Neat profits or sour aftertaste? The whisky market un-casked

Colin Fraser from Doerr Dallas Valuations provides some useful insight, hints, and tips for enjoying a neat long-term relationship.

The whisky market has existed for decades, even centuries and has endured lows and celebrated highs. In the 2010s and early 2020s, it enjoyed a boom with bottle prices surging, being redefined as an asset class, and various million-pound-plus casks (including the £16m Ardbeg cask) delivering remarkable returns for sellers.

Whilst there are many fine, honest, and trustworthy sellers of casks who have weathered the ups and downs of the market and will continue to thrive. There are also unscrupulous dealers, so-called experts, and brokers who have flooded in, seeking a quick profit, taking advantage of the hot market, and of honest buyers and investors.

More recently, the market has cooled, and prices have compressed. But Scottish Whisky (no ‘e’) and Irish Whiskey (with an ‘e’) are likely to continue to be an effective investment – if you know what and when to buy, have an exit strategy and store it correctly.

Firstly, understand the risks involved by speaking to a reputable broker or distillery directly (there are only a few that sell casks). Buying a blue-chip whisky will always offer the best return and/or protection, but these casks are rare and highly sought after. The point many private buyers seem to miss, which is crucial, is: know your exit strategy. Are you buying to bottle for a special occasion like a family wedding, birthday, or anniversary, or are you looking to sell? Those are all very different opportunities.

Sadly, there are a number of methods that scammers use to take advantage of people, with some criminal outcomes – people facing the loss of life savings and pensions, with little chance of recouping their investment, let alone the vast profits that were essentially promised.

Various tactics include:

• Using genuine past data to project an unrealistic future – no market’s past performance is a reliable guide to its future
• Selling casks that are overpriced and not genuine
• Providing a fake Delivery Order or Certificate of Ownership, leading to casks that never existed being sold, or in some cases, casks that do exist being sold more than once, often alongside inflated prices.

There’s no guarantee, but some things a potential investor should do include:

• Don’t get caught up in the hype of promised returns
• Only buy from a broker with a proven provenance
• Ensure the paperwork is in order
• Request a Delivery Order in your name from the seller, and if not possible due to warehouse restrictions, consider moving the cask to a different warehouse. Any cost will be worth the peace of mind.
• Get your cask valued on a semi-regular basis
• Ask for samples and regauge figures - the measure of what volume and strength is in the cask, which will ultimately determine return.
• Refer to the Scotch Whisky Association for the best guidelines.

Casks of whisky are a physical asset but by law must be stored in HMRC-controlled and licensed warehouses, many of which don’t deal with the public, meaning you never take physical possession of the goods. The standard ‘proof’ is a ‘Delivery Order’ or DO. This is a document that lists unique identifiers of the cask, details of the seller and buyer and is addressed to the Warehouse keeper. The process is similar but smaller for a private individual; often, a delivery order acknowledged by the warehouse will suffice. For completeness, a contract of sale and a paid invoice should be possible to provide.

Keep your bottles standing upright. Corks degrade over time, so avoid long contact between the liquid and the cork. Tip each bottle once or twice a year so the liquid briefly wets the cork. This slows drying, but it will not prevent old corks from breaking.

Light fades labels and dries out glue, which causes lifting and peeling. Sunlight also speeds up evaporation. Store your bottles in a dark cupboard or a display case with limited light.

Whisky bottles are heavy. Use sturdy shelves and avoid overcrowding. A toppled bottle can damage labels, boxes and nearby bottles.

Whisky prefers a steady, moderate environment, so avoid large swings in temperature and humidity. Avoid attics or garages where you get freezing winters and hot summers. These shifts cause evaporation, dry out corks and damage labels and boxes.

Some collectors wrap the top of the bottle with parafilm to slow moisture loss. It will not cause harm, but results vary. Even bottles parafilmed by distillery managers can still arrive with broken corks and lower fill levels, so do not expect it to solve sealing issues.

Collectors place growing value on clean labels, intact boxes, and complete packaging. Avoid price stickers because they mark boxes and labels. Keep outer sleeves, certificates, and any marketing material. Small details help the future value of your bottles.

Avoid shaking bottles, especially older ones with fragile corks. Move them steadily and watch for signs that the cork is weakening.

Watch the fill line over time. A slow drop can mean the seal is failing. Move the bottle to a cooler and more stable space to slow further loss.

If your collection has grown in value, speak to a broker about specialist cover. Standard home insurance may not be suitable for higher-value collections.