Preselling full barrels

[Bakery87]

Hey everyone,

I have a question for those selling an entire barrel as a means of drumming up investors.  We're thinking about preselling maybe 100 barrels of whiskey (bourbon, single malt, rye, etc).  We're toying with a couple ideas on what the consumer would get out of these, as well as developing a price structure.  My initial thoughts are below. I'm just trying to get a feel for what is industry standard is, or what others are trying to work with.  I don't feel like having to do a new recipe based on suggestions by a consumer, as this may lead to more than one barrel being produced with our system.

• Barrel cost, maybe ~$10k (53 gallon)
• Buyers get to help with production for a day, if desired
• They receive all bottles of the final product from that barrel
• Different label with the name of the person/business, differentiating from a regular bottle of the type of whiskey
• They get to keep the barrel once dumped
• The buyer comes in every 6 months to get a sample
• The whiskey is only pulled when both the buyer and the distiller feel that the product meets their standards

[DrDistillation]

Have you looked into the legalities of doing this?  I have no idea, but wouldn't be surprised if you had to hold the money in escrow until they take possession of the bottles and you move the spirits out of bond.

You might be able to issue them a "gift certificate" that they could later redeem. IE a $50 gift card to a fine restaurant. Typically the funds are placed in a liability account (on the books) until the service is rendered then transfers as a sale when the person dines or purchases.

I'd definitely talk to a lawyer versed in TTB regulations to see the proper way to set this up.

You could also think outside the box and have investors purchase the barrels, then you rent the barrels from them at a pre-agreed price plus bonus (based on quality) only to be paid at time of bottling.  That's a type of investment that would keep you out of trouble as your just renting equipment. You could set the "rental fee" to the low end of the expected amount of bottles and give a bonus based on quality to match the content of additional bottles you get from that barrel.  Again run anything like this past a lawyer.

What I see as a potential problem is what happens when you have 10 people doing this and 5 barrels turn out great but 5 are a bit lack luster in taste?  If blended you likely have a good product but individually might have 5 happy people and 5 not so happy people depending on which barrel they were assigned.

The bigger companies like Jack Daniels select known good barrels they sell this way and give the customer a choice of 3 to 5 barrels to sample and decide which barrel to purchase.  The customer always gets to pick a barrel they like this way.

Don't know how much experience you have with barrel aging but 6 barrels produced right after each other filled with the same spirit may come out a lot different then you might imagine after being in a barrel for 4 years.  Master blenders mix many barrels together to "fix" these types of problems while setting extraordinary barrels aside for special releases or single barrel releases.  This is something you'd not have the ability to do unless you got an agreement from all parties to blend their barrels.  Just something to think about.

[bluestar]

Just accept the funds as a deposit toward purchase of the bottles when the barrel is bottled for them.

[Rye Frenzy]

I am not a lawyer.

I too was looking at this for a quick cash raise.  What I was considering was selling a voucher for 1 single barrel, bottled.  The assumption being that I'm not selling the barrel, but the voucher and the voucher would be exchanged later.

Like DrDistillation brought up, it's hard to know how something is going to age.  I was planning to sell 4 barrels, then as I was tasting the barrels for final vatting, I would choose several that were quite well and then have the 4 people come choose their barrel.  You could still bring them in, and show them how the whiskey is aging in general terms.  Just be up front that these are representative tastings and they would get to choose their specific barrel at the end.  While I'm not everyone, as a consumer I would much rather pick my barrel at the end, knowing that it's been curated than have to pick the barrel at the beginning and hope it's good.

Edit to add the rest of my thoughts:

I think the rest of your incentives are good.  Keep the barrel, custom label, etc.

[DrDistillation]

You could actually have some fun with this. You could sell vouchers for full casks, half or quarter casks.  You may get a lot more people willing to buy 1/4 casks then 1/2 or full casks.  Only the full casks get the barrel so they have incentive to step up what they purchase.  If you get to keep the barrels you could resuse them making American Whiskey (think Michter's) or any other spirit that doesn't require a new oak, like a Scotch style single malt.

Check out this video of what Balcones does: 

So anyone who buys a barrel voucher get's to do this as part of their purchase.  They could choose a blend vs single cask.  You get the advantage of all their tasting notes and blend ideas (some could be good you hadn't thought of). You get to make this part of the cask purchase and can sell out the class to others.  You could allow the others to purchase bottles of their blend for $50 (whatever price you set for custom personal blend bottles).  You could even sell the class to those not wanting to go in on a cask to include X bottles of their personal blend or class blend.  You could even sell the blend the class comes up with as a special reserve bottle and feature it as a bottle of the month or something until it's sold out.  You could even list all blenders on a back label or card tied to the top of the bottle (think Christmas gift card). People love this type of thing and will buy bottles to give as gifts (especially with their name on it).

Of course to do something like this you need some variety.  Casks you sample along the way that aren't interesting could have a port or sherry stave(s) added for some "finish" which could make them more interesting (just break into 1/4 and shove through bung whole). You could use American Whiskey or Scotch like single Malts from USED barrels, anything to give you more variety. You could barrel up some Rye and Wheat whiskey's as well.

Jack Daniels put's your name on the wall when you purchase a full cask. Think outside the box and try to make it both fun for the buyer and interesting for yourself as well.