Brokerage creates opportunities for small investors to own barreled whiskey.
For two decades, passionate American whiskey fans have hunted rare bottles to drink, save and re-monetize via secondary market sales. Many hunters shrewdly viewed the cost of those extraordinary whiskeys as investments that, once sold for huge profits, would afford them luxe experiences, down payments on homes and even start-up cash for their own whiskey-centric businesses.
Proof° Equity takes whiskey investing much further, to a place where investors buy barrels of whiskey to age and sell for strong returns. As a brokerage, Proof° Equity handles every step of the deal, from acquisition to aging and legal sale of barrels that commonly yield gross profits of 15-20 percent annually and north of 100 percent after four years of aging.
“Over the last 10 years, bourbon investments have out-performed gold. Proof° Equity wants to give other investors entry to these amazing opportunities.”
“Demand for bourbon isn’t just huge right now in the U.S., it’s global,” said Bryan Avery, managing partner for Proof° Equity. Most commonly, bulk sales of American whiskey barrels occur between distilleries and non-distilling producers (NDPs) that bottle those liquids to sell under their own labels. Seeing an opportunity to profit in the same space, industry outsiders are stepping in to buy and sell whiskey to a wide range of customers. “Over the last 10 years, bourbon investments have out-performed gold. Proof° Equity wants to give other investors entry to these amazing opportunities.”
How It Works
According to Avery, Proof° Equity seeks out buyers with disposable income who want a nontraditional yet safe investment in an in-demand commodity.
“Most investors don’t know they have access to opportunities like this,” said Kevin Sullivan, Proof° Equity partner and chief marketing officer. “Normally, when you think about tangible equities, you don’t think about barrels of whiskey.”
The brokerage locates and sells minimum lots of 25 barrels of newly distilled and aging whiskeys to investors for a range of prices starting at around $1,900 per barrel. Prices include the cost of storage and insurance in all its prices, creating a set-it-and-forget-it proposition. Selling within the 2- to 4-year-old range appears to be the reliable sweet spot for profitability, Avery said, since per-barrel prices can more than double in that timeframe.
“Since investors own those barrels, they can let them age longer and see if they can get a better price later,” Avery said. But as with any commodity, market prices rise and fall, and Proof° Equity fields sale offers at any age at which demand exists. “If a buyer is looking for 2-year-old whiskey and is willing to pay a good price, we may call our investors and offer them the opportunity to sell then. But ultimately, when our investors sell their whiskey, is up to them.”
Once barrels are sold—usually to an NDP, sometimes to a distiller, and sometimes to another investor party—owners pay the same capital gains tax they would if selling common stocks.
“We find the buyer, manage the sale and put the proceeds back into your account,” Avery said. If barrel owners want to sell those assets themselves, he added, Proof° Equity can help them acquire a TTB wholesaler’s license. “We handle everything from start to finish, keeping the transaction simple.”
Who Is The Typical Barrel Buyer?
Avery and Sullivan said barrel buyers are a mixed bag of personalities. Some are single-party investors who view it as a reliable short-term play for a significant investment of 500 barrels. Others are established companies seeking to diversify investment portfolios in a novel way. Still others are friends with extra cash who get together to buy 25 barrels.
“For a group of people who want to do something like this together, 25 barrels isn’t a huge investment,” Avery said. That the transaction is simple, compared to buying securities, is part of the appeal, he added. “It’s also kind of fun for some because they’re investing in bourbon. But still, it’s about profiting from that investment.”
“Our position is simple: If you’ve got disposable income to invest, you might want to consider this.”
Since Proof° Equity does not sell securities, a barrel buyer’s net worth is never requested for any transaction.
“We’re never going to ask about someone’s level of wealth,” Avery said. “Our position is simple: If you’ve got disposable income to invest, you might want to consider this.”
As simple as the investment sounds, Sullivan and Avery believe it will attract high-level investors who recognize bourbon’s global appeal and surging demand. Sullivan cited the removal of whiskey tariffs in both Europe and Asia as the creator of “new pathways for opportunities like ours.”
Avery said that Proof° Equity is working with spirits producers overseas to purchase American bulk whiskey they will bottle, brand and sell as their own in foreign markets. He said disposable income in Europe and Asia for investments like these “is off the charts.”
Who Makes The Whiskey?
While Proof° Equity can purchase bulk whiskey from multiple American distilleries, it has partnered for its first offering with Coal Pick Distillery, located near Drakesboro, Ky., in the western third of the Bluegrass State. The brand is known for its delicious and full-bodied wheated bourbon. The team has also forged relationships with other providers who make aging barrels available to our clients as well.
Founded by Kevin Lawrence, Coal Pick produces several thousand barrels annually and ages all of its products onsite. The secured and monitored location is on thousands of acres of woodlands and farmland where its master distiller, Whitney Spence, grew up.
“The whole site is amazing: cattle and buffalo on the property, lakes and streams, and the limestone water they ferment and distill with also comes from there,” Sullivan said. “When you talk about bourbon, Kentucky is it. It’s what people want to buy.”
Both men said barrel buyers tend to be excited about the product itself, even where it’s made. Subsequently, they’re working to create entertaining investor outings at Coal Pick.
The idea for such events grew out of a visit by a group that purchased a barrel of Coal Pick Wheated Bourbon, donated by Proof° Equity to a charity auction. After touring the site and experiencing the private pick, “That whole group has come back to us and said they want to be a part of this,” Avery said. “We definitely want to do some fun stuff out there with our buyers. They see firsthand what a cool thing this is to be involved in.”
Visit the Proof° Equity website to schedule an appointment with one of our Client Ambassadors.