The UK Advertising Standards Agency ("ASA") has published an enforcement notice targeting whisky cask investment advertising. The enforcement notice follows two recent rulings against whisky cask investment companies in which the ASA deemed their advertisements to be "misleading", as discussed in our previous blog.

The guidance aims to enhance consumer protection by reducing the volume of misleading advertising practices from certain cask investment practices. It does so by prescribing a set of rules that companies should abide by when presenting cask investment opportunities.

The notice applies to all advertisements online and offline: ads appearing on websites, within email marketing, featured in magazines or newspapers of promoted by social media influencers or affiliates will all be covered. The notice references the earlier two ASA rulings about the advertising of whisky cask investments, in which it was concluded that the ads were misleading and socially irresponsible.

If non-compliant ads persist after 2 January 2024, the ASA will take enforcement action that may lead to targeted monitoring and sanctions, both of which carry the potential for significant reputational damage.

Material information and qualifications

The ASA states that whisky cask investments are financial products, and thus must abide by the relevant advertising rules contained within Section 14 of the CAP Code. Advertisers must highlight that whisky cask investments are unregulated in the UK, and as with any investment, the value of a cask can go down as well as up.

Separately, the enforcement notice states several key considerations that must be highlighted on every advertisement, regardless of medium, to allow consumers to make informed choices:

  • fees and charges. All advertisements should explain applicable fees that a consumer can expect to pay in relation to a cask and the services of the investment company (including storage costs, insurance policies, bottling fees and VAT that may be payable). We recently discussed the types of initial and exit costs purchasers were likely to face in our recent blog.
  • whether the spirit is "new-make". New-make spirit is often sold as an investment, although that product cannot be marketed as 'whisky' because it has not been matured for the 3-year minimum term. Adverts should explain that new-make spirits must be held for three years in a cask before it can be called whisky, during which time its alcoholic strength could reduce. To be marketed as 'whisky', the product must retain a minimum strength of 40%.
  • the "Angel's share". While whisky is maturing in casks, whisky evaporates through the wood and into the atmosphere. There are a number of factors that affect the percentage rate of evaporation including the age of the spirit, the size of the cask, and the way it's stored. Advertisements should provide information around this process, and how it may impact the purchaser.
  • how investments can be realised. Unlike other types of investment, whisky casks do not generate an annual return. Purchasers will only make a profit when you either resell the cask or bottle the contents. Any advertisement should provide a consumer guidance over how their investment can be realised, and any conditions or further fees involved in that process.

Returns rates claims

One of the most widely shared statistics by companies is the most recent Knight Frank Luxury Investment Index, reporting the value of rare whisky had 12-month growth of 40% and a staggering 10-year rise of 582%.

However, Knight Frank have themselves highlighted the statistics were based on "a small number of very rare bottles and their performance is not necessarily a reflection of the wider market, including casks".

Any claims made in relation to rate of return must be supported by documentary evidence and be specific to the potential return on whisky casks – not bottles. Advertisers must ensure their word choice is clear and unambiguous. The ASA has highlighted the importance of word choice in relation to % claims: "up to X%" shall be treated as the % representing the maximum return possible, whereas an "average X%" return suggests there is potential for consumers to recover even higher sums that stated on occasion.

The ASA enforcement notice states:

"The average consumer is unlikely to be experienced in understanding whisky cask investments, and ads must ensure they do not irresponsibly take advantage of consumers’ lack of experience or credulity; they must be made with a sense of responsibility to consumers and to society."

The theme of the enforcement note follows the general position of the ASA in relation to advertising within all sectors. Businesses promoting whisky cask investments must ensure their advertisements are clear, honest, and do not mislead consumers about the risks involved. Companies that follow these guidelines are best placed to develop an excellent reputation in an industry that is expected to continue to grow in the coming years.

Finally, it is important to emphasise that marketers must consider the overall impression of an advert. The ASA has reinforced the principle that qualifications cannot always override the overall impression of an advert: "qualifications may be used to clarify claims, but they must not contradict those claims to the extent that consumers are likely to be misled." Any qualification that is deemed to contradict the claim it qualifies is likely to be considered misleading.

The ASA enforcement notice can be read in full here.