Are NFTs the future of the premium drinks market?

BlockBar, the world’s first direct-to-consumer non-fungible token (NFT) marketplace for wine and spirits, is using blockchain technology to disrupt the beverage sector. db spoke to the company’s founders to find out more.

Cousins ​​Sam and Dov Falic worked extensively with their family in the duty-free alcohol industry, experience that gave them insight into what Sam described as a “gaping hole where the supplier has no information about their consumer and the consumer has no access to the supplier.”

“The liquor industry has three main problems,” Dov explained. “Authenticity, proof of ownership and the resale market – the secondary market for wine and spirits is extremely complex.”

Elaborating on that last point, Dov said: “You have auction houses and that’s where most of it is done, where you send your stuff to Sotheby’s or Christie’s, for example, and they then resell it for you. . If you buy it you have to take care of shipping, insurance – then if you want to sell it you send it back to London to be reassessed and then sent to another country and that country may not be able to import it . It’s not friendly enough … Most people don’t know how to buy at Sotheby’s, most people don’t know how to buy at Christie’s, most people don’t know how to get in touch with these auction houses.”

It was these problems that led them to seek what Sam described as “an easier, simpler way to do business” and found BlockBar in October 2021. For them, the solution to the trio of problems they saw in the industry was NFTs. Although some may think of images of ‘Bored Apes’ as NFTs, there is more to it than that, as Samuel explained: “The very simple way to understand an NFT is that it is unique, an -off asset where ownership and authenticity is publicly provable on a public digital ledger, and that is what is called the blockchain. So in very simple terms, anybody anywhere can go online and see who owns what, and that really adds more accountability to somebody who owns an asset.”

In the case of BlockBar, the customer buys and their bottle is then stored in a facility in Singapore until they wish to redeem it – the NFT acts as a digital certificate to prove they are the rightful owner. Within a year of its launch, there were more than 300,000 BlockBar users and there had been $7 million in sales, including a $226,000 investment in a bottle of Hennessy 8.

According to Dov, BlockBar has been a democratizing force, opening up the premium drinks market to a younger, tech-savvy group: “More than 80% of our customers are 25 to 34 years old, which is encouraging because it means we’re really expanding that market. It’s a demographic that most companies are trying to reach, especially on the high-end side where the collectors are usually much older, but we also want to expand into that older demographic as well.”

As well as widening the age range, Dov suggested that the platform had prevented geography from being an obstacle: “Our belief is that you don’t need to be in a physical place to actually buy something – for us, the world is already digital.” So so far, BlockBar has actually had customers from “everywhere, from Latin America to Asia,” according to Dov, who noted that Cognac tends to generate interest in Asia, while Bourbon (perhaps unsurprisingly) does well in the US.

BlockBar isn’t just getting the attention of potential buyers – brands are also seeing potential in the platform. Among those who have released products on it are Johnnie Walker, Penfolds and Perrier-Jouët. Sourcing bottles directly from these brands helps minimize the risk of counterfeiting.

But the sudden boom in NFTs has been met with some criticism and skepticism, especially in light of last summer’s crypto crash (although BlockBar has nothing in crypto). When some of these concerns about the digitization of beverage sales were raised, Dov responded: “The whole point of what we’re doing is that you own the bottle itself. The difference here is that you have the right to choose when to redeem it or sell it without having to touch it. Not everyone has the luxury of living in a house with a basement, and a lot of people are afraid of insurance to get it.”

Instead, Dov argued that far from being a passing fad, NFTs provide a long-term solution to long-standing problems: “We don’t want to be a gimmick, something marketing-related. If someone wants a regular vodka or Tequila, they can buy it off the shelf and consume it straight away – that’s not where we play.”

Dov said there were no plans to slow BlockBar’s expansion drive, especially with its wine offerings: “In the wine business, everything takes a little longer [as opposed to spirits]it’s more of a traditional business, but we’re starting to make great strides there.”

Whether NFTs will dominate the wine and spirits secondary market remains to be seen – but there is clearly a demand for platforms like BlockBar from a new generation of aspiring investors and collectors. Dov suggested that competition from other new direct-to-consumer channels would be a positive thing: “The more people who understand this, the fewer critics there will be. It will bring more people into this environment.”