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Bargain Hunter

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I know investing in Whiskey barrels has been discussed on the forum before. I wanted to know what everyone thinks of the offering from Nant distillery in Tasmania?:|

http://nantdistillery.com.au/barrel-sales/

At the end of the maturity period even if the company goes broke and doesn't buy back the whiskey (as per its guarantee) at least you can take delivery of it and bottle it to drink it or give it away as presents or try to sell it.
 
Not a good investment! Creative and a good way for them to raise some money but not a good investment for you. You will be paying $125 per litre of whiskey (100L per barrel). This seems ridiculous - not sure if I read it correctly or its actually 3X100L (3 barrels). If its 3 barrels then its still very high at $41.66 per litre (no duty paid). Keep in mind that this cost does not include bottling, logistics and duty. Duty will be at least $30 per lite (this is not payable until the whiskey is removed from bond). For the $12,500 you can buy wine at $3-$6 per bottle and flip it for 30% profit after overheads in 6 months time.

Only invest if you love the distillery, love the product and plan on drinking it all yourself ;)
 
Its 3 x 100 Litre barrels for $13,750 ($12,500 + $1250 of GST). Therefore the price is around $46 per litre. Yes if you want to get it bottled at the end you will have to pay a fee. However you will not have to pay bottling, logistics or duty fees if you sell it back to the company. While $46 a bottle may seem high all the products they currently sell on their website all sell for well north of $100 per 500 ml bottle. Make no mistake its high end stuff. Would you expect to be able to buy a bottle of Johnny Walker blue Label for $20? No you wouldn't. Same deal here.

If you expect the retail price of the whiskey to remain above $100 per bottle it would still be economical to take possession of the whiskey after including bottling, logistics and duty expenses if your paying $46 per litre. If you think their products will eventually lose their premium rating/pricing then yes you will be stuffed if the company doesn't buy back the prodfuct, if however you believe they will maintain their high retail prices than its not a problem.

Including GST in the purchase price, if the company makes good on its buyback promise that's a roughly 6.5 - 7% per annum rate of return (before capital gains tax). I doubt its easy to buy wine at $3-6 per bottle and flip it for a quick 30% profit.
 
Read Clause 3, 4 and 7.2 carefully.

The biggest catch is that you seem to be taking 100% responsibility for the barrel even though it is not in your possession.

Some BOTE calculations:
- 300 litres at start. Somewhere between eight to ten percent of the alcohol volume will be lost to evaporation in the first year. Evaporation continues over subsequent years at a rate of four to five percent per barrel. A good whiskey is likely to lose approximately thirty percent of its original volume by the time it is ready for bottling. Because they are claiming a 4 year maturation, let's say it is 20% (optimistically).

- Volume at end = 240 litres.

- This equates to ~330 bottles at cask strength (typically ~55-60%) or ~510 at 40%.

- $13,750 + 9.5% for four years = ~$19,800. This means the alcohol in each cask strength bottle is worth $60 @ 60% cask strength or $40 @ 40%.

- Excise is currently $32/bottle for 60% and $21/bottle for 40%. (Moves at CPI)

- Say $5 for bottling and the manufacturers cost price (no profit, retailing costs or GST) would seem to be at a minimum $100/bottle for 60% or $66/bottle for 40%.

I have no idea of the quality but a good 47% Sullivans Cove (also from Tasmania) retails at Dan Murphy's around $120-$140. Hence, assuming my rough maths is correct, the price seems to be well on the upper end of the retail market. Given such a high price, it would seem most likely that it would be sold at cask strength through the various Whiskey clubs (some of which go into the $300-$500 per bottle price range) but this is a niche market where the barrels are (a) limited and (b) exceptional. The buy-back guarantee seems to rest on the ability of the manufacturer to target this market and would be worthwhile checking out how they currently sell their product.

Hope this helps.
 
Bordsilver if you look at their website the company is selling each bottle of whiskey for a minimum of $125 per 500ml bottle (all the way up to $295 per 500 ml bottle) therefore the current retail price is a minimum of $250 per litre. I guess it all depends on how much you expect the retail price of the product to be in 4 or 5 years time. Also their is an export market for them to sell to. The buyback price is stated as $17,970 (its not really a 9.5% per annum return as they aren't including GST in their purchase price calculation). Their sales have doubled over the past year so they do seem to be able to sell the stuff despite the high prices, whether it can continue is another question.
 
Bargain Hunter said:
Bordsilver if you look at their website the company is selling each bottle of whiskey for a minimum of $125 per 500ml bottle therefore the current retail price is a minimum of $250 per litre. I guess it all depends on how much you expect the retail price of the product to be in 4 or 5 years time. Also their is an export market for them to sell to.
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That's good (because it would have to be that much).

As I said, it's definitely not out of the question but is targetting a niche market rather than attempting to shift volume through the major liquor chains. If you are comfortable that the distillery has a good track record of tapping that market (personally I'd want at least three "vintages") then it looks more favourable.

The other really big consideration would be the contract clauses around the losses and potential insurance. I almost bought into an abalone scheme in South Australia a few years ago and although many go like clockwork, something happened to the crop I was looking at (I forget what) that meant they lost the lot.
 
Last year i saw something similar at CostCo. A dingle barrel of JD. Price inclusive bottling, boxing and custom label with distiller signature. And you get to keep the barrel, which will be signed too.

I can't remember ut might be $21,000.
 
Bargain Hunter said:
Its 3 x 100 Litre barrels for $13,750 ($12,500 + $1250 of GST). Therefore the price is around $46 per litre. Yes if you want to get it bottled at the end you will have to pay a fee. However you will not have to pay bottling, logistics or duty fees if you sell it back to the company. While $46 a bottle may seem high all the products they currently sell on their website all sell for well north of $100 per 500 ml bottle. Make no mistake its high end stuff. Would you expect to be able to buy a bottle of Johnny Walker blue Label for $20? No you wouldn't. Same deal here.

If you expect the retail price of the whiskey to remain above $100 per bottle it would still be economical to take possession of the whiskey after including bottling, logistics and duty expenses if your paying $46 per litre. If you think their products will eventually lose their premium rating/pricing then yes you will be stuffed if the company doesn't buy back the prodfuct, if however you believe they will maintain their high retail prices than its not a problem.

Including GST in the purchase price, if the company makes good on its buyback promise that's a roughly 6.5 - 7% per annum rate of return (before capital gains tax). I doubt its easy to buy wine at $3-6 per bottle and flip it for a quick 30% profit.
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I organise imports of wine, beer and spirits. You can buy good quality wine EXW for $3-6.

I did not look into how much the company was selling their whiskey for - I just assumed that above $100 a bottle for 500ml would be insane. I know a lot of people who would buy Johnnie Walker Blue Label but not many that would this (not saying that people wouldn't, just not many). Would not recommend selling it yourself unless you want to be sitting on 300L of whiskey. Most of the time 'high end stuff' is 'high end stuff' because of positioning and branding (plain package vs. branded). In this case I think its also because of economies of scale. Therefore yes I believe you could buy a product as good as this for less. Thanks to AUS law you can do this through grey markets. Most people don't do this as it is a highly competitive industry and a large investment is needed for it to be profitable. Therefore the majority of people focus on wine and beer as it is less costly and you can make a good profit without a large outlay (that's why most small independent stores are usually wine and beer heavy). I recommend wine as it can be stored longer than beer.

However, if you are not looking to move into the liquor industry then I would recommend not investing in it. Purchasing bottles on a collector level is fine for a hobby and can be profitable.
 
bordsilver said:
A good whiskey is likely to lose approximately thirty percent of its original volume by the time it is ready for bottling. - Volume at end = 240 litres.
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"The angels' share" ;)
 
The Nant Distillery is one of the newer Tasmanian distilleries that have popped up in the last few years since the regulations on distilling were relaxed to encourage the boutique liquor industry.

They produce very high quality spirits that generally receive 90+/100 scores from credible reviewers (I remember Jim Murray ranked one of them very highly).

Tasmanian whiskey is gaining a reputation around the world for being really good and Nant is one of the better ones. They're not trying to compete with Johnnie Walker Red by churning out large volumes (of *ahem* crap whiskey), they're artisan distillers making a premium product for an educated audience.

(Unfortunately this one of those areas where Australians don't believe something produced locally is any good until someone from overseas tells them it is. The same thing happened with Australian wine 20-30 years ago).

The reason they're selling barrels is because they can't fund the 3-5 year lag between production and sale themselves out of free cash flow. This isn't unusual for new liquor producers where there is an aging process involved. If they try to grow the business organically it would literally take generations of reinvesting profits back in to the business after waiting for the revenue from production that occurred 3-5 years ago to start flowing though. They're essentially running a miniature futures market by pre-selling a portion of their output in advance for delivery in a few years. There's nothing wrong with that, but you should be aware of why they're doing it.

Ask them for their information pack and see what it says.

[edit] Disclaimer: I've drunk a fair amount of Tasmanian whiskey, including some Nant releases. My opinion is probably biased. I was aware of their barrel investment before this this thread was started.)
 
Big A.D. you seem to be somewhat knowledgable on the topic, what do you think of the nant whiskey barrel investment program? 6.5-7.0% (after adding GST to purchase price) isn't a particularly high rate of return). Is it something you would ever consider and would you consider it to be high risk?
 
This is a good thread that has been touched on before. I would say if there was no risk then it wouldn't be an investment.

As far as Nant goes from a tourist's perspective though - beautiful surroundings, extremely friendly staff that are willing to accommodate late arriving mainland dickheads, and an exquisite product. Not that I've opened the bottle that I bought from them ($180 ouch), I've only tasted their freebies and I must say yum. So I'll say it. "Yum".

I have considered their investment programme, but at this stage, I am committed to other areas. (ie malleable yellow metal) :/
 
Bargain Hunter said:
Big A.D. you seem to be somewhat knowledgable on the topic, what do you think of the nant whiskey barrel investment program? 6.5-7.0% (after adding GST to purchase price) isn't a particularly high rate of return). Is it something you would ever consider and would you consider it to be high risk?
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I would consider it myself because for me the risk is lower than for a lot of other people.

The common wisdom with alcohol investment is "be prepared to drink it all yourself if everything goes wrong". I wouldn't have to do that because my circumstances mean that I'd be able to dispose of it elsewhere reasonably easily and probably even make a profit on it. Being able to do that is actually a plus for me rather than a worst case scenario. (That isn't an offer to buy everyone's surplus booze by the way).

The GST is an annoyance and I'd be talking to an accountant before putting any money into it to see if I could buy it via a business and claim GST credits to offset other GST liabilities.

TBH, I think Nant could probably structure the offer differently and (legally) avoid charging GST. For example, if you were purchasing a $5000 option to buy a barrel of whiskey for $1 in three years time, you could probably argue that that's a financial product and exempt from GST (although you'd eventually pay 10c in GST on the $1 barrel of whiskey). Then again, that would mean you can't say "I own a barrel of whiskey" which is actually quite an attractive part of the investment for a lot of people.

For what it's worth, I'd consider just lending money to a distillery and taking a barrel of whiskey as security on the basis that they're a local business employing local people producing a top quality local product. Of course that would show up on their books as a liability and I suspect a "buy the barrel" scheme has a lot of benefits to the distillery in being off-balance sheet. Anyway, I know from experience how hard it is starting a business in a capital intensive industry so I can sympathise with their position.

At the very least you should buy a bottle or two of their whiskeys and take yourself off to a Whiskey Appreciation for Beginners night somewhere. Don't invest in anything you don't understand.
 
Can you claim your investment as an educational expense?

Just joking....

My main task is keeping "funds" for future family benifits.

Only 2 know where the boat is sunk & the fiat in the garden.

When Boneyard mortal remains goes for medical science, those 2 can have pistols at 5 paces.

Will they find a cask of whiskey?
 
If you think it's a goer, last years Hellyers Road matured in a bourbon barrel sold out fast after receiving a good review
Maybe a good option since previous history

I purchased a bottle of Lark to celebrate my daughters birth and its still three quarters full two years later. Turns out I prefer 12 yr Glenlivet
 
At the risk of another bollocking... this sounds like another case of buying a cow for the milk.
 
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