How Blockchain Technology Can Help Wine Industry?
How Blockchain Technology Can Help Wine Industry?
August 5, 2020
How Blockchain Technology Can Help Wine Industry?
How Blockchain Technology Can Help Wine Industry?
August 5, 2020

Wine is an alcoholic drink that has been produced for thousands of years, usually contain water, alcohol, aromatics, acids, and tannins that come together to give each style its distinct flavor and character.

About 40% of individuals above the legal drinking age consider themselves “wine drinkers”, which is higher than all other alcoholic beverages combined (34%) and those who do not drink at all (26%).

The wine industry is very different from the brewing sector, which indeed is an industry while winemaking remains very much in the hands of small- to medium-sized producers. However, this industry requires enhanced strains to solve commercial and manufacturing problems.

Today, the five countries with the largest wine-producing regions are in Italy, Spain, France, the United States, and China.

Global sales of wine are expected to reach over $224 billion by 2021, and there is an increasing demand for sparkling wine, together with premium wines.

In this article, we will discuss how blockchain technology can help wine industry.

Blockchain in Wine Industry

When most wine drinkers hear the term “blockchain,” they naturally think of Bitcoin and other cryptocurrencies, all of which are based on blockchain technology. However, when it comes to the world of wine, there is a far more important role for the blockchain: helping to prove the authenticity and provenance of fine wine.

Once a bottle of wine has been proven to be authentic and its provenance certified to be correct, that information could be added to the blockchain. Any time a buyer or seller would like to authenticate a bottle of wine, all he/she has to do is check the information stored on the blockchain. Theoretically, blockchain technology would be of immense interest to any wine industry participants, such as auction houses, private collectors, retailers, or hospitality venues, which absolutely need to be assured of the quality and authenticity of the bottle of wine they are selling.

Blockchain can resolve the issue of data tampering and ensure the credibility and transparency of the wine supply chain traceability system. Every entity, that is associated with production to the selling of wine is recorded as a block in the chain and is made visible to all relevant participants. If any entity in the chain even tries to tamper the chain, all the interconnected members would know the tamper.

Let’s take an example of how overall wine has been made with the help of blockchain. Once a grape is tagged with a barcode, we will have an idea of the source of the grape. Grape is then sent to a particular wine producer. This information then added to the ledger as a new block in the chain. Authenticating wine producer and grape used for making the wine. Once the wine producer receives the grape, he sends it to the bulk producer for wine production. After bulk wine is produced, it is sent to transit cellars for further process. From Transit cellars, wine is sent to filling and packing center for packaging. Once the wine is packaged, Wine Distributor is given the task of distributing wine to retailers/wholesalers/importers. All the actions performed are stored as a block of information in the chain.

When a buyer buys a fresh bottle of vintage wine, he just has to scan the barcode of the bottle and the whole story from its production to its packaging, and to the retailer, everything can be known.

How to Use a Blockchain for Wine Industry?

Image: AZCoin News

In 2017, the world wine market reached 300 billion dollars, while, according to expert estimates, every fifth bottle of wine in the world is fake, if it is French varieties – every third. For the global economy, this means a loss of 60 billion dollars, and for society – tens of thousands of deaths annually due to the use of low-quality counterfeit products.

Further, it will be discussed how this and other key problems of the industry can be solved using the blockchain. We will describe how to implement a decentralized distribution register in the wine industry’s sales chain and what it will give to producers, consumers, and society as a whole.

How to Implement Blockchain in the Sales Chain of Wine Products?

Wine production can be divided into many elements, depending on who is the main subject at one time or another in the product life cycle. 

The elements are:

  • Supplier
  • Winegrower
  • Winemakers
  • Wholesale distributor
  • Freight operator
  • Importer
  • Grape grower
  • Bulk distributor
  • Wine producer
  • Filler/packer
  • Transit cellar
  • Finished goods distributor
  • Wholesaler
  • Retailer
  • Consumer

By using these elements, blockchain can be integrated into the wine sales chain.

Let’s have a look on what some of these above-mentioned elements mean!

Winegrower

This is the initial link in the sales chain since wine production begins with vineyards. People who are professionally engaged in the cultivation and harvest of grapes are called winegrowers. They take care of the plants and control the growth parameters (humidity, acidity and soil compaction, temperature, etc.), and are also responsible for protection from weeds and insects.

Integration of the blockchain at this stage means the following actions:

  • A network of sensors is being created that automatically collects data on weather, soil conditions, and other parameters that affect the quality of the grapes in a particular season (production cycle).
  • The winegrower enters the system with data and the land plot (location, height, type of soil), type and number of vines, their origin, irrigation, and processing. Here, it is important to consider everything: from what fertilizers were used to how and when the vine was cut.
  • When harvesting, data about the date of harvest, how the grapes are delivered to the winery, etc. are entered into the system.
  • After harvesting and squeezing the juice, the information about the date of this procedure, the equipment used, etc. is entered into the system.
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This information is important because it affects the taste of the drink, environmental friendliness, and ultimately the cost of wine in stores. Having collected a large array of such information, you can also use data science to understand how to grow grapes, from which the most delicious wine is obtained.

Winemakers

These are people and companies involved in the production of wine. To ensure traceability, such entities must add to the blockchain:

  • Data on suppliers, grape variety; date of receipt of raw materials; description of the state and quality of the obtained raw materials; data on the conditions of its delivery.
  • Records of internal procedures, such as decantation, fermentation, and preservation, as well as aeration in the production of rose wine.
  • Information on temperature, chemical content, and additives.
  • Data on storage conditions and production spill.
  • Information about yeast and its use.

There is no need to make a detailed description of the wine production process in the system, as this may violate a commercial secret – the producers of elite wines keep some elements of production in secret (this is characteristic not only for the wine industry).

The mature wine is sent to the distributor of the wine mass, filler/packer, or other winemakers for mixing. This can be both the shipment of a product to a new subject, and the transportation of wine to another factory workshop.

Wholesale Distributor

These are people or structures responsible for obtaining wine from winemakers, mixing them, and sending the finished product to a transit cellar or packer. Wholesale distributors contribute to blockchain:

  • Date of obtaining, data on the conditions of transportation and storage.
  • Information on processing, sampling, analysis of bulk wine, and the date of dispatch.
  • If the blending process is performed, this is also recorded in the blockchain.

Transit Cellar

Image: Science | HowStuffWorks

They are responsible for receiving, storing, shipping, processing, sampling, and analyzing bulk wine. In fact, the role of the transit cellar is similar to the role of wholesale distributors, the difference in minor details of the logistics chain. Consequently, the data to be entered into the blockchain at this stage is identical to that described in the previous section.

Distributor of Finished Products

Wine-filled packaging is sent to the retailer or distributor of finished products. The duties of the latter include the storage and shipment of finished packaged products to points of sale, as well as inventory management. To do this, the item is usually re-packaged and remarked in large batches.

What needs to be reflected in the blockchain:

  • Reception date, storage conditions, and date of shipment.
  • Re-packaging and remarking information.
  • Information about the destination of the goods.

Wholesalers

Receive boxes with wine and send them to retail stores. At this stage, the blockchain receives information on the obtaining, storage, and delivery of goods, most of which is collected automatically using sensors and RIFT tags. These devices monitor temperature, movement speed, shaking, and other data that may affect product quality.

Data about the conditions of storage and transportation is important because, according to research, during transportation, 20% of wine deteriorates due to non-compliance with temperature regimes or excessive shaking. And neither the ordinary buyer nor the expert will be able to understand what wine is spoiled until the bottle is opened.

Retail

The retailer receives finished products in the form of bottles, cans, barrels, and cardboard boxes from the distributor of finished products or the wholesaler and sells them to final consumers. Retail is responsible for displaying in the network information about goods received, their storage, and sale. The sale must be logged so that the same identification tag cannot be reused.

So, end-users can quickly and easily obtain information about wine and its origin, it is necessary to develop a mobile application. It can be used together with a QR code located on a bottle of wine.

Problems facing by Wine Industries

There are some problems faced by wine industries. Let’s take a look:

  • Adulteration of wine: Adulteration of wine is the biggest problem of the industry. Large-scale wine producers spend millions of dollars annually on fighting counterfeit products, introducing protection means more efficiently than those used by the Federal Reserve to protect the American dollar. In April 2018, the world-famous producer of Bordeaux wines Grands Vins de Gironde was fined $ 500,000 for selling cheap table varieties under the guise of more expensive ones. This is a scandal, but it fades before the Rudy Kurniawan fraud, which managed to sell tens of thousands of bottles of counterfeit wine worth over $ 500 million.
  • Quality control: The two main factors that influence the quality of the wine are temperature and humidity. The ideal storage temperature is 10–12° C for strong wines and 14–16 ° C for dessert wines, and it should not fluctuate more than 3–5 degrees a day. Humidity is also important since its optimal value (60–70%) does not allow the crust to dry out and prevents the growth of mold. According to surveys, 90% of consumers would like to be able to check these and other factors when buying wine, and more than 70% of them are willing to pay a higher price, by having such an opportunity.
  • Accessibility of information: On the usual bottle, there is information only about the chemical composition of the wine and its manufacturer. This is clearly not enough to understand how safe, tasty, or organic it is.
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How Blockchain solves these Problems?

In case of adulteration of wine, with the help of blockchain, such cases will become rare or disappear altogether, since anyone can trace the origin of the wine. And even if the manufacturer makes a fake, it can be easily and quickly understood by comparing the data taken into account with the actual capabilities of the winery.

In the case of quality control, blockchain allows you to fulfill this need by tracking important parameters throughout the life of wine in real-time. These data are recorded in the blockchain network and are provided to everyone so that everyone can check the conditions of storage and transportation of the “solar drink”.

And, in the case of accessibility of information, by digitizing the wine production process and writing the necessary data to the blockchain, users and appraisers will be able to get comprehensive information about each bottle. If you enter a rating system and the ability to leave reviews, this will help with the evaluation of taste, not only the variety as a whole but also each individual batch.

Chai Vault

Maureen Downey, a wine fraud specialist who played an important role in the Rudy Kurniawan investigation, launched the Chai Vault, an innovative solution using blockchain technology for securing the authenticity and provenance of fine wine. Once authenticated through The Chai Method (TCM), a wine can be virtually tracked and certified on the blockchain through a permanent digital record of provenance that can either be kept private or made public for marketing purposes.

Downey said:

For two decades, I have been inspecting bottles for authenticity and condition (sadly, the only measure of provenance that could be relied upon) on behalf of auction houses, private collectors, retailers, restaurants, hotels and casinos, and have established a proprietary, systematic approach to inspection, – The Chai Method™ (TCM™). In that time, I have been plagued by the fact that following the inspection of a bottle, the only findings which could be reported in any way that was transferable, was a counterfeit finding reported in a formal written report. Due to fact that inspected authentic bottles can be refilled or altered after inspection, there has been no way to positively report a bottle to be authentic and have that authentication mean anything after I left the room beyond opaque trust.”

Chai Vault certification is layering physical bottle, tech, bottle data, images, and provenance documents about that bottle, in a blockchain ledger to create a truly robust, useful solution that will empower consumers to make the only risk-averse, information-based purchases. Chai vault is also unique in that is empowers producers to see where their bottles are leaving legitimate supply chains and entering grey and black markets.

Chai Vault certification will change how fine wines and spirits are traded by empowering consumers to make well informed, risk-averse purchases. We can now definitively authenticate secondary market bottles and display the positive results by certifying bottles in the blockchain, and by clicking on the ledger’s URL any consumer can see the bottle’s Certificate of Authenticity and Provenance. Importantly, the authentication remains accessible and thus carries forward for the entire life of the bottle.

Because provenance and authenticity are inseparable, Chai Vault certification addresses provenance as well as authenticity. An individual bottle’s blockchain certificate displays all provable provenance in that bottle’s history, alongside the authentication date, location, and name of the independent, TCM™ Authenticator. The ideal provenance for any bottle, including those in the Chai Vault, is when the bottles can be traced back directly to the producer. Thus, bottles certified in the Chai Vault at the time and place of production, by producers will carry even more value in secondary markets. Each time a bottle changes hands, the provenance is updated, and ownership is transferred.

Here, we will see some of the reasons why Chai Vault certified wines and spirit bottles will benefit every aspect and sector of global markets from production to consumers:

  • Layered: The Chai Vault utilizes both low tech and high-tech applications, layered for security.
  • Immutable: Having the ledgers in the blockchain ensures they can never be corrupted. Assurance of Authenticity and Provenance are fact-based, not trust-based.
  • Timeless: Ledgers last for the life of the bottle.
  • Transferrable: All authenticity and provenance data transfers to the new owner when a bottle is traded.
  • Proof of Both Authenticity and Provenance: The Chai Vault addresses both.
  • Independent: Third-party authentication increases consumer confidence.
  • Consumer Empowering: Assurance of Authenticity and Provenance is transparent, empowering the consumer to verify data on their own, without having to “trust” the seller or the seller’s representative, prior to making a purchase.

WINE Blockchain

WINE Blockchain builds trust and transparency between the producer and the final consumer, by controlling the wine production chain from the origin of grapes to the transformation into the bottle. The Wine Blockchain is the first exploration of a “Virtual Zero-Mile” product, enhancing the relationship between producer and consumer.

A smart tag placed on the bottle is the access key to a set of information and data that describe the wine and its production.

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Consumers can learn more about the final product, increasing awareness of what they are drinking and loyalty with the brand. Every wine-making process is tracked and certified, so the final consumer can learn the whole transformation process from grapes to wine bottles.

Bottle Scanner

Image: Inc

The core feature of the app is the bottle scanner, that lets consumer identify the wine and access the related information. As soon as the scanner reads the smart tag, the app shows a landing page with the wine details.

Wine Information

The wine landing page provides information, mainly regarding its wine-making process, but also promoting social activities. The consumer can get different kinds of information simply scanning the bottle.

Key features:

  • Geographical context: All information related to the geographical area of wine-making with a focus on the vineyard.
  • Cultivation: All detailed information related to pesticides, fertilizers, and the different phases of the growing process following a specified timeline.
  • Winemaking process: Production steps with a timeframe tag and the description of the process.
  • Distribution and sale: Data related to the amount of the wine produced (in liters) and bottles spread in the distribution channels.

Benefits:

  • Protection: Product certification and guarantee of authenticity with blockchain.
  • Falsification: All information to the geographical area of wine-making.
  • Control: Every wine-making process is tracked and certified.
  • Trust: Consumers learn more about a bottle of wine, increasing awareness, and loyalty with the brand.

Companies using Blockchain in Wine Industry

  • SevenFifty: SevenFifty is a trade and communication platform that helps importers, manufacturers, distributors, and retail buyers to communicate with each other and conduct business in the production and sale of alcoholic beverages in the US market. SevenFifty allows manufacturers and distributors to create a portfolio with a list of products and complete, traceable history of the origin of each bottle, and customers to study the portfolio and choose from a variety of options suitable, and verify the authenticity of the goods.
  • Chai Vault: A platform created by Maureen Downey. This is a world-class expert who not only assesses wines but also fights against fraud in the market. On her account, the exposure of many fraudsters, including the aforementioned Rudy Kurniawan. At the heart of Chai Vault is the Everledger blockchain, which collects and stores information about the movement of wine along the sales chain.
  • VeChain: A Chinese platform for tracking the origin of various goods and optimizing logistics. In 2017, VeChain signed a partnership agreement with French wine producer Pierre Ferraud & Fils and Chinese distributor Direct Imported Goods (DIG). Currently, 30% of all wine imported to China comes in through DIG (over 1 billion bottles).
  • EY Ops Chain: EY Ops Chain is a set of applications and services to simplify the management of sales chains, record the history of origin, and the conclusion of transactions. The project was created by consulting company EY (included in the Big Four along with Deloitte, KPMG, and PwC) in collaboration with EzLab and is focused on protecting the quality of Made in Italy production and increasing market transparency. The development uses the winery LaVis.
  • VinX (Vinsent): The platform created by Medici Ventures to provide wholesale and retail buyers with the opportunity to enter into futures contracts for the purchase of wine (large quantities and single bottles). That is, you can buy wine here before the grapes from which it is made are grown. Traceability of the sales chain, the ability to conclude P2P transactions, and open access to information on the blockchain are also present.
Image: Prima
  • CWEX (Crypto Wine Exchange): A decentralized platform for buying and selling collectible and ordinary wine for cryptocurrency. The service guarantees the anonymity and security of investments by providing a certificate of ownership based on a chain of blocks for each bottle of wine sold on CWEX. The project was developed with the support of DotChain GmbH, located in Switzerland, and is at the stage of the initial offer of coins.

There are other companies that are also using blockchain technology to help track, trace, and improve the provenance of the wine. Among them is Everledger, which started its platform in 2016 in response to research, claimed that up to 20% of international wine sales were counterfeit.

Likewise, Ernst and Young (E&Y), one of the top four accountants globally, have announced that it is helping a firm called Blockchain Wine in Singapore to operate a platform using Blockchain technology. The platform will be called Traceability, Authenticity, Transparency, Trade, Origin, and Opinion (TATTOO), and will initially be used by an Asian wine retailer, called The House of Roosevelt, to be able to track and ensure the provenance of wine from vineyards to customers. It is also the intention to be able to use tokens, which help producers pay to track wine, by improving their supply chain logistics. In time, this may lead to lower insurance premiums, as TATTOO offers greater traceability from vine to a shop’s shelf.

Conclusion

The need for blockchain technology in the wine industry has become a hot topic of conversation amongst buyers and sellers of fine wine. The wine industry is still a very fragmented sector. Only a few consolidated large wineries in California, South America, and Australia purchase enzymes directly from their manufacturers.

Thus, by 2022, the volume of wine sold is expected to rise to 281 million cases, worth $32.9 billion, for a five-year CAGR of approximately 3%.

Cover Image: Vox


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Ishita Bora

Ishita Bora is a Senior Content Creator at Digital Notice Media Labs with an experience of 1 year. She has completed her Master's Degree in Language and Linguistics in 2019 from Gauhati University, India. Her interest lies in blockchain technology and cryptocurrency space, as she loves writing about blockchain and other blockchain-related articles. Currently, she is working on blockchain-based news, reviews, featured articles, and guides.
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