Unfortunately, the short answer is no. Federal laws dictate that in order to take physical possession of a barrel of bourbon, you must be properly licensed as a Spirit Wholesaler or a distillery with a federal DSP number. To save our clients and investors the hassle of having to get properly licensed (and having to pay the attorney fees that go along with that), BWBX maintains physical possession/ownership. Our investors technically own the proceeds to the barrel after it is sold.
This being said, it is worth mentioning that if a client was to want to take possession of the barrel at any point in time, we could get them in touch with the right people to get them licensed. Some potential investors like the idea of one day taking one of their barrels and bottling it as a “vanity label” just to show off to friends. This can be done, there are some extra hoops to jump through, which we can help with along the way.
Yes! In some cases, it will be more beneficial for potential investors to do a group buy. We give quantity breaks for purchases exceeding 10 barrels and again at 50 barrels. So, for example, if 4 friends all wanted to buy 3 barrels each, they could create an LLC and buy 12 barrels at the discounted price. In this case, the members of the LLC would make all buy/sell decisions internally (i.e. they would decide who’s barrels were to be sold first on the back end, if we were to encounter a partial sale).
Furthermore, if a group of people are interested in investing and not all of them are “accredited investors”, they could create an LLC to invest as a group. As long as one member of the LLC (typically the Head, Manager, President, etc.) is accredited, we can accept investments from the LLC.
BWBX does recommend forming a business entity or establishing a legal/operating agreement that details each individual’s ownership stake. BWBX can only place the name of one individual or company on the ownership certificate.
In some cases, banks will be willing to give loans on barrel liens. We are aware of specific financing options offered through Truist Bank that do just these sorts of things. However, in almost all of our investor’s cases, they will not have physical ownership of the barrels. Since BWBX maintains possession of the physical barrels, the investor would not have anything on a balance sheet that would be able to be used as collateral on a loan. If asked this question, you can answer it like this:
“We are aware of some banks doing this, but that is a discussion that will need to take place between you and your lender of choice. BWBX will not participate in any lien assignments.”
Yes, the short answer is that the investor ultimately decides on when and for how much to sell their barrels. We use a base package of 3 years because in our research and analysis, we find that to be the optimal long-term return. For example, if an investor were to hold a barrel until it turns 9 years old, they will make a large total return. However, if they were to sell their barrels every 3 years and roll their return into more barrels, they will make a far greater return after 9 years.
The barrel of bourbon appreciates very quickly for the first 4 years of aging. After it’s 5th year, the appreciation rate begins to slow down. If you were to look at the appreciation rate of a barrel over time, the line it would draw would look like a hockey stick (see figure). So, it is best to capitalize on the higher appreciation rate.
With all this being said about what we recommend, the investor still makes the ultimate decision. We typically start with a 3-year aging package. Once an investor’s barrels are about 3 years old, we will give that investor a call and discuss the current value of their barrels. We will discuss what we think we can sell those barrels for, and how long it should take us to complete a sale. The investor will then decide if they wish for us to sell those barrels or if they want to hold for another year. If they wish to hold, BWBX will draw up another contract for 12 months of aging (all other terms remain the same) and we will only charge the cost of storage and insurance for a 12-month period.
After the additional 12 months, we will call the investor again and the process repeats.
Another point is that we get asked for barrels on a regular basis. Let’s say, for example, a buyer comes to us looking for 2 year old barrels. Let’s say that we have an investor that has 2 year old barrels. Then, we would contact that investor and see if they would be willing to sell early. We would discuss what price we could sell those barrels for, and see if that would be desirable for the investor. If not, no worries, we will continue aging. If so, we will sell those barrels. Again, the investor has total control. *If an investor decides to sell their lot early, we will not refund storage, insurance, or other fees for time not used.*
It is also worth mentioning that, depending on supply and demand in the market, an investor’s barrels may not be liquidated immediately. We typically ask that our clients allow 2-3 months for us to find a buyer for their barrels. *If a buyer is ready to sell their barrels after 3 years of aging, and it takes us another 6 months to sell those barrels, the investor will not be charged for additional storage, insurance, etc.*
Almost always. We typically have some unclaimed barrels in our inventory at any given time. However, barrel investment availability depends on the demand that we have for investments at that given time. We do not offer investments in barrels that we do not have physical possession of, and we do not presell barrels. If we do not have barrels to offer an investor, we will have them join a waitlist until our next barrel drop. We have scheduled barrel drops that come into our inventory every few months, so if we do can not have barrels for an investor day-of, the waitlist period should not last more than 2-3 months TOPS.
With any investment, including this one, there is always a possibility of financial loss. An investment’s past performance is no guarantee of future performance. The bourbon industry is quickly changing and, as with anything, there can be unforeseen circumstances that change projections of appreciation. We strongly encourage every investor to perform their due diligence in researching the market prior to their investment, and decide for themselves their tolerance for risk.
HOWEVER, with that being said… it is unlikely that an investor will lose money on a barrel investment. Historically speaking, a barrel of bourbon has never depreciated below its initial cost, even during the prohibition. So, as stated above, this investment carries some degree of risk that a barrel of bourbon’s appreciation could be diminished due to unforeseen circumstances. However, in most cases the investor should at least be able to recoup the cost of investment. So, worst case scenario they should at least be able to make their money back.
Unfortunately not. Almost all of the bourbon that the “big guys” produce, they keep for themselves. The bourbon that we buy is made by the most reputable bulk producers in the country. These distillers produce bourbon and sell it as new make, right off of the still. Rather than focus on branding and labeling their own bottles and products, their operation is to sell the juice as soon as they make it.
Although these “bulk producing” distilleries don’t have many bottles on shelves of liquor stores, they still have a reputation with bottlers, blenders, and copackers as having quality bourbon to blend with. We buy the most reputable wholesale bourbon so that our buyers know the quality to expect in the bourbons that they use to make their products. Every bottler, blender, copacker has different tastes and specifications they look for, so we like to have bourbon from a broad range of locations, distillers, and mash bills so that we have options.
When someone invests in barrels, they are investing in specific, individual barrels. We have a sophisticated inventory system that tracks each barrel’s inventory number that we assign it, the barrel number (if applicable), the manufacture date, the warehouse location, the type of barrel used, mash bill, etc. Every detail of every individual barrel is listed in our inventory system.
We give this information to the investor when he/she buys their barrels and completes paperwork. This piece of the agreement is called the “Addendum A” and consists of a spreadsheet listing each of the investor’s barrels and the pertaining information for each. This “Addendum A”, along with the agreement in full, serves as the proof of ownership for the investor and ties their name to their specified barrels.
No, the wholesale value of the barrel will only be tendered to the individual or entity named upon the ownership certificate upon the time of sale. However, if you choose to sell your barrel(s) to a friend we will treat it as a normal transaction. Meaning that BWBX will earn a 5% on the sale and a new ownership certificate will be issued.
Special requests to visit and taste your bourbon will be handled on a case by case basis.