Cask X Is Opening The Door To Investing In The Booming Bourbon Market One Barrel At A Time
The bourbon industry, much like the entire spirits market, is amid an unprecedented expansion, one that seems to only be gathering speed as consumers seek out premium products. According to the Distilled Spirits Council, revenue from the super-premium category of American whiskey rose by 17.2% in 2021. Volumes increased by 15.6%. If you are looking for proof of the booming popularity of bourbon, look at the back bar of your favorite restaurant or bar the next time you are out. It is a forest of different bottles, each with its own story.
This thirst for unique high-end brands has led to severe shortages across the market as aged barrels of bourbon are gobbled up to fill bottles. This need has led to one company looking to tap investors into the possible profits by owning their own share of freshly distilled bourbon.
Cask X is the first investment firm that has brought the idea of investment in whiskey barrels, something that has exploded in the Scotch whisky market, into the bourbon market.
“We believe that we’re opening up the marketplace to retail investors that previously wouldn’t have this opportunity,” says Jeremy Kasler, the founder of Cask X. “The bourbon market itself is where the Scotch market was 15 or 20 years ago in Scotland. Investors realized that they could make money if they could manage to procure barrels and put them away for a few years.”
The company works with accredited investors under FCC oversight, offering them the opportunity to buy into freshly distilled bourbon in lots of 24, 36, or 48 barrels. The whiskey is then racked and stored at the distillery, where it is produced for up to eight years. During that period, an investor can sell their share of the product through Cask X, which maintains ownership of the actual product under their umbrella. In the normally insular bourbon world, with its epicenter in Kentucky, the opportunities to purchase and age a barrel or barrels have traditionally been limited. You had to know someone or work in the industry to gain access, but the massive demand for the product has created an avenue for non-traditional investors to get involved as distillers look for new revenue streams.
“There’s never been a time when more people in the bourbon industry are trying to secure bourbon barrels. There is a shortage of product right now that the industry is working to catch up,” says Kasler. “In the past private investors wouldn’t be able to get involved in this market, but we are positioned to allow people to tap into this market.”
That shortage of aged bourbon has led to an unprecedented expansion of the industry in Kentucky. According to the Kentucky Distillers Association, there were five times more active distilleries in the state in 2021 than in 2009, when the bourbon craze began to take off. Less than 3% of barrels in inventory have aged more than eight years, and less than 7% are over six years. In an attempt to catch up, distillers have invested more than $1.9 billion over the last five years and are projected to invest $3.3 billion over the next five years.
The sudden demand for bourbon led all the major distillers in the state to stop selling their aged barrels, something that used to be quite common not that long ago, to smaller boutique brands around 2012. Many popular premium brands started their businesses by bottling products created from bourbon from the larger houses. That has led to numerous contract distillers setting up shop to fill that need. But distilling isn’t cheap.
Part of what makes the Cask X model work for distillers is the opportunity for an instant cash infusion, something rare in the whiskey world. That is because distillers traditionally have had to deal with a lag time as their product aged inside barrels. Only when it was fully matured would they receive their payout for a product they had created and watched over for years. By buying whiskey up front, sometimes even before it’s in barrels, they provide the funds needed to allow for the purchase of new equipment, expansion of facilities, and new aging warehouses for barrels.
“Everybody is on a major ramp-up right now since we are all producing at capacity. Our growth is unlimited right now. In our first year of production in 2014, we produced fifty barrels. Last year we hit 3,200, and are planning on 5,500 this year, and 6,500 next year,” says Chris Miller, the distillery director at Kentucky Artisan Distillers. “That type of growth takes money, and Cask X allows us to expand without taking on debt. They have become our second-largest customer in just two years, and I would sell them more barrels if we had them.”
As demand rises, so have prices for barrels of whiskey. According to Miller, in 2014, when they started, a barrel of four-year-old whiskey sold for $1,500. Nowadays, the price is around $4,200 to $4,500, with expectations for them to keep climbing. Part of what is driving the prices up is the lack of product. The other is the popularity of bourbon in Asia and Europe, especially now that the Trump era tariff war has ended.
By setting their entry-level investment at 24 barrels, around $50,000, Cask X works with more mature investors looking for longer-term commitments. It is not for someone looking to do a quick in and out transaction. According to Kasler, their projections show a double-digit growth of around 10-12% year over year. While there have been some concerns voiced in the past about investing in Scotch barrels, Cask X is bullish on the opportunities in the bourbon market. If they are correct, the thirst for America’s homemade spirit could make investing in bourbon barrels age as fine as a twenty-year-old Pappy Van Winkle.