Scotch single malt whisky specialists VCL Vintners has amassed over £60 million in stock under management.
Investors seeking financial shelter during times of economic volatility will naturally head towards tangible assets – and the Scotch cask investment market has benefited enormously from this influx of new investors. With Covid-19 shutting down Scotland’s entire whisky production industry and retail alcohol sales up 9 per cent by mid-June, prices for pre-existing casks of single malt casks have skyrocketed.
Rare whisky has the potential to be hugely profitable over the medium-to-long-term for patient investors seeking a secure asset. Indeed, the Knight Frank Luxury Investment Index documents growth of 564 per cent over the past decade, with Grand View Research forecasting a CAGR of 6.4 per cent for the entire whiskey industry from 2019 to 2025.
The fundamental upon which this growth is based is a perfectly inverse supply/demand imbalance for generic whisky. Specifically, the Scotch whisky industry has around 120 distilleries and at maximum capacity can produce approximately 35 million litres of single malt annually, while consumer levels globally sit at an astounding 500 million for whisky as a whole.
2019 was a record-breaking year, with Scotch whisky exports topping £4.9 billion, up 4 per cent on 2018 levels, and with single malt exports hitting £1.5 billion – another record-breaking sum. Bottle prices were no slouch either, with a single bottle of 60-year-old 1926 Macallan selling for £1.45 million.
While many new whisky brokers are now queueing up to satisfy investors’ insatiable thirst for the amber nectar, it was London-based whisky investment house VCL Vintners that first broke into the highly lucrative cask investment trade, cutting out a great deal of the brokers and middle men, and dealing directly with the parent organisations of some of the best-known distilleries in Scotland.
Originally founded in 2010 as a wine and spirit merchant, VCL has, since 2013, scoured Scotland for the world’s rarest and most desirable casks of Scotch single malt, and today houses some of the largest privately owned cask collections of ultra-exclusive Macallan, Dalmore and Bowmore, to name a few. VCL even owns casks procured by the likes of Abe Rosenberg, once a notorious prohibition-era bootlegger who became a giant of the (legal) whisky world.
“Having entered the market at the beginning of the curve, we were able to amass a collection of super-premium casks, which have, in many cases, made significant gains for those investors savvy enough to jump on board,” says Benjamin Lancaster, one of VCL’s foremost whisky experts. “Over time, we have diligently accumulated casks that have an unprecedented scarcity value. We have carefully nurtured and developed relationships with independently owned distilleries and multinational conglomerates alike, and as a result we are considered to be perhaps the go-to company for that once-in-a-lifetime cask investment acquisition.”
Your money maturing
There are two primary ways in which rare single malt whisky will increase in value. “Firstly, and unlike bottled whisky, liquid in the cask will go through a ‘maturation’ process, during which it will continue to take on the characteristics and complexities of the cask that it’s housed in. Through this money-making osmosis, whisky will get better with age and therefore far more valuable as time goes on,” says Sales Manager Tim Ashley. “Secondly, there is an enormous and increasing rarity and scarcity value attached to these casks the longer they are held. Over time, all casks will fulfil their ultimate destiny which is to be bottled and consumed. This leaves fewer and fewer of the highly prestigious casks held by our investors and so again the trend is that they rise rapidly in value.”
VCL is now a truly global company, with more and more overseas buyers interested in owning a profit-making piece of Scottish heritage. Its network of clients now covers Asia, Europe and the US and, owing to the direct relationship VCL has with many distillery owners, it is increasingly the go-to company for whisky brokers and wholesalers. “We have been stockpiling Scotland’s rarest whiskies for many years now,” says managing director Stuart Thom. “Nowadays, these whiskies rarely come to the market, so when we do introduce them the demand is huge and they tend to be purchased very quickly”
While the romance and pedigree of the industry will always be a draw for whisky lovers, VCL takes a more analytical approach. “We assess the viability of each distillery’s stock in much the same way that a City analyst might assess the merits of a listed company,” says Ben Lancaster. “We consider various factors including rarity, collectability and quality, and all this within the framework of 200 or so different whisky micro-economies worldwide. Generally speaking, the benefits of whisky investment are available for all to see – just open a broadsheet or investment magazine. Where our expertise is utilised best is stock-picking the best casks, from the most prestigious distilleries – but, of course, at the right price.”
This modern approach to whisky investment has attracted an ever-younger audience. No longer the preserve of aristocratic gentlemen in cardigans, VCL’s clients now include a far younger demographic of buyers. Fed up with underperforming traditional investments and with time on their side, they appreciate the rigorous analysis performed by the company and see whisky as a low-maintenance investment that can seriously improve their future wealth position.
VCL is committed to breaking these stereotypes. Chiefly among these is the ever-increasing number of both female investors and staff. Currently, there is a precise 50/50 split between male and female employees. This is in line with the industry’s hopes to broaden its appeal, best seen through the huge tourism initiative for Scotch whisky.
Fully managed service with years of expertise
VCL’s level of professionalism and expertise is unparalleled. Earlier this year it held an investment forum at the Scottish Houses of Parliament, focused on strengthening the trade relationship between Scotland and India, with Scotch whisky central to discussions. It is owing to this kind of commitment to the Scottish whisky industry, and its rightful place within the commodity investment arena, that VCL is now considered by many to be the premier cask trader in the country.
As a performance-related brokerage, VCL has a genuine and vested interest in how its clients fare financially. With affiliation to both the Wine, Spirit & Trade Association and The London International Vintners Exchange the company is well positioned to offer expert advice to clients wishing to capitalise on this rapidly growing market.
“As is often the case, investors come to us with very specific requirements,” says Stuart Thom. “Our whisky specialists create bespoke portfolios, providing up-to-date market information. Regardless of whether you are a whisky aficionado or a complete beginner, the simplicity of our investment structure and the intimate knowledge of the market held by our account managers means that whisky investment is something that can be hugely beneficial for all.”
Safety and security are key to the market and it is underpinned by a strict set of HMRC rules and regulations. By law, all Scotch whisky casks have to remain within the boundaries of Scotland in whisky-specific bonded warehouses. For savvy investors, this means that the asset is free from both VAT and duty, as well as being fully insured to its market value. In addition, owing to the fact that whisky casks can be categorised as a “wasting chattel”, there are potentially huge benefits in relation to Capital Gains Tax.
Clients can exit the market with their profits just as easily as they can enter it. Cask brokers, distilleries, whisky collectors and funds are all viable exit strategies. VCL will soon launch VCL Auctions, creating a platform where investors can buy and sell whisky casks. “As a team, we are very much unified in our dedication to provide the best possible service and, of course, that means profits for clients,” says Thom. “We try to perfectly fuse a devotion to Scotch whisky’s history and romance alongside a keen commitment to generating profits for our clients.”
For more information on starting your whisky cask portfolio, contact the team at VCL Vintners for a no-obligation consultation
by Tim Ashley, Sales Manager, VCL Vintners