The rise and proliferation of whisky cask investment companies has been hard to ignore in recent years. Assertions in recent advertisements include that whisky cask investment can net returns of “up to [sic] 12 per cent per annum” and that such investment will “make stable returns in one of the world's most profitable liquid assets”. However, these statements and claims like them have been brought to the attention of the Advertising Standards Authority (ASA), with questions posed over their verifiability and their intention.
On 23 August 2023, British newspaper The Times reported on the results of two investigations conducted by the ASA into two cask investment companies. In both cases, four issues were examined and upheld, resulting in the ads in question being banned.
The complaints made against Blackford Casks Ltd (trading as Whisky Investment Partners) and London Cask Co Ltd were concerned with various campaigns and promotions across both online and print formats.
One of the issues investigated in relation to London Cask Co pertained to an advert on its website, under the heading “Why invest in whiskey?”. The advert said that whisky had seen growth of 478 per cent between 2010 and 2020 – an often-misquoted figure from the Knight Frank Luxury Investment Index – and that whisky was an investment “where the process of ageing only adds to the potential value”.
Although the London Cask Co insisted that the information was clarified by UK Investor Magazine (which had previously stated, “Rare whisky is another strong performer, with a 478 per cent growth over the past decade”), the ASA ruled that the information was likely to be misleading and the marketing did not make clear that past performance or experience does not necessarily give an accurate guide for the future.
In the case against Whisky Investment Partners, the ASA examined a page on the company’s website – linked from an advert under the heading “What is the Best Performing Asset Class of 2020? Whisky” to the Whisky Investment Partners site – which included the following claim: “We help investors get involved in a billion-pound market that has shown an average return of 8–12 per cent (as seen in The [Daily] Mirror newspaper) over the last couple of decades.”
In response to the ASA’s claims that the advert(s) were misleading, as they didn’t make clear the risks involved in whisky investment, Whisky Investment Partners argued that it did not believe it was selling a financial product – as “[consumers] could bottle the whisky for personal consumption” – and therefore felt it did not need to include information required for financial products such as that that value of investments could go down as well as up.
In its ruling the ASA stated, “[W]e considered that the purpose of the ads and the name ‘Whisky Investment Partners’ was clearly focused on purchasing a whisky cask as a means of investment.”
In summary, along with upholding the remaining complaints, the ASA ruled that both companies’ ads must not appear again in the form complained about.
Following its rulings against London Cask Co and Whisky Investment Partners, the ASA has confirmed that it does not have any other complaints outstanding against cask investment companies.
In response to the rulings, the Scotch Whisky Association (SWA) said, “As a trade association which represents producers, it is not within the SWA’s remit to regulate the cask investment market.” A spokesperson suggested that potential customers refer to the SWA’s Scotch whisky investment guidance document, adding, “We will continue to monitor developments in the market to ensure that consumers, and the reputation of the Scotch Whisky industry, are not put at risk.”
The wider picture
Interest in the Scotch whisky category has reached levels that previously few in the industry would have thought possible. With ballots for new and sought-after bottlings, queues to purchase limited editions or distillery exclusives, and a booming secondary market for vintage whiskies, the landscape has changed almost immeasurably since the early 2000s.
It could be argued that the burgeoning cask investment sector is an organic evolution of the success that Scotch whisky is experiencing; wherever there is profitability, there are those who will seek to capitalise on it. However, concerns are being raised inside the industry about the explosion in the cask investment market and the conduct of some players within it.
Independent consultant David Robertson, founder of Robertson Whisky Consultancy and joint founder of Rare Whisky 101, compared the current situation in whisky cask investment to a “gold rush”, saying the market was “a bit like the Wild West”.
It was Rare Whisky 101 which supplied the Knight Frank Luxury Investment Index with data about whisky investment returns that is now widely quoted – out of context – as an example of the sector’s potential for investors. David says that he and Rare Whisky 101 co-founder Andrew Simpson have contacted numerous cask investment companies and “invited them to change [or] update their websites or marketing material to show that the stats in our reports were based on bottles, not casks”.
He added, “It is heartening that these types of ads both on social media and in print [are being] challenged and removed from circulation [by the ASA].”
Phil and Simon Thompson of Dornoch Distillery offered a producer’s point of view on the subject, and on why they’ve avoided cask investment as a business model.
“We take compliance very seriously. It’s very important for us to differentiate what we’ve done from what cask investment companies are doing,” Phil explains. “Our cask purchase scheme offered individuals the opportunity to by a 50-litre cask for personal use – personal consumption, gifting, et cetera – not investment,” says Phil.
Simon is the licensed warehouse keeper for Dornoch and is responsible for (among other things) keeping records of ownership of its casks. “We’ll even go as far to help with bottling and exporting once the time comes,” he says. “When third-party cask investment companies get involved and the amount of liquid surpasses what HMRC deems as more than personal use, identifying who actually owns a cask gets very complicated in legal terms.”
Oliver Chilton, whisky maker for Elixir Distillers (which owns Tormore and Portintruan distilleries and produces the Port Askaig and Elements of Islay brands), has personal experience of what he suggests is incorrect information being given by some cask investment companies, including claims that customers could purchase casks directly from established distilleries, promises of inflated returns on investments, and even misinformation about the legal ownership and storage of casks.
“This is alarming. Wood is not being checked, the condition of the whisky is not being assessed, and the people responsible for it are not likely to have any idea how to gauge its shelf value. At the end of the day, the cost of duty, bottling, advertising, and distribution have to be covered, and bottles must be sold. Without doubt, some people will lose out,” he says.
Whisky consultant and broker Blair Bowman has been a vocal critic of the cask investment market and is particularly concerned with how some of these companies are interpreting the regulation of casks stored in bonded warehouses.
“Although the ASA rulings are a positive thing, more needs to be done. This whole section of the industry feels like a train hurtling out of control,” he says. “The problem is that there is a grey area that some investment companies are exploiting. The Financial Conduct Authority [doesn’t] regulate cask sales, and HMRC only tends to be involved once there is a duty bill to pay. And the only way that Trading Standards or the National Fraud Intelligence Bureau will get involved is if there is overwhelming evidence in a case against [a cask investment company].”
He says that the greatest problems may come not from people making investments, but when they try to cash them in, particularly if the market is spooked by a trend of poor returns which then prompts many more investors to move for the door. He advises anyone considering investing with a whisky cask investment company to exercise caution and “do your due diligence”.
This article is for information purposes only. It does not constitute advice or guidance in relation to any investment or types of investments, and you should take your own professional advice before deciding whether to invest in whisky or any other products.