it to your loved ones and friends, or celebrating an occasion with the bottling. Therefore, the right whisky cask is the one you like.

Some of you would like to taste the whisky before making a choice. We need to let you know in advance that paid samples can be hard to come by. As our cask list includes private casks held by individuals, the sellers may not want to provide paid samples as it depletes the whisky within the casks. Also, the cost of a 500ml sample does not come cheap. Nonetheless, we can try to ask the owner for a sample if you wish to pay for a sample.

Budget is crucial

Besides personal preferences, the next question is your budget. Whisky casks vary in prices due to the distillery prices, the size of the cask, and the type of cask. Therefore, it is ideal to work with a budget, especially if you are planning on re-racking the whisky into another cask before bottling.

It also pays to remember that bottling and logistics incur cost. You will do well to put those costs at the back of your mind when doing the calculations for your budget.

The Suitable Whisky Cask for Bottling (Company)

As the owner of a business, your desire to bottle a cask usually stems from the potential sales that you can make out of it. The whisky may eventually be sold at your bar, restaurant or hotel. It can also be given as gifts to your high net worth clients if you are not an F&B business owner.

Know the flavours preferences

Choosing a suitable whisky cask, in this case, is not about what you like, but what the general public may like. Knowing your clients’ preference is paramount. If your clients love the sweet, dark fruits of a Speyside whisky matured in a sherry cask, looking for a cask that closely matches the preference will work. Otherwise, consider buying a bourbon cask and re-racking it into a sherry cask. On the other hand, if your clients like the sweet and fruity flavours, buying a bourbon cask is a better option.

Budgeting Matters

Business is all about the bottom line, so matters of finance are critical too. While an individual may be concerned about his budget, a business must be aware of its bottom line and profits. Bottling a cask will potentially earn you more profits, which translate to your ROI. That is why you have to know the type of whiskies that are popular in your bar, restaurant or hotel, and buy a suitable whisky cask that is in line with what’s popular with your customers.

To Conclude

To be sure of your end goal is just as crucial as knowing what whisky you like. Spirits Castle provides recommendations and nuggets of information to help you select, but the ultimate decision lies with you. Just like other kinds of investments, a certain level of risk is involved. We encourage you to find out as much information as you can from the materials we will send you at the beginning and from your research.

3 Reasons Why Whisky Drinkers Buy Casks

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There is no surprise that we sold two whisky casks in the short two weeks since our launch of the cask ownership program. The popularity of whisky is on the rise since 2010. The momentum is gaining on us as many whisky drinkers seek ways to overcome the rising prices of whisky and capitalize on the increasing market value of whisky.

If you are thinking about why people are buying whisky casks instead of whisky bottles, we propose three reasons below.

Whisky prices are rising exponentially

Buying a cask reduces the total cost for a whisky drinker over time. The cash outlay may be high at the initial stage, but the return is far higher. He avoids the increased prices in future, and get to enjoy his favourite whisky when he bottles the cask! The owner also gets to put his personalised label on the bottles, making the whiskies uniquely his.

Whisky casks are assets

In an uncertain economy such as now, people are worried about the future. To safeguard their money, one can consider numerous investments. Buying a cask is an option when one is a whisky drinker. A whisky drinker buys only casks produced from his preferred distilleries. Comparing whisky casks to stocks and shares in a volatile market, the physical product holds potential, especially when one looks for long-term investments. 

Whisky casks are flexible investments

A cask owner has got a lot of choices when he owns a cask. He can sell the cask in a few years, re-rack the whisky to a different cask, keep it for long-term returns or bottle it when the time is right. In fact, there are just so many things that one can do with a cask. 

How to Own A Whisky Cask

If you would like to find out more about our cask ownership program, head over to our designated page. We recommend that you download our e-brochure to understand the process of buying a cask too! Knowing what to expect is crucial to make your journey as a cask owner easy and smooth.

Slàinte Mhath,
Zerlina Zhuang