Whisky – and by this we mean high quality whisky – has been written about extensively as an alternative to investing your money in public markets. But the key has always been the price end consumers have been prepared to pay for it. So how can we invest in whisky?
HAH Whisky has a new and different angle to whisky investment that also allows investors to take advantage of a tax free yield using bonded warehouses.
HAH buys whisky from Scottish distilleries for its whisky club – an association of whisky connoisseurs who take delivery of the end product once it has matured beyond 12 years. But what happens to the whisky in the meantime?
Whisky investors can provide HAH with the capital to buy whisky, and actually own the whisky as it sits in casks in secure bonded warehouses in the UK. At this stage in time it is not incurring any duties or capital gains and sits outside the UK tax net.
Eventually the whisky will be mature and ready for distribution to the HAH bottle buyers club. At this stage HAH buys the whisky back from investors – indeed it expects the right of first refusal on the casks. Once HAH takes ownership and begins to bottle and distribute its luxury whiskies, duty is applied, as the whisky is now leaving the bonded warehouse environment.
As an investor you are making your return on the price between that paid for the whisky leaving the distillery, and the price paid by HAH to buy the whisky.
How to invest in whisky while still in bonded warehouses
HAH reports that its investors already own more than GBP 4.5 million of whisky in casks in bonded warehouses. The anticipated mark up – which is dependent to a degree on the quality of the whisky and price it expects its bottle buyers to pay – is usually in the region of 100-300%, give or take.
The HAH whisky investment opportunity is currently only available to UK resident buyers unfortunately.
Investors should expect to own casks of whisky that are between 5-8 years old and which is sold on when it is at least 12 years old. They can be looking at annualized returns of around 7-10% per year, which is well north of even high yield credit.
“Working warehouses don’t want to have to deal with the end consumers,” explains Craig Chidgey, Founder of HAH Whisky. ‘’Spirit must sit in bonded warehouses for 3 years and a day before it can be called whisky; most distilleries release 10% of casks for general sale for cashflow purposes.”
His investors benefit from the rise in price in the product as it matures in its casks in bonded warehouses. As raw materials and labour costs continue to go up, Chidgey reckons that the big distillers will come under more pressure to sell their finer whiskies onto the independent market.
Chidgey recognizes that there is a capacity level for the investment, which is based upon the amount of bottles the Whisky Club expects to sell. But the company already has over 2400 regular buyers, and Chidgey expects that number to continue to increase.
Like all other investments, this one is not a guaranteed, but Chidgey thinks investors will definitely get back what they put in, at a bare minimum. Whisky does not tend to lose its value as it matures and Chidgey’s buyers will be looking for a commodity that will sell on to their buyers.
The entire investment is not subject to UK tax, including capital gains, so there is that additional benefit if you have used up your ISA allowance. HAH cask investors are generally purchasing between GBP 2500 and GBP 10,000 although some do invest more.