Is the Wine Industry Ready for Cryptocurrency? (Maybe)

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In May, fourth-generation winemakers Angelina, Alycia, Riana and Giovanna Mondavi announced they would accept cryptocurrency for their Dark Matter and Aloft brands.

“This is an opportunity to expand our network for our wines on a more global scale,” says Alycia Mondavi. “It’s to be ahead of our time, to dabble in something unique to our industry. We’ve seen that several fine wine auctions have also started collecting crypto, so I think we are onto something, even if we might be a little early in the game.”

One of those is Acker Wines, America’s oldest wine merchant and the world’s largest fine and rare wine auction house. It announced it would start accepting cryptocurrency in April.

Cryptocurrency is virtual or digital currency that often uses blockchain technology to record transactions and verify ownership. Early adopters include major corporations like Microsoft, Starbucks, Overstock and Whole Foods.

The wine industry, on the other hand, is notoriously resistant to technology. Many estates only take reservations by phone, and some don’t use social media.

Nonetheless, a handful of wineries and retailers have dipped their toes into cryptocurrency. They acknowledge its volatility and lack of widespread adoption, but they’ve believe that crypto might just be the future of finance.

Cash Poor

The Mondavi sisters and Acker have completed some crypto transactions, but they say that consumer interest has been minimal thus far. Alycia Mondavi believes most cryptocurrency investors, herself included, tend to hold onto their investments and ride the extremely temperamental wave, at least for now.

“The wine industry is not cash-rich, it’s cash-poor,” says Napa Valley winemaker Dan Petroski, a cryptocurrency enthusiast. “If Bitcoin decides to tank, I won’t have the cash to do what I need to do to bottle my wine.”

“As a small business who struggles with cash, with crypto you could either bankrupt your company or do really well for yourself.” —Dan Petroski, Winemaker

Petroski doesn’t plan to accept cryptocurrency for his Massican wines until the market becomes much more stable.

“As a small business who struggles with cash, with crypto you could either bankrupt your company or do really well for yourself,” he says.

Adding Value with NFTs

In April, Yao Family Wines, founded by retired NBA star Yao Ming, announced it would auction its smallest-production wine, a 2016 Cabernet Sauvignon called The Chop, alongside a limited-edition, non-fungible token, or NFT. An NFT is a unique digital asset, like a piece of art or a video, that cannot be replicated and can be sold.

Four NFTs that feature an image of Yao Ming were divided among the bottles. An additional, one-of-a-kind NFT was created for bottle No. 11, the number that he wore during his basketball career.

These NFTs are akin to collectible trading cards, but in digital form. Half of the 200 available bottles, which can only be purchased with Ethereum cryptocurrency, sold upon launch. The rest, says Bill Sanders, the company’s chief marketing officer, are “selling at a steady clip.”

Yao Wine NFT
Yao Family Wines auctioned its smallest-production wine with an NFT / Photo courtesy Yao Family Wines

One month after Yao Family Wines debuted this package, Acker launched its first NFT-accompanied auction and saw huge returns. For the release of 16 single-bottle lots from the 2019 Domaine du Comte Liger-Belair, each bottle was paired with a NFT that consisted of a video of Comte Louis-Michel Liger-Belair.

In total, the wines sold for $61,752, a whopping 332% above the low estimate.

“It’s a unique way for customers and wine drinkers to connect on a more personal level with the greatest producers of the world,” says John Kapon, chairman of Acker Wines. “Imagine in 100 years, you want to see the great Comte Liger-Belair, a winemaking legend. He has since passed away, but this lives on forever. To experience the wine through the Comte’s eyes, it’s a very tangible thing.”

The Future of Collecting?

The appeal of NFTs for the wine industry goes beyond entertainment and bragging rights. Each time an NFT is sold, the transaction is recorded forever on the blockchain, which offers provenance for collectors. NFTs could one day help combat wine fraud.

“Let’s say I have a bottle of 1975 Pétrus and so do you, but mine is with an NFT,” says Jack Ambriz, marketing director of Yahyn, a wine e-commerce startup that also partners with wineries to offer NFTs with their bottles at auction. “We’re both trying to sell to a collector, but mine is a more attractive piece because they know it came from the vineyard.

“Your bottle, they don’t know anything about it,” he says. “With an NFT, they’re really able to see everything that went on with that bottle. From cellar to cellar, they’re able to see who owned it before.”

Yahyn wine NFT
Wine e-commerce startup Yahyn partners with wineries to offer NFTs with their bottles at auction / Photo courtesy Yahyn

The Sustainability Question

In addition to adoption, a big obstacle for cryptocurrency in the wine world is sustainability. Wine is an agricultural product, and winemakers and consumers have prioritized the preservation of natural resources in recent years.

Cryptocurrency mining, or the process of maintaining the blockchain ledger and putting more coins into circulation, sometimes requires large, sophisticated processors that use a massive amount of energy. In May, Tesla CEO Elon Musk pulled the plug on the company’s acceptance of Bitcoin due to its environmental impact.

“At the end of the day, it’s probably 10 times the amount of energy used to create a dollar bill, and that’s not good,” says Petroski.

Wineries Strive for Carbon Neutrality. Is It Enough?

Still, he believes that cryptocurrency is the future. He’s developing his first NFT for Massican, but he plans to tread lightly until crypto mining’s carbon footprint is reduced. When he launches it, each NFT will sell for just 0.1 Ethereum, currently worth the equivalent of roughly $210 and requires minimal energy to mine.

Several mining operations have begun use solar power and hydroelectricity, which uses flowing water to produce energy. A Bitcoin Mining Council, created soon after Musk’s comments, has committed to publish current and planned renewable usage.

“The technology behind the blockchain and cryptocurrencies is still very young,” says Petroski. “I believe it’s going to be cleaner, more efficient for the environment, and it’s going to be life-changing.”

Published on July 13, 2021
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