The alcohol industry is considered as old as time, but in today’s connected digital age, we’re seeing an increasing shift in the whole industry pushing for technological adaptation wherever possible. From supply chain and production to marketing, and even branding, manufacturers and distributors are aligning their business practices with that of the digital age. And the next big tech to tackle the industry? Blockchain.
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Since Bitcoin’s rally in 2017 brought cryptocurrency to mainstream fame, it’s been hard to ignore the hype and growth of the sector and the asset class as a whole. But one key element that is often left in the dark is the blockchain.
You’ve seen the word thrown around. But actually, what the hell is the blockchain? The blockchain is a record of transactions maintained across an open-source, peer-to-peer “network” (computers). Blockchain technology and the use of a public ledger is designed to be tampered-proof. In the case of the alcohol industry, each link in the supply chain is tied to and responsible for its role; from manufacturing to the consumer purchasing the product. As a result, the process creates transparency in the full cycle, while creating efficiency.
Farmers, processors, retailers, and consumers are all brought together via the blockchain, resulting in transparency that has the potential to improve food safety. With blockchain technology, product updates can be made in minutes, allowing you to see the location of a product, how it was produced, and when it will be delivered all centralized in one platform.
Consumer values are shifting, and ethical production & consumption has been becoming more and more important to the everyday consumer. Blockchain technology can inform consumers about the techniques used as well as the ethics of any raw materials sourced. As the market becomes more aware of ethical sourcing and production, blockchain solutions may become the norm.
What can this do for the alcohol industry, and on a greater scale the whole F&B sector? Address the counterfeit issue.
According to various studies, 30 to 60% of alcohol nowadays is fake. This can range from parallel distribution and gray market practices, all the way to unlicensed gin manufacturing products making their way into counterfeit bottles out of China, only to be sold as the real deal.
Utilizing blockchain technology can solve the fraud aspect in the overall sector. With manufacturers employing NFC tabs for each bottle, commerce partners and consumers can scan the end product, allowing for full transparency of the product's authenticity. This is already common practice with the technology from VeChain and deployed across the luxury goods sector, while also growing in the F&B side of things.
Let’s dive a little deeper into the framework.
Back in 2019, Walmart announced that it would require all leafy green suppliers to implement full end-to-end traceability of their products. By the end of 2022, the FDA is expected to implement the Food Safety Modernization Act Proposed Rule for Food Traceability. The goal here is to promote the use of blockchain technology, as it is the easiest, most secure, and most cost-efficient way to ensure end-to-end traceability.
According to an IBM study, 71% of the consumers stated that traceability is important and they are willing to pay a premium for brands that provide it. Blockchain technologies such as VinAssure provides an ecosystem that prioritizes traceability and efficiency across the wine supply chain. From grape to glass, every record of data is shared resulting in a totally transparent supply chain. Other companies such as Cellr are using a different route. By embedding NFC/RFID chips within the bottles, they are prioritizing traceability while also creating a platform to deliver direct-to-consumer campaigns and deploying brand protection via guaranteed authenticity in the same breath (well actually, cork).
Natural wine aims to tell the story of: Who made it? Where was it made? And how was it made? I’ve visited a Georgian biodynamic vineyard where the vigneron told me how their grape harvests are aligned with the cycles of the moon, a detail I would’ve missed from the bottle of Rkatsiteli given my lack of ability to speak Georgian. I learned about the Kakheti region of Georgia, the particular highlands these grapes rest on, and the conditions affecting the year’s harvest.
My experience gives me a nostalgic and special appreciation for this producer - but many consumers coming across the bottle in the local natural wine shop would not be able to experience what a visit to the vineyard delivered to me. However, the power of blockchain is in conveying this information: the story that every natural wine producer longs to tell, to a niche market that actively wants to learn and understand more about what they’re consuming. Pair that with the blockchain traceability component of the technology, and you have a powerful end-to-end branding, marketing, and supply chain logistics tool. I truly see this becoming more prevalent in the world of natural wine.
With the cryptocurrency sector experiencing a significant downturn (as many sectors are in 2022), a lot of the speculative nature of the industry begins to disintegrate. This provides an opportunity for the fundamental elements and technologies that allow actual value in real-world applications to gain use and momentum. Using the blockchain for supply chain traceability is a real-world example of utilizing blockchain technology within the $1 trillion alcohol industry. And while that figure is expected to grow at CAGR 4.9%, the blockchain is here to stay and we’ll begin to see rapid adoption as individuals move from the “This would be nice to implement” mindset to the “We absolutely need this.”
One of the biggest hurdles to embracing blockchain technology is education. Many in the supply chain industry are unfamiliar with blockchain technology and, as with any change in systems and workflows, are hesitant to learn and implement new processes. It’s a challenge I face when I have conversations about OrderEZ, and how it can create efficiency in your business, and save countless hours each week. Those are two things anyone in the F&B space would love, but it’s the use case application followed by educational content that really helps an individual take the leap into adapting to new technology.
