From Production to Delivery: NFTs Can Streamline the Spirits Industry
By Nimantha Siriwardana, Co-Founder and CTO of Metacask
There’s no denying that quick shifts in demand, the fragile nature of glass substances and a kaleidoscope of regulations complicate the spirits industry’s supply chain. For the spirits industry, an end-to-end solution would mean making supply chain technology look, feel and operate in an entirely new way by modernizing this decades-old industry with blockchain-based solutions and NFTs. It also means getting down to brass tacks and using this technology first and foremost to deal with the operational inefficiencies and supply management dilemmas that are keeping this hyper-competitive industry up at night– with little to no relief in sight.
Bottlenecks in existing supply chain processes
Counterfeit spirits remain one of the biggest challenges in the industry, posing a threat to public health, consumer loyalty and brand reputation, and costing the industry €1.3 billion euros in revenue every year. The other side of the coin is that the way people consume spirits is constantly evolving. There’s no longer one place to go and buy a bottle of whisky. And it’s becoming increasingly important to navigate new channels and convey not only brand information but product specifics, so that trust is established with consumers.
Behind this curtain, however, are schedule disruptions since port omissions and transshipment ports can cause major delays. A steady supply of bottles has become another strain on producers, as consumer demand has outstripped the available supply of glass bottles. And even if suppliers are able to solve this and other shortages, once the product gets to the warehouse, space is limited or it becomes a game of hide of seek. The involvement of brokers has welcomed further human error and a long drawn-out process that runs the risk of updated ownership records never making it to the bonded warehouses – where it matters most.
In the end, spirits collectors spend a lot of time finding the perfect blend, meaning that customer satisfaction today depends on product integrity and the experience of knowing the origin of the product and how it was processed. It comes back to supply chain management and the need to invest in more effective tracking technologies that can appropriately manage inventory. What’s missing is the necessary real-time information and end-to-end visibility of the product as it traverses the system. Without it, even the provenance and authenticity of these goods become questionable – and near to impossible to trace or detect.
Solutions that make the glass half full
Everyone from the growers and harvesters down to the labeler and brand house their own set of data within their four walls. In other words, there hasn’t been a single transparent platform or system to record ingredients, bottles and casks as they move from hand to hand down the supply chain. And while information exists about each unique item, there has rarely been a digital trail, let alone this level of information at the product level.
That’s not to say there haven't been technological advancements in the industry. Inventory management systems like DRAMS – a bulk inventory and warehouse management software – have enabled spirit producers to optimize warehouse utilization and track stock movements and maturation losses and gains. Distillery Genius, a web application for inventory management, has provided more concrete records and reports on every step from production to dispatching orders. There are also asset-tracking solutions like Selinko that provide near-field communication (NFC) tags for assets to address the lack of information on labels, which exposes the industry to counterfeiting and fraud.
While this has been a significant leap forward, they haven't holistically addressed the problem of traceability. Existing vendor supply chain solutions like inventory management systems and asset tracking exist within walled gardens, allowing challenges to persist well into delivery and leaving everyone from well-known brands to craft distilleries without a solution that offers customizable data that is transparent, accessible and reliable.
NFTs solving the decades-old system
As the blockchain space matures, we’re seeing an increase in real-world utility, and the whisky and spirits ecosystem is no exception. The security, transparency and real-time data that this technology can provide means that high-end collectibles can be tokenized, bought, sold and resold, and the blockchain database will house all the data shared between the cooperating entities – producers, distributors and resellers. In other words, there will be end-to-end data on all transactions, and stakeholders will easily be able to verify the authenticity, origin and possible loss of product quality, without the information being exposed to copying or counterfeiting.
But this is only the tip of the iceberg when it comes to ways in which the industry can employ blockchain-based solutions. Knowing the complete lifecycle of every product would be the key to minimizing costly supply chain issues and decreasing product recalls. From the point that the raw materials are grown and harvested, producers can document every step of the process on the blockchain, from the hand-grown or mechanically produced grains used and the mashing and distillation process to the batch fillings and the distillates as they mature in wooden barrels or other vessels.
After blending and bottling, instead of managing products using reference numbers, distilleries can attach NFC tags linked to NFTs on the blockchain, giving each bottle or cask a unique digital identity that can be tracked, including all data related to its history, use or location – especially as shipments move through customs. This kind of connected system means producers can turn to one place to review all the records they need to improve the production quality of their products, evaluate overall equipment effectiveness and reduce the financial damage from the sale of items that do not meet required specifications. It also means that distilleries can verify assets against the blockchain.
No more crying over spilled spirits
As more and more world-renowned spirits brands dive into blockchain and NFTs, it’s becoming increasingly apparent that it’s not only about authenticity, it’s about helping producers and brands regain control over the journey of their products through the supply chain to the consumer. It’s about enhancing the whole consumer experience of purchasing a bottle or cask, and it’s about helping a decades-old industry evolve to welcome a new generation of buyers, enhance scarcity and facilitate secondary market trading to maintain high brand value. The brands and producers that realize this first will be the ones that are ahead of the curve.
About the author:
Nimantha Siriwardana is the Co-Founder and CTO of Metacask, the marketplace for spirits-backed NFTs. Nim has over 20 years of experience in delivering technology solutions. Prior to co-founding Metacask, he served as the CTO of GSR and has worked across various financial services companies, including Goldman Sachs and Source Capital AG. Nim has a master of engineering degree in Computer Engineering from the University of Southampton. In 2021, Nim and co-founder Stuart Thom launched Metacask, which is modernizing the purchase and ownership of whisky and spirits casks by streamlining transaction processes and issuing NFTs that serve as digital proofs of purchase. The platform not only increases accessibility to the luxury spirits industry but also helps producers and brands by providing the first fully-integrated inventory management, asset tracking, and marketing solution available to the spirits industry.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.