How luxury spirits labels are taking away the NFT market

Even amid the thought of trust in crypto, minimal NFT trading volumes and low token prices, collectors’ thirst for luxury liquor NFTs seems unquenchable.

Just last week, Dewar’s, Hennessy and Orientalist Spirits dropped new NFTs, joining the likes of Karuizawa, Johnnie Walker and Patrón, which launched NFTs in recent months during a market stagnation following the spring crypto crash. So why are luxury beverage brands keen to adopt this new technology?

“NFTs have become a way to build strong communities around brands through experiences, which include access to rare spirits, making this a compelling channel for brands to connect with their audiences,” explains Layal Baaklini, Global Managing Director of Disruptive Innovation in the Bacardi Group, which owns Patron, Dewar’s and Gray Goose.

Indeed, in recent months there has been a shift in the NFT market, with interest in pixelated JPEGs dying and investments in utility-based tokens growing by the day. And with metaverse and NFT projects predicted to be worth $50 billion (RMB 360 billion) to the luxury industry by 2030, fine spirits businesses are now realizing that NFTs can be effective in three key areas of branding for a new era: creating community , foster trust and expand reach.

Creating community invested in the brand

Luxury houses have long known that online communities (as seen through social media) can be just as valuable as those in IRL, and this belief is now also spreading to the rarified world of good spirits.

“If there are exciting new ways to engage with people digitally, then we want to be there – experiencing whiskey at home in a fun, immersive way or enabling people to visit our sites online,” says Joao Matos , Johnnie Walker’s global marketing director.

The Diageo-owned whiskey brand has released no less than four NFT drops in the past year, from limited edition 1 in 75 Blue Label Ghost bottles to the even rarer Master of Flavor whiskeys of at least 48 years. The latter also came with exclusive tastings and a price tag of $35,000.

Johnnie Walker Masters of Flavor NFT dropped on May 31, and is the brand’s first foray into digital art. Photo: Johnny Walker

The investment that NFTs represent resonates well with collectors of luxury spirits, who are often used to draining resources into reserves of bottles built up over the years.

“Through NFTs, we can offer consumers more autonomy over their assets, allowing them to hold the NFT, give it, exchange it or redeem it for the exclusive physical bottle,” adds Bacardi’s Baaklini.

For example, earlier this year, Bacardi’s Patrón teamed up with NFT platform BlockBar to launch its first-ever tequila NFT, which gave access to 150 individual bottles of limited-edition Patrón Chairman’s Reserve, each priced at around $4,000. Buyers can choose to redeem their token right away for the physical bottle or have BlockBar store it for them in a secure location. They could also sell NFTs to other collectors.

Someone like Hennessy is moving forward with the Web3 community with a Decentralized Autonomous Organization (DAO). Danielle Barich, Hennessy’s Web3 Development Director explains that the brand “just launched a cultural membership with Friends with Benefits DAO called Café 11. We use NFTs as proof of membership to exclusive events and experiences, but most importantly access to a community that we will co-create future Web3 projects with.”

Hennessy’s NFT with Friends With Benefits gives users access to the brand community, Café 11. Photo: Hennessy x Friends With Benefits

The LVMH-owned Cognac brand kicked things off in January when it released an NFT of the first and last bottles (1 and 250 respectively) of Hennessy 8, a rare limited edition series. The NFT was sold via BlockBar for a staggering $221,000.

For spirits groups tapping into a loyal audience, the appeal of NFTs is clear: they create a permanent link between business and customer, etched into the blockchain. As Bacardi’s Baaklini observes, “the data we collect gives us the opportunity to engage and educate influential consumers with invitations to exclusive private tastings, brand visits or hospitality at important events.”

Build more trust with HNWIs while tackling fakes

As in many other parts of the luxury market, counterfeiting is rampant among luxury spirits. According to a study by the East Kilbride-based Scottish Universities Environmental Research Centre, one in three rare Scotch whiskeys were found to be either fake or distilled in a different year than declared. In recent years, some distillers have begun turning to blockchain technology to prove farm-to-bottle authenticity.

In this regard, NFTs have proven quite effective in building trust and loyalty among fine spirit connoisseurs, as they can offer proof of authenticity that previously required imperfect like-for-like comparisons or expensive carbon dating sampling.

One of the driving forces behind the creation of BlockBar was to help alleviate collectors’ fears around authentication. “Offering NFTs is the best way to show transparency and guarantee authenticity to all buyers,” notes Blockbar CMO Charlotte Shaw.

Transactions are recorded on the Ethereum blockchain and buyers can trace ownership all the way back to each brand’s distillery itself. The company works directly with spirits labels such as Johnnie Walker, Hennessy and Glenfiddich to find unique bottles, and has so far arranged more than 70 drops.

Connect with more audiences – and younger ones too

Luxury spirits are often seen as the preserve of older, more affluent collectors. But NFTs may be set to change that, as a group of nouveau riche, tech- and crypto-savvy buyers get used to seeing digital goods as valuable – sometimes even more valuable – than physical ones.

“The NFT market has gathered a group from the young generation, Gen Z, who can become our potential customers,” notes a representative of whiskey brand Karuizawa. “Additionally, digital token trading has somehow avoided the uncertainty and risk of shipping exact whiskey bottles across different countries.”

The Japanese distillery made available on BlockBar just one of 211 remaining 50-year-old bottles from its closed distillery, which has become something of a cult product among aficionados. It sold for approximately $79,000.

Karuizawa issued an NFT to guarantee authenticity to those purchasing from the last 50-year-old whiskey cask. Photo: Karuizawa

Luxury wine and spirits NFTs may also start to look particularly appealing as stocks and crypto tokens fall in value amid a looming worldwide recession. The Liv-ex Fine Wine 1000 investment benchmark, for example, has outperformed the S&P 500 index of the largest US companies so far this year.

But buying whole bottles isn’t the only way to invest in good spirits. Experienced young collectors, who may be familiar with fractional stocks introduced by digital brokers such as Robinhood, have also been lured by shared ownership of casks through services such as BlockBar and Metacask. The latter was behind the record $2.3 million (RMB 16.7 million) sale of a rare 1991 Macallan cask last October.

NFTs are meant to be… enjoy?

While the heady highs reached by NFTs in 2021 have faded, the buzz surrounding their arrival in the fine spirits world can sometimes cause brands and collectors to forget an important maxim: the physical experience of tasting a rare, high-quality bottle of whisky, rum , or tequila can never be replaced by a digital token.

“So much of whisky’s value and appeal is linked to the physical, sensory aspects: the heaviness of the bottle in your hand, the wonderful noise when you pop the cork, the wonderful aroma, the amber spiral glistening in the light and the incredible taste,” enthuses Rod Gillies , brand director at The Dalmore. The label’s first NFT release last year came with a four-piece set of single malt whiskeys from four different decades, selling out in minutes for around $137,000.

“As with rare whiskeys sold at auction, I would always hope that at some point the lucky owner would actually open the bottle and enjoy it,” continues Gillies. “Our focus will remain on [NFTs] enhance or accompany a real sensory experience, not replace it.”