Blockchain Application in Wine Industry

Wine counterfeiting is one of the major challenges faced by wine industry and fake wine market amounts to 15 billion USD worldwide. There are various ways by which fake wine is introduced into the market some of which are as following: Relabelling of wine bottles is one of the most common ways through which fake wine is introduced into the market. In some cases, cheaper wines are labelled as expensive wines while in others, wines are mislabelled with a famous origin because of the premium it commands.

For instance French Wine label on a wine bottle indicates that the wine would be from France, but actually the origin of that wine is a different country say Spain and this, is a real scenario which came to light recently where millions of Spanish wine bottles were being sold as French wine. Further, in some of the cases, original wine is adulterated with some cheap substitutes to increase the profit margins. For instance, wines have been found to contain hazardous components like diethylene glycol in order to increase their sweetness. Some chemicals may also be used to mask faults and unpleasant aroma of the wine.

One of the other prominent ways of wine fraud is through blending of the original Wine. One variety of the wine that is touted to be 100% pure is blended with various other cheaper wines. For example, a wine with a dark color is often assumed to be of higher quality, so blending a darker color variety with a cheap lighter wine could enhance the market value of the cheaper wine. To put a check on the wine fraud, there needs to be a mechanism that can assure a customer that the wine he is buying is authentic and not some cheap counterfeit. Till now, there is no foolproof method to establish this fact, as there are many loopholes in the current wine tracking system.

blockchain technology for wine industry

The first one being the inefficiency, to validate the authenticity of the source information. Since the wine supply chain is quite complex, involves large number of stakeholders and the wine changes multiple hands before it reaches the retailers, it is quite feasible to reproduce or forge the information at any point of time. Additionally, there is no efficient method to identify counterfeit wine bottles since these bottles are always accompanied by fake provenance histories. Blockchain technology has the potential to mitigate these issues of the wine industry and ensure authenticity and provenance of each wine bottle produced.

blockchain implementation for wine industry

Let’s understand how blockchain will work for the wine industry. All the stakeholders involved in the wine supply chain will be required, to register themselves on the blockchain network and subsequently, will be required to add relevant information on the blockchain. As wine is produced from grapes, let’s start with grape growers as they are one of the key stakeholders in the wine supply chain. Grape growers take care of the grapevines and monitor the parameters such as temperature, soil moisture, fertilizers etc. Once these grapes are ripe they deliver them to the winery. In a blockchain based system, the grape growers will be required to upload information about each plot of the grapevine, location details, the altitude at which the plants are grown, type of the wines, fertilizer requirements, irrigation requirements and origin of water used for the irrigation. Further, the grape growers will also record information about dispatch date of these groups to the next link in the chain, that is to the manufacturing companies.

Next comes the wine manufacturers, who manufacture wine from these grapes. The information that they will be required to add on the blockchain includes receiving date of grapes, variety of grapes, record of chemical contents and internal procedures for example, decantation, fermentation etc performed to transform grapes into wine. The winery is responsible for identifying each production run with a batch number. Thus the applicable batch numbers, additives used, transportation and storage conditions will also be recorded on the shared ledger. After this stage, the wine is sent to bulk distributors, which will also be recorded on the blockchain along with the dispatch information. A Bulk Distributor is responsible for receiving, storing, processing, sampling, analysing and dispatching the bulk wine. When the wine arrives, the bulk distributor verifies the supplier information, records all the information including the amount of wine received and then takes samples for tasting and analysis. Irrespective of whether wine passes or fails the analysis, the results of wine analysis will be stored on the blockchain. In case the wine is rejected, the wine is returned to the source.

For the wine that has passed the analysis, two distinct processes are performed: Bulk wine is stored and dispatched without any blending or any other processing. The batch number in this case remains same. Or wine blending is performed that involves blending of different wines and then dispatching the new blended bulk wine. The complete information about these processes will be recorded on the blockchain. A new batch number is allocated, which is different from any other batch number used in the blending process. Then the bulk wine is sent to a transit cellar or a filler or a packer in different kinds of containers that can be identified with a unique code allocated by the bulk distributor.

The role of a transit cellar is almost similar to that of a bulk distributor. He will send batches of bulk wine to a filler or a packer. He is responsible for receiving, storing, dispatching, processing, sampling, and analysing the bulk wine. Each container sent is identified with a unique number and the associated quantity of wine in litres. All of this information will be recorded on the blockchain.

blockchain for wine industry

Next comes a filler or a packer who receives the wine from the bulk distributor or transit cellar and fills it into different containers such as bottles, bags or kegs. Since the identification and labelling of each wine is done at this stage, therefore it is very important to ensure the consistency of the labelled information with the records stored on the blockchain for that particular batch of wine. During this step, a unique code will be allocated to each wine bottle. The next step is the packaging of these wine bottles into cartons and pallets and then dispatching them to the finished goods distributor. A finished goods distributor will record the details about receiving, storing, dispatching, and inventory of the finished goods. At this stage, if any re-packing or re-labelling is required, then these details will also be stored on the blockchain. From the distributor, the finished goods are then dispatched to the retailers. After receiving finished goods from distributors, retailers sell these to the end consumers. The retailer will be required to record the received items, inventory details, and sales information on the ledger.

When a bottle or a carton is sold, the information will be recorded on the blockchain so that it is not possible to use the same label again. The consumer is the final link in the wine supply chain who consumes this wine. Therefore should have full rights to know about complete journey of the wine he is buying. With the implementation of blockchain, he will be able to see all the information that was recorded on the digital ledger throughout its journey. Since every bottle is assigned a unique ID, the consumer can easily traceback the complete journey of the wine by scanning the code though his smart phone or by entering the unique ID on the brand’s website. After receiving the product ID, the system first identifies the batch of wine and then traces back all information recorded by different stakeholders for that corresponding batch. Since the details of a sold wine are also recorded on the blockchain, it is not possible to sell another bottle with the same ID. Thus the proposed system makes wine counterfeiting almost impossible.

This is how blockchain ensures transparency and security in the wine supply chain. Other advantages that blockchain technology can offer to wine industry are as following: Helps in validating shipping temperature. The wine manufacturer takes special care in maintaining controlled conditions to protect the manufactured wine. Similarly at the other end of the supply chain, a consumer takes special care of the product by storing it under predefined controlled conditions. Because unwanted change in the environmental conditions can change the perceivable characteristics of the wine.

For instance, optimal temperature for storing white wine is between 13-15 deg C, and for red wine is between 10 deg C to 20 deg C. But if the temperature rises above the desired range, it can deteriorate the wine quality and change its color. In the current scenario, there is no effective method to ensure that the wine remained in its desired conditions during its transportation.

Blockchain and IOT can offer a solution to this issue. IOT sensors can be attached to wine bottles and cartons, which can then capture the temperature of wine during its transportation and upload it on the blockchain. Consequently, any change in the temperature will also be recorded on the blockchain. Thus, through blockchain each and every stakeholder can ensure if the wine stayed at its right temperature during its transportation. Fine wines have traditionally been bought based on the trust for a particular manufacturer or a brand.

Although the buyer shells out a fair sum of money to buy a fine wine but he himself has no means to validate if the wine has aged properly under the desired conditions. During the aging process, a wine undergoes a series of different chemical reactions to improve its taste and quality. These reactions can easily be affected by physical and chemical changes taking place in the environment. The storage conditions should be appropriate for wine maturation including the desired humidity, temperature and darkness.

During the wine maturation, a wine should be kept under dark conditions because the UV light can damage wine by degrading stable organic compounds present in it. Just as direct sunlight can negatively affect your skin, it can also damage fine wines. Another very critical factor in aging of wine is temperature. The recommended temperature range for aging wines lies between 13°C and 15°C. Though if the temperature is maturation process speeds up but it causes undesirable changes in the wine as well. Therefore it is very important to maintain the recommended temperature range for perfect maturing of the vine.

The next important factor is humidity. 60-70% humidity is essential to ensure that a wine ages gracefully. When humidity levels are too low, the wine bottle cork will dry out and will becomes brittle. Because of which air will leak into the bottle and will oxidize the wine, thus spoiling its taste. And in case the humidity levels are too high, it also has undesirable effects on its aging. But the question here is – how can a customer know and validate all of this information?

IoT along with blockchain has the solution to this issue. IOT sensors will be installed to sense all of these conditions under which a wine ages and these IoT sensors will then record these details on the blockchain. Subsequently, a consumer will be able to see all this information regarding the wine aging by scanning the unique ID present on a wine bottle. For wine manufacturers, it would now be much easier to keep their inventory at an optimum level, since all the sales information will now be recorded on the blockchain.

This would empower these wine manufacturers to bridge the demand and supply gap in the market and at the same time, will ensure, that they do not hold excessive inventory which then converts to monetary losses for them.

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