This is not investment advice. It isn’t even advice in what not to invest in, just a series of observations based on my own experience of buying and selling whiskey casks. It’s important to get that out front and centre because while the Irish whiskey category has generated a lot of buzz and drawn in a lot of speculators, a whole bunch of people threw money into things they didn’t quite understand – bottles, distilleries, and casks. I’m not about to contribute to that, because if there is a bubble in Irish whiskey, it’s deflating, and those who were drawn in by the promise of riches are about to enter their finding-out phase.
Seven years ago I had a few quid to spare. We had been struggling for a few years, but while we were asset rich we were cash poor. We sold a house, poured money into another one, and then had a couple of quid left over. I spotted an opportunity to join the West Cork Distillers cask co-op. It offered casks at wholesale prices to ordinary punters like me – there would be buybacks and cask swaps, along with an online marketplace where you could trade casks with other members. The most appealing part of this was that I knew the distillery, knew the owners, had been through the whole site and had written extensively about them. They had mature product on the shelves so I could try their existing whiskey, and they also had a thriving clear spirits range and a sideline in ingredients. They were, from their foundation well over a decade before, aiming to be Ireland’s MGPi; a hardworking distillery that just wanted to make good booze, and not rip people off. Buying casks from them was not without risk, but overall, it was a solid proposition. But bear in mind, I did this knowing that I could lose all my money. I had set aside €10,000 or so to play with, and so I put most of this into nine casks. Here is the breakdown:
I paid €8,827.76 for nine casks of whiskey – four single malt, four single pot still, and one grain. The new make malt cost €3,343.88; the new make single pot still spirit cost €3,263.85; and the new make grain came in at €712.53. The casks themselves cost €1,215 in total, and the cost of purchasing them worked out as 9 X €135. Casking cost €292.50 as the cost of filling each of the nine was €32.50. All casks were held at the WCD bonded warehouses and covered by insurance policies in the name of WCD for an amount up to the original price paid for the purchase of the cask certificate representing that cask. So should something happen to the casks, I get the initial purchase price back, not the value at time of loss. I pay annual storage charges, the most recent of which was €216 for all nine casks.
Buying the casks was a bit of fun – it was not part of any kind of investment, or plan, just something I thought might be a bit of craic. At the most recent valuation by Hilco for the distillery, the casks were worth a total of €18,171. I opted to free up some cash last summer so I sold two casks of five year old single pot still back to the distillery for €1,985 each. The other two casks of five year old single pot still I opted to swap for four casks of new make, this time opting for single malt. So I had my bit of money, and still had nine casks, albeit with a lower total valuation. It should be noted that five of the casks are for my four kids and my godchild so I can’t cash in the lot or they would lynch me.
Perhaps you are reading this and thinking, wow, all those ads you saw on Facebook are right – there is money to be made in whiskey casks. Well, kind of – it is a tradeable commodity, not an especially liquid one, and for most people, it is confusing, complex, and ultimately a very, very risky way to spend. I did so knowing I could lose every cent, but also knowing a little bit about the industry and about the vendor itself. I dealt directly with the distillery and they have been great, every step of the way. But those ads on Facebook, or at the top of your search results when you google certain terms, are horribly misleading. They misuse stats and research that has nothing to do with casks – the Knight Frank luxury index tracks niche investments and while it measured how whisky had grown in value, it was whisky bottled under brands that was being followed, not casks. These entities – which misused these stats to the point that Knight Frank had to distance themselves from them – lure ordinary people in with the promise of great riches, get their phone numbers before they even vaguely outline the costs of the deal, and then pummel the phones using hard sell tactics to force casks of new make from often-unremarkable or unproven distilleries onto consumers who have no idea what they are doing. Worse than this, they often sell these by the pallet of six, and at prices upwards of €2,300 per cask, it will be a long, long time until those casks even come close to turning a profit, and that is before we even consider the global downturn in whiskey consumption, an ongoing cost of living crisis, or any number of trade wars or the ongoing, actual war in Ukraine. The slowdown in the production by Bushmills and Great Northern, and the halting of production for three months by Midleton may be based on future predictions about sales but it has a cooling effect in the short term. Irish whiskey, as a category, will find its equilibrium eventually – but casks may not rise in value as mine did.
So where do these mom and pop investors who bought pallets of casks sell their white elephants? Not on the open market anyway. I asked Revenue about a few issues around casks and this was what they told me in relation to selling casks of whiskey:
“The sale of whiskey casks may only take place in a premises and by a person licensed for such sale. The statutory provisions governing the sale, supply and consumption of intoxicating liquor in licensed premises are set out in the Licensing Acts 1833 to 2018 and are the responsibility of the Department of Justice. Revenue’s role is confined to that of a tax administration i.e. the collection of the relevant taxes and duties and the issue of the relevant excise licences. Under this licensing code, persons who sell, take orders, or deal in intoxicating liquor are required to hold the appropriate Liquor Licence in order to trade legitimately. It is an offence under Section 50 of the Finance Act (1909-1910) Act 1910, to make, manufacture, deal wholesale, or sell by retail, any intoxicating liquor without the appropriate excise licence.
“There is no restriction on the purchase of whiskey casks by persons for non-commercial purposes however, it is not legal for a private unlicensed individual, investor or otherwise, to sell a cask of whiskey on the open market.”
As for the oft-touted claim by the investment set that casks are capital gains tax free, this is what Revenue told me: “Alcohol sold within the State is subject to of Alcohol Products Tax (APT) and Value-Added Tax (VAT). The application of excise duty on alcohol is governed within an overall EU legislative framework. The primary directives are Directive 92/83/EEC (as amended) and Council Directive 2020/262/EU including the control and movement of excisable products. The corresponding national legislation can be found in Part 2 of Finance Act 2003 and Part 2 of Finance Act 2001.
“Liability for APT arises either when product is imported into the State, or if a duty suspension arrangement applies, when the product is released for consumption from duty suspension arrangements in Ireland. These duty-suspended movements are controlled by Revenue and all other tax authorities within the EU to protect tax revenues using the Excise Movement and Control System (EMCS).
“It should be noted that the Northern Ireland protocol ensures that the abovementioned EU excise law and thus the above administrative controls continue to apply in Northern Ireland.
“Profits arising from the carrying on of a trade are chargeable to tax under Case I. Whether the profits from the sale of whiskey casks is carried on in the course of a trade is a question of fact having regard to the particular facts and circumstances of each case and also having regard to the ‘badges of trade’ and case law.
“Should the purchase and sale of whiskey casks take place other than in the course of a trade, i.e. as a form of investment, the disposal of such whiskey casks may be subject to Capital Gains Tax (CGT).
“In general, CGT is chargeable on a gain arising on the disposal of an asset at the rate of 33 per cent. The first €1,270 of chargeable gains of an individual in any year are exempt from CGT. All gains are chargeable gains unless otherwise provided for by Capital Gains Tax Acts, and any such gains are liable to CGT, subject to any reliefs and/or exemptions which may be available in the context of the disposal giving rise to the gain.”
Given that a number of cask investment operations claim to have sold thousands of casks of Irish whiskey to ordinary punters as investments, I asked Revenue what their stance was on CGT: “It appears from the details supplied that whiskey casks may be considered an asset for the purposes of CGT, and so any gains arising on the disposal of whiskey casks, other than in the course of a trade, may be considered a chargeable gain. Any CGT liability arising in respect of such a gain may be relieved or exempted in accordance with current legislation.”
If it is the case that there are thousands, or tens of thousands of casks being held in warehouses on the island of Ireland in the names of private individuals who purchased them as investments, then Revenue are going to be interested. This isn’t quietly trading old Lego sets or stamps or sneakers on eBay – this is trying to shift massive wooden containers of hard liquor and unless you are a semi-professional bootlegger I would suggest that Revenue will track you down eventually. If, within the next five years, all those casks start getting shoved onto the market via auction sites, the great glowing eye of the State will swivel towards every auction site in the country.
As for me, my casks will sit there doing not much. They may go up in value, they may go down. As I said at the outset, this isn’t investment advice because the casks weren’t an investment, more an experiment by someone who likes whiskey. In whiskey there are no shortcuts and anyone thinking they can get rich quick in it would really be better off just studying the secondary market and speculating on bottles rather than casks.
There has been a significant knock on from the rise of the investment set – many distilleries here hoped to replicate Dingle’s founding fathers programme which saw them sell casks to private individuals, not necessarily as investments, but more as a fan club membership, with an annual gathering in the distillery and the chance to bottle your cask down the road. But whereas most of these cask clubs had offerings from €6,000 to €10,000 per cask, the hard-sell crowd offered a lower price – so there is at least one distillery I know of that faced a seven million euro gap in their business plan because they couldn’t shift casks. They then attempted to hire someone specifically to flog casks as investments. But the moment has now passed.
Aside from this there is the reputational damage to distilleries – one Irish distillery has been named repeatedly in the press as being the source of casks which were mis-sold or which are failing to sell at auction. The knock-on from their name being tarnished could then impact the value of all the other casks they have allowed to be sold to these uninformed investors.
In the UK, this issue has seen the Scotch Whisky Association take a firm stance, offering advice on their website about things to look out for when buying a cask. The UK press also has been giving coverage to the crisis, and tonight, BBC Scotland runs a Disclosures special investigation titled Chasing The Whisky Bandits, followed by a podcast series on the topic. Even Reddit has done some leg work in warning people off seeing casks as an investment.
There is a distinct lack of alarm in Ireland about the issue or any potential fallout from it – but if we get painted as wheeler dealers who engaged in and facilitated widespread cask investment fraud, then we will only have ourselves to blame. Irish whiskey’s reputation is in a delicate state – a lot of young, very expensive whiskey, a lot of old, also expensive whiskey from one of three sources, a lot of misleading messaging on labels and around sourced brands, and a dangerous level of hype; all this make us an easy target for scammers. All those witless headlines about ‘the Irish whiskey boom’ made useful fodder for anyone promising that a cask from some unproven distillery would only rise in value. The glory days, however, are coming to an end, and all those casks will need to be six to ten years old before the ‘investors’ can even break even. And even then, who will they sell to?
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