Liquid Assets

Whiskey investment - Is it a good alternative investment?

Increasing concerns about firms, which offer Whiskey investments, were raised by the British Department of Trade and Industry (DTI) to the beginning of 1997.

This warning was supplemented with the opening of the proceedings against the two companies James Devereaux, Ltd. and Napier Spirit Co., Ltd.

Both companies had offered Whiskey Investment schemes by offering malt whisky casks as an investment.

DTI has raised a petition to close Napier Spirit Co., Ltd., because "the potential returns and the marketability of such Whiskey investment schemes were 'untrue'."

DTI said further, that they have details about a dozen companies, which offer Whiskey investment in the field of whisky, champagne and port wine.

There shall be claims against James Devereaux, Ltd. in a height of more than EUR 2 million, against which only EUR 35.000 in form of assets stand.

James Devereaux, Ltd. also sold whisky, but was specialised on investments in casks of a newly founded distillery.

The distillery and the media company, which produced the flyers for James Devereaux, Ltd. had bad debts in a height of EUR 175.000 respectively EUR 125.000.

The news in August 1997 tell about two additional application for settlement made for the companies Ewart McLaren, Ltd. and Brooktheme, Ltd. which used the name Millennium Spirits Investments for their 'trade'.

The companies are confronted with the following violations:

  • "Claims made by the firms about the potential returns and the marketability of such Whiskey investment schemes were 'untrue'."
  • "The grounds of our petition are that no established market exists in which investors in whisky casks can be sold and investors are unlikely to recover the sums paid."

The typical loosers when investing in whisky casks are citizens who paid sums between a few thousands and several ten thousands Euro's for whiskys, they have not seen and will never see in the future. The promised profits as well as the invested money is normally lost.

Any Whiskey investment was proposed in the following way:

There are 3 ways of investing directly in whisky - identifying limited edition bottles that will rise in price once sold out, buying casks at a good trade price that will be in demand in years to come, and looking at the new single malt distillery projects.

1. New Distillery Projects The Scotch Whisky sector has not only the global drinks companies (that continue to develop their Single Malt brands around the world) it also has enterprise at a smaller local scale providing a mix of innovation, traditional values and opportunities for the alternative investor.

2. Limited Edition & Discontinued Bottlings for collectors and investors. There is a growing 'investment' interest in rare whisky bottles and, in the best cases, some remarkable increases in value have been recorded.

3. Casks with particular appreciation potential for investors. The holding of casks of whisky, which appreciate as they age, remains a viable investment category. The skill is identifying casks that are in strong demand AND likely to be, or are already in, short supply.

Scotch Whisky Association

Such schemes are frowned upon by The Scotch Whisky Association, the distilling industry's leading body.

"There is no whisky spot market, exchange or investment regulatory body,- said Campbell Evans, the Association's spokesman.

This type of business is highly speculative and we don't offer any advice on whisky as an investment."

Investors are being offered a hogshead (55 gallons), for £1,000 or a sherry butt (110 gallons), for just under £2,000, of clear whisky spirit.

This will then be put into a bonded Customs & Excise warehouse at the distillery, where it is supposed to increase In value.

John Grant, managing director of the J & G Grant distillery, which makes Glenfarclas whisky, believes investors are being taken for a ride."I think it is an absolute rip-off, nothing more, nothing less."

The Problem with Whiskey investment compared to wine is that it is impossible to buy a rare vintage.

Simon Coughlin is a director of Law Reserve wine merchants, which is offering investment in Springbank whisky, one of the finest single malts.

The company quotes an 18 per cent annual return as "probable" in its literature.

We buy a hogshead from Springbank for £700 and our £1,000 offer to the public includes storage," he said.

"Even if the market collapsed, you could end up with 450 bottles of fine whisky in ten years time. It is obviously not a mainstream investment but we never market it as that."

On balance I believe that unless you go into a Whiskey investment scheme, with the full knowledge of the detail, and that this is a purely speculative, and probably high risk venture, then stay clear!

Can I point out that these are purely my own personal views, and I'm not a qualified investment advisor.

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