The real deal at Scotty’s Drams
Last weekend’s article (click here to read) has caught me by surprise. It was actually pretty well received, and while you may not see this looking at the site, I had quite a few comments and private messages of a positive nature which I was totally not expecting. It has been a big boost to me, especially when much of the details that I have written came from an article I wrote in March without any professional assistance. I had better watch what I write, as people might actually think that I know what I am doing!
Of course, that last statement was very much tongue in cheek, as I do try my hardest to bring you accurate information, or at the very least make you aware when it is opinion rather than fact. The pleasure of knowing your opinion is also correct or shared by the right people also is a very pleasant feeling. However there was something that was left unsaid in the last article.
The true costs and the realistic expectation
One thing I couldn’t do was give you an expectation of value of owning a cask, nor brokerage costs. I could only highlight the hidden costs and practicalities that many people may not be aware of. It was through some of the comments made after last weekend’s post that I actually researched another distillery in Ireland that never gave an idea of any tax costs, seemed to have a really low bottling charge and seemed to guarantee a return. For a brand new distillery venture, this seemed too good to be true, and the marketing did seem to skip over the not so pleasant sides of cask ownership, and the terms and conditions seemed to be a lot more basic than some of the others I had seen.
Anyway, to advance the narrative of this article, one of the people who got in contact with me after the article was Mark Littler, the broker I had used to confirm some of the information that I used. It was great to see him so enthusiastic about what was written but he suggested I write another article to give you an idea of brokerage costs, the actual range that a cask could achieve and how a broker works. To be totally honest, he wrote the article for me, so think of it as a ‘guest writer’. I hope that you find the information useful. It is certainly useful for me, as I had a couple of articles in progress, but due to child illness and other family issues, I have not had time to write another article for you though I can assure you there are plenty of metaphorical juggling balls in the air as I type.
In the quest for disclosure, I do realise that I have said in the past that I plan to keep Scotty’s Drams independent, and this article may seem like a sales pitch to some, but I would say it is a fair and balanced assessment of what you can expect if you were to buy a cask through a broker. I’m not getting paid for this input, but I felt if sources are going to give me information, it is better for me, and ultimately for you to have the full story. Plus you can’t get much better than hearing it from the horses mouth.
In my last paragraph before I hand it over to Mark, I’ll say that while this is a first for me in letting somebody else writing for my personal blog, I think that this could be a good forum for others to share their whisky experiences if they ever feel that they want to share something, either a whisky they think is great / not so great / cooking whisky / drain cleaner, a whisky based experience such as a distillery visit, or a wee story about their whisky journey. Or perhaps you can write about how much you enjoy my blog! Drop me a line using Facebook, the comments on the WordPress blog or e-mail email@example.com
Anyway – over to Mark
I’m Mark Littler – the broker that Scott refers to in his article. It is a great article and highlights a lot of the pitfalls that most people are not aware of and that we have been working hard to bring to light. I do think it would be good to show the other side of cask investment too.
In my business we help people sell their items both through private sales and auctions. We sell everything from classic cars, vintage Rolex watches, pretty much any antique you can imagine, and a lot of whisky – both bottles and casks. We have over 300 five star reviews of our service now – including lots of reviews from customers who we have sold casks for. These are customers that have been very pleased with their cask investment because they did it the right way.
To be clear, the average return is around £5,000 to £40,000 from an initial £1,000 investment. Most people who made more than average were lucky – they bought a Macallan cask for £2,500; can you imagine? Or they picked up a Springbank in the brief window they were available to the public. However from all the customers we have helped sell casks we have found there are two simple rules that if you stick to then you will likely see a good profit.
First – buy a young cask of whisky and let it mature into an old cask of whisky. This is the premise of cask investment – the older the cask gets the more value it potentially has. This is how ALL of the customers we have helped sell casks for have made a profit. They bought their casks in the early 1990’s or 2000’s, almost forgot about them, and then came back to the market at the right time with a mature cask.
This comes down to a fundamental law of nature – you cannot speed up time. If you want a 15 year old whisky you have to wait 15 years for it to mature. So, if you invest in a young cask, and mature it into an old cask, you will be rewarded for tying up your capital for that period of time.
Second – they all paid a fair price for their casks. This is the real crux of the matter and what really angers me about the modern cask selling market. The whisky cask market is the last asymmetrical market out there – which is bad news for buyers.
An asymmetrical market is one where the seller has more information than the buyer. However, the internet has been a very democratising tool and now almost every selling market is balanced. For example:
If you want to research the value of a car you can use Auto Trader.
If you want to research the value of a fund you can use Morningstar.
If you want to research the value of a house you can use Zoopla.
You can now verify the value of almost anything online with a quick search. The sheer volume of data available means that in almost every selling situation the buyer can almost guarantee they are going to pay a fair price.
There are no publicly available indexes or price guides about the value of casks. If you are inside the industry you will have access to this privileged information and you are able to build up your own database of the value of casks which are sold on a regular basis.
The reason for this lack of information is quite simple: casks are not generally for public consumption or ownership and therefore a publicly available index would not serve any purpose to the industry (and as such the information is kept strictly private).
Another reason for the lack of a whisky cask index is that no two casks of whisky are alike. As such you cannot ever create a meaningful index of the value of whisky casks.
For instance, a cask of Macallan 1995 which has 210 bulk litres remaining at 52% ABV will be more commercial than an identical cask which is at 49.5% ABV. Trying to compare the value of both of these casks would be like comparing apples with pears as they are totally different (note – casks over 50% ABV are more attractive to the Asian market and so command a premium over casks under 50% ABV).
Due to this lack of market data the buyer is almost 100% reliant in trusting the people selling them the casks. I personally feel that the way some people are selling casks amounts to fraud – the sellers know the true market value of their stock, but charge significantly more as they know their buyers can’t research the correct price.
It’s my mission to add some much needed transparency to the cask selling market and help people buy casks in an open and honest way.
As mentioned, casks can be a great and fun investment but you just need to obey two rules. 1 – buy a young cask and expect to wait 10-15 years for it to mature and 2 – pay a fair price for the cask.
I don’t think that you can do this in the market at present which is why we are starting to sell casks. I don’t feel it is fair that the cask ownership/investment market has been taken over by phoney companies who are solely looking at their financial gain. It’s not fair in the industry and it is not fair on the consumer.
Most of the other brokers do not seem happy to make a small margin on the casks they sell. Likewise, the auction houses that advertise casks for sale don’t seem to want to put accurate estimates on the casks they offer (£18-20k for a Lochindaal 2009 – come on now! £8,000 – 12,000 is what it is actually worth).
We are open with our fees and charge a £300 brokerage fee per cask – so the price we get offered the cask at is the price you pay (plus our brokerage fee – we have to pay the bills after all).
We’re also putting a lot of material out in the public domain to help people make an informed decision. We’ve got a LOT of information in the pipeline, but at present we have so far published the following articles/guides to help people who are looking to buy a cask of whisky make an informed decision.
We have made the cask calculator that Scott refers to: https://www.marklittler.com/cask-calculator/
We also have made a series of 10 videos about cask investment and all the pitfalls: https://www.marklittler.com/whisky-casks-and-the-knight-frank-index/
We have also just sent to print a 52 page magazine about cask investment going into every nook and cranny and busting all the ‘facts’ that the other brokers are using to sell their casks.
If you want to receive a copy of this magazine just DM me or email me with your address and I will get one in the post to you as soon as they are back from the printers (end of Jan 2020).
Mark Littler MA (Hons)
Well, what can I say but thank you for Mark for providing us with all this information, so we can all have a realistic expectation. While I have not personally met Mark, having communicated with him over the past couple of weeks, I can confirm that I feel he has been genuine, helpful and unbiased. This is an important quality, just as last week’s article highlighted, when you look at advertising on social media or even some distillery websites that are selling casks, the information isn’t always there. I am sure Mark will understand however when I say that should you wish to invest in a cask, regardless of who you choose to do so with, that this is at your own risk. The information that I have provided on my blog is to make you aware of the potential pitfalls and benefits. It is also prudent to advise you that nobody can predict the future regards regulations, tax and duties payable or what casks will be popular in the long run, as these things change.
Now that I have got myself adequately off the hook in case you sign up to buy a cask that fails to realise a profit, all that is left to say is that Mark’s website is www.marklittler.com where you can find his contact details there.
And of course, Slainte Mhath!
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Scotty’s Drams encourages responsible drinking. To find out the facts about drink, and where to find help if you need it visit Drinkaware.co.uk by clicking on the link.
All photos – supplied by Mark Littler