May 31 2006 / (6)

Cask strength.

A few years ago, I became interested in Scotch. I forget exactly how I ended up trying it for the first time, but I enjoyed the smokiness of the peat (I've always favored peaty scotches) and the complex flavor. I also like the fact that it's a sipping alcohol -- you take your time with a glass, savoring it, rather than pounding it down and pouring another.

A couple months ago, my friend Min Jung stayed with us for a few days as she made her way across the country. She's also a scotch drinker, so I showed her my collection and offered her some samples. We got to talking about how cool it'd be to have our own cask. I mentioned that I own caskstrength.com -- upon which nothing currently resides, but it was once going to be a scotch blog -- and MJ started brainstorming a business out of it: we'd buy casks from different distilleries and create a sort of mutual fund of scotch, with the return on investment being bottles of your personal cask! And caskstrength.com would be where it was all managed!

We talked a little more about it and then started feeling fellow scotch-drinking friends out on the idea. Everyone we talked to thought it was a great idea and said they would definitely throw a bit of cash into the pot if we got it off the ground. Worst case scenario, MJ kept pointing out, you get a few bottles of scotch.

So we left SXSW with plans to research the idea further and regroup later. One of my assignments was to talk with distilleries and private bottlers at WhiskyFest Chicago in April. Which I did. And it didn't sound good. The people I spoke with -- who included everyone from salemen to actual distillers and bottlers -- painted a very negative picture of our prospects. Here's a run-down of what I was told:

• The cost would depend on the size of the cask, but would likely run around $2,500 for a barrel.
• You might only get 100 bottles out of the barrel, due to loss of the "angels' share."
• There was no guarantee you'd get what you paid for -- unless you oversaw every step, you might receive bottles of inferior whisky or a blend instead of the premium single malt you bought.

Apparently buying casks was a bit of a fad in the 1970s and '80s, but fell by the wayside because of the above issues. I was a bit disheartened, to say the least. I pretty much abandoned the idea as good on paper but that's it.


Totally Doable
Then what should I read a couple weeks ago but an article in the Wall Street Journal about just the thing we were hoping to do: Several small distilleries were now offering casks for purchase!

• Bruichladdich, on Islay, offers barrels, which yield approximately 200 liters, for £775 ($1,452).*

• Bladnoch, one of the last Lowland distilleries, is offering 30 barrels at £795 ($1,489) on a first-come-first-served basis.

• Isle of Arran offers casks, too, according to the WSJ article. Their site doesn't have any details about availability or pricing, but it does give a good amount of information about costs once a cask has matured and is ready for bottling. The prices may not hold true in 10 or however many years from now when bottling actually occurs, but it's a good guideline.

All three of the offers include storage, care and insurance for 10 years, after which the cask may be bottled or additional years of storage can be purchased.


Doing the Math
To calculate costs post maturation, I'll assume we're looking at barrels, which according to Arran will yield approximately 300 bottles at 86 proof (cask strength -- between 110 and 120 proof -- would be a smaller yield), or 25 12-bottle cases. Arran puts the cost of bottling at £20-25 per case ($48), so total for bottling would be about £625 ($1,170); figure a couple bucks more per case for labeling. Taxes are £70.65 per case / £1766.25 per barrel ($132.34 / $3,309). There's an additional Value Added Tax (VAT) of 17.5 percent, which is based on the purchase price of the barrel -- on the Bruichladdich, that'd be £135.63 ($254).

That brings the total cost a barrel, not including shipping, to £3301.88, or $6,185.89. That works out to $247.44 per case, or $20.62 per bottle. A bottle of 92 proof Bruichladdich 10 Year currently retails for $48.99 at Sam's Wine & Spirits, so even building in, say, $10-15 per bottle for administration fees, investors are still getting a considerable deal.

What do I mean by administration fees? Well, somebody's going to have to keep track of all this -- managing finances, interfacing with the distillery and other suppliers, updating investors and maintaining current contact information, monitoring the investment, etc. It won't be a full-time job (well, assuming we're only talking one or two barrels) but it'll be more than anyone should do for free. $3,000-4,500 seems like a fair wage for the task.


Bottom Line
So now, I guess the question isn't whether it can be done, but whether there are enough people willing to wait 10+ years for their drink for the deal to be financially feasible. The way I see it, we'd probably want people to buy in for at least half a case, an initial investment (shipping in 10 years will be extra, don't forget) of around $200-250. A full case would run you about $500. And, obviously, we'd have 25 cases to sell.

You interested?

* All currency conversions as of May 31, 2006.

6 Comments / Leave a comment

June 02 2006, 10:29 AM / Andrew

Whoops -- I accidentally had comments turned off! Comment away!

Or email me at a.huff at me3dia.com.

June 02 2006, 11:22 AM / Phineas

Sounds like a great idea in theory. But what if, in ten years, I'm a teetotaling fundamentalist? Or, y'know, dead or something?

(Given the choice, I think I'd hope for dead.)

That's a damn long time to wait for a dram.

June 04 2006, 05:54 PM / Andrew

As with all investments, you must wait for the payoff. All we can do is deliver the scotch -- we can't make you want it. :)

June 04 2006, 06:43 PM / Dan

Anne mentioned this. I might be interested.

I might know others too.

June 20 2006, 05:11 PM / Victor

I remember you mentioning this at SxSW and thinking it was a great idea. I still think its an awesome ide. I am interesting in seeing how it develops.

July 04 2006, 11:36 PM / John

This is a fantastic idea. And if you get an angel investor you can tell them with a straight face that they will, in fact, get their share.

Count me in.





    

Archives: or

About
Andrew Huff is editor and co-founder of Gapers Block. He writes ...well, just about anything, for a living. Email him at a.huff@this domain. The site's RSS feed is here.

Other projects » Dead Horse / Gapers Block / Out of 5 / I [star] Chi

All content © Andrew Huff, 2001-present. Design by Weightshift.

More at Flickr