1. Introduction

Traditionally, verifying the authenticity of a bottle of wine, including vintage, origin, or varietal could be achieved through chemical or sensory analysis. Applying these methodologies at the point-of-sale, however, is cumbersome and impractical. An innovative cure can be offered by tokens operating on a blockchain. Tokens in the context of blockchain are digital representations of assets on a blockchain and can be held or traded. They operate within the framework of smart contracts which execute transactions based on predefined and software-coded rules (Kamilaris et al., 2018). Albeit both are independent concepts and serve different purposes on the blockchain, they collectively enable a wide range of applications and facilitate automatic transactions (Sunyaev et al., 2021). In this study, token-based use cases and business models are being explored. Booth concepts are occasionally used interchangeably although they are distinctively different. While a business model provides a framework for value creation and capture of an organization, a use case focuses on the practical application of a product in the realm of customer value creation.

The two types of tokens that are typically discussed in the context of blockchain are fungible and non-fungible tokens (FTs and NFTs). They differ in the way they are interchanged. With FTs, each asset has the same attribute as the other asset. On the other hand, NFTs represent unique physical and digital assets that are not inimitable, not inter-changeable and cannot be replaced by other tokens. NFTs have been typically linked to digital art, consumer products, and media. Following the cryptocurrency Bitcoin (Nakamoto, 2008), NFTs became the second most prominently visible application of blockchain technology (Dowling, 2022). Recently, the wine industry discovered their potential.

The attention of blockchain in the wine industry was further raised in November 2021 during a symposium on the digital transformation of the Viti vinicultural sector held by the International Organization of Vine and Wine (OIV). At this event, it was reported that blockchain technology has been voted among their members as the most important digital technology for the wine industry in the short to medium term (OIV, 2021). This expectation is predominantly based on the view that the novel technology promises a wide range of benefits to the industry. Through its public ledger blockchain, a distributed data storage entity, it enables trust through transparency of transactions, immutability of recorded transaction data, tokenization of digital and physical assets, as well as tradability enabled by smart contracts (Kramer et al., 2021).

Albeit a young technology with its roots back into 2009, blockchain technology (BCT) has already been adopted by several industries, including but not limited to agriculture, finance, health care, manufacturing, and logistics. Within the supply chain and its management, it has the potential to significantly impact traditional challenges such as counterfeiting, tracking, and transparency issues (Treiblmaier, 2018).

An extended literature overview provided the results that only limited research has been conducted on the various token-based use cases that are at an operational stage within the wine sector. It was therefore concluded that a research gap exists in evaluating and categorizing the various token-based use cases in the wine supply chain. Addressing this gap, the objective of this study is to identify the existing operationalized use cases and to provide a taxonomy for their various implementations. Furthermore, this study aims to provide an overview on the status quo of blockchain-based token adoption in this traditional sector. Based on the above the following research questions were formulated:

RQ1: What are current use cases for digital tokens in the wine industry?

RQ2: How could the different use cases be aligned with digital tokens?

RQ3: Which challenges could digital tokens potentially address in the wine supply chain?

Regarding the structure of this article, following the introduction, a literature review and theoretical background on the research topic will be provided. Subsequently, the methodology will be described, and the results of the extensive literature overview will be outlined. Within the results, a categorization of the different token use cases will be provided. Furthermore, the findings from conversations with different stakeholders in the wine industry will be presented. Based on this, the status quo will be summarized and an analysis of the benefits of blockchain token application and challenges for its adoption in the sector will be presented. The article concludes with a discussion and practical implications as well as the potential areas of future research.

To summarize, this study seeks to close the current gap in knowledge about the transformative potential of digital tokens in the wine sector. It aims to provide an analysis of the current situation, to identify both the future of tokens as well as aspects that ought to be elaborated on further.

2. Theoretical background and Literature Overview

Over the last decades, agri-food supply chains have transformed from being vertically integrated to vertically collaborating networks. The redefinition and change of food quality - also caused by food scandals in the early 2000s - promoted the transition to vertical cooperation in supply chains coordinated by a central company (Hanf and Dautzenberg, 2006). This led to the requirement of better coordination and collaboration in agri-food supply chains. Hanf and Dautzenberg therefore developed a management framework that incorporates the aspects of cooperation and coordination in combination with the three management levels of company, dyad, and network. This framework aligns well with the structure of food network which have been classified as strategic networks requiring close cooperation (Jarillo, 1988). Attributes of strategic networks include hierarchical coordination by a focal firm, intensity of relationships, and coordination mechanisms, all of which influence supply chain management. The focal firm acts as a “chain captain”, not only defining the target market for the network but also setting the common strategy (Hanf, 2005). It also selects the stakeholders that become part of the network and manages the individual relationships. Thus, the focal firm has overall responsibility for network coordination and supply chain management. Coordination ensures streamlined operations and can be understood as the alignment of actions to mutually achieve goals among intentionally selected partners (Gulati, 2005). In supply chains, coordination mechanisms can be broadly classified into six groups: power, contractual relationships, information sharing, joint decision making, collective learning, and building routines (Belaya and Hanf, 2012; Handayati et al., 2015). Within these groups and in the context of blockchain transactions, consensus building and smart contract coding act as innovative coordination mechanisms (Pietrewicz, 2019). Blockchain technology has the potential to release dynamic capabilities creating intangible assets such as trust (Jell-Ojobor and Kramer, 2023), a capability that aligns well with the requirement of consumers who nowadays demand detailed information about their food in the supply chain. As a result, agri-food firms are required to provide information such as provenance and production data of the food products to support credence attributes and build trust, which in turn could increase customer loyalty. Trust also evolves as an essential element for vertical cooperation in supply chains (Rindfleisch, 2000). As such, collaboration in the agri-food industry is driven by trust and credibility in food quality, origin, and safety. Trust and cooperation are also the key organizational drivers of the food sector (Fink-Hafner et al., 2010). Since trust is also used in the agricultural food supply chain to manage the risk of cooperation problems, it is another driver of vertically cooperated supply chains (Hanf and Dautzenberg, 2006).

Blockchain technology and digital tokens have been increasingly utilized to address trust issues in the agri-food and wine supply chain (Santos et al., 2023; Tokkozhina et al., 2021; Yiu, 2021). Specifically, its decentralized nature, immutability of data, and transparency of transactions align well with the trust requirements. Smart contracts, often using digital tokens, have the potential to improve operational efficiency by adding transparency and traceability to the agri-food and wine supply chain (Sunyaev et al., 2021).

In its current stage of development, blockchain technology, the underlying technology of digital tokens, can be considered a disruptive technology because the application of the technology can replace existing business models (Kramer et al., 2021). The basis for further development of existing and creation of new business models is the identification and use of innovative and disruptive technologies. Therefore, one of the main tasks of corporate management is to collect and process knowledge and skills of strategic resources and coordinate their transformation into profitable services of the company.

The term “disruptive” is commonly associated with Clayton Christensen who coined the theory of disruptive innovation (Christensen, 1997). However, in practice it has often been misinterpreted and misapplied. One of the main reasons is that different innovations require differentiated strategies (Christensen et al., 2018). The term “technology” has no single definition. On the contrary, it has multiple, sometimes contradictory meanings (Schatzberg, 2018). The use of disruptive technologies can lead to an increase in efficiency with the goal of increasing output while maintaining the same input (Zhang et al., 2016). Both terms, disruptive technology and disruptive innovation are often considered interchangeable.

Blockchain is also considered a potential general-purpose technology that could significantly change the way business transactions are conducted (Kramer et al., 2021). It has the potential to profoundly change business, society, and organizations and create new business models and industries. It is therefore important for managers to understand whether blockchain can be considered a disruptive or a general-purpose technology, as this should have an impact on the chosen business strategy. These need to be adapted early enough to position themselves among the competition and make the best possible use of the economic potential.

In the context of blockchain a token is an identifier representing specific assets or access rights issued on a specific blockchain (Buterin, 2014; Sunyaev et al., 2021). Tokens enable the exchange of value across various economic frameworks (Furlonger and Uzureau, 2019). Extending this concept, digital tokens can be categorized into crypto tokens and native coins. The latter represent digital currencies exchanged peer-to-peer, whereas crypto tokens are utilized to access assets and services (Berg et al., 2019; Tasca, 2019). This study will solely focus on crypto tokens. Albeit the term “crypto token” is more precise the common term “token” will be used throughout this article.

The definition of token should be viewed through two lenses: the first focuses on the function it performs and the second through the nature of what it represents (Freni et al., 2022).

In the function role, its purpose is to serve as a digital certificate of ownership (Chalmers et al., 2022; Hartwich et al., 2023) which can be held and exchanged. This certificate can be linked to a digital on-chain or tangible off-chain asset. It is therefore used for obtaining ownership over assets, as an investment, or for preserving value. Typically, it serves as a unit of value within an organization to enable its customers to interact with its goods.

The nature of what tokens represent is multifaceted. In essence, it represents quantifiable value, rights, and trust (Freni et al., 2022). In addition, tokens can also represent a fact or a governance right (Furlonger and Uzureau, 2019). Tokens can also serve as incentives, rewarding stakeholders for governance related activities and support in decision-making processes. While the token holder trusts in its rights and enforceability, the concept of trust arises as an essential attribute (Freni et al., 2022). Additionally, tokens can facilitate the creation of autonomous business models (Tasca, 2019).

In general terms, the attributes of a token such as rights, functionality, or limitation are reflected by its intrinsic value. Technically, tokens are represented by hexadecimal, alphanumeric, or binary characters (Buterin, 2014). Tokens by themselves are not programmable. However, smart contracts that manage and use tokens can be programmed to reflect specific rules and conditions. Smart contracts are lines of software code represented by a program. They are based on blockchains with rules for automatically executing transactions upon certain conditions that must be met (Kamilaris et al., 2018). As a result, tokens can demonstrate specific behavior when governed by smart contracts. Smart contracts can be seen as coordination mechanisms applying an institutional perspective over coordination (Frantz and Nowostawski, 2016). They enable the tracking of wine along the supply chain, provide ownership management, as well as automatic payments (Adamshvili et al., 2021).

Two main categories of token exist: fungible and non-fungible token. Fungibility in the economic sense can be defined as the ability of a good or asset to be interchanged with other individual goods or assets of the same type such as a dollar bill (Chohan, 2021). The same applies to digital currencies such as Bitcoin where each Bitcoin has the same attributes as any other Bitcoin (Nakamoto, 2008). In contrast, a NFT is a unique, indivisible, irreplaceable and verifiable token representing a physical or digital asset (Valeonti et al., 2021; Bal and Ner, 2019; Leech, 2022). A NFT can represent a unique asset, such as the image of Mona Lisa and while it may be possible to reproduce a painting with the same features, it would never be the same since important aspects such as the identity of the creator, the painting’s age and reputation are not reproduceable. The same holds true for digital art works: while an image can be copied in the way that its underlying code is identical, some aspects cannot such as, for example, the fact that a certain image is the first to ever be created in a series of identical images. Such items are not simply interchangeable and are therefore non-fungible. Applying this concept to the wine industry, non-fungible tokens, as tradable certificate of ownerships for a new class of digital assets, can represent a unique bottle of wine (Dowling, 2022).

The application and distribution of NFTs has predominantly been monitored in the realm of digital art. A recent publication reports that the number of active NFTs in self-custodial wallets has grown exponentially in the past years (NonFungible.com, 2022). Use cases in other sectors including wine exist mostly to invest and collect but also for the purpose of authenticity verification (Yiu, 2021). While in the first two cases, NFTs serves as an instrument for more frictionless trading, the latter touches upon the immense problem of fraud in the wine sector: the net impact of food fraud in general on output and employment in the whole economy amounts to losses averaging up to 1.8 billion euros and of 20 000 jobs per year, revealing an intrinsic fragility of the agri-food system, especially in those subsectors featuring relatively large price elasticities such as quality products like wine (Rocchi, 2020). The transparency and traceability potentially resulting from the use of NFT technology in the wine sector is not limited to fraud prevention though but promises added value along the wine supply chain to distribution and marketing (Adamshvili et al., 2021). However, for the successful adoption of NFT solutions in the wine sector several challenges need to be overcome. Such challenges include identifying and employing employees with the right skillsets to operate the technology and the ability of the management to trustfully share data about the solution (Silvestri et al., 2023). To summarize, a token is a digital asset utilizing a blockchain. It represents value and ownership credentials that rely on trust between inter-acting stakeholders. Consequently, tokens drive use cases and enable transactions in economic systems. Smart contracts can create tokens or govern their transfer, eventually representing a business process.

During the past quarters, the global wine industry noted the emergence of several novel use cases based on NFTs (Mendis, 2021; Laiz-Ibáñez and Mendaña-Cuervo, 2022). Previous analysis has shown that NFTs are used to tokenize wine when it is treated as a collectible and investment product (Laiz-Ibáñez and Mendaña-Cuervo, 2022). Beyond this, NFTs can further serve to provide trusted provenance data, track- and traceability, as well as authenticity resulting in a trust-based competitive advantage of firms (Silvestri et al., 2023).

Based on the core characteristics of blockchain technology of decentralization, transparency, immutability, and automation, the technology has been lauded for several years as a game-changer across many industries, including finance, healthcare, government, manufacturing, and distribution and is poised to innovate and transform a wide range of applications (Monrat et al., 2019). It has gained substantial recognition for its ability to induce transformation and innovation in existing business models and frameworks (Tandon et al., 2021), creating a multitude of use cases.

3. Methodology

The methodology in this exploratory research consists of three parts: a literature overview, a use case analysis, and discussions with stakeholders in the wine sector.

An exploratory qualitative approach towards the research was adopted based on a multiple case study approach (Eisenhardt and Graebner, 2007; Yin, 2018). To further improve the credibility of the results, data source triangulation was conducted (Patton, 2015). This approach was chosen to further enhance the robustness of the findings, specifically aiming to mitigate the subjectivity introduced by the discussions held with stakeholders from the wine sector. Several data sources were integrated, including articles, data from company websites, from e-commerce sites, and observations during the personal discussions at the wineries, all aimed to provide a more comprehensive and objective analysis of the cases studied. To solidify the theoretical framing, an in-depth literature overview concerning fungible and non-fungible tokens in vertically coordinated agri-food supply chains, particularly in wine supply chains, was conducted. This was performed through a systematic search using the Boolean operator enhanced search string: token AND NFT OR FT AND “wine industry” AND “supply chain” OR “supply chain network” on academic search engines such as Google Scholar, Web of Science, ResearchGate, and Scopus, but also through journals, books, newspapers, and magazine articles. The justification in the selection of these keywords lies in the research questions to be answered. While research question 1 is aimed to examine the current use cases for digital tokens in the wine industry, research question 2 explores the challenges that these tokens could potentially address within the wine supply chain. It was concluded that these specific keywords were deemed relevant for the research. In the context of this study the keywords were deliberately chosen and carefully considered to address the aim of the research. In addition, domain-specific research with the above-mentioned terms on selected key journal websites as well as applied bibliographic mining was conducted.

Second, 65 use cases of NFT applications were analyzed using publicly available information such as company websites, published online interviews, and articles about solution providers. The objective of this literature review was to identify research conducted in the realm of token-based use case categorization in the wine sector.

Third, discussions with 19 stakeholders of different firms that are involved in the use of FT and NFT were held. The discussions took place between spring 2021 and summer 2023 by means of personal and video conversations as well as via e-mail. The aim of the discussions has been to determine including but not limited to the target market segments, potential business model, and implementation challenges on the path towards the adoption of digital tokens. Moreover, further discussions with stakeholders of FT and NFT solutions with practical experiences with the operationalization of token are ongoing. This serves the purpose for identifying additional solutions including but not limited to tracking, tracing, provenance, and transaction specific solutions.

4. Results

Despite an increasing interest in BCT in the wine industry, this sector is decidedly in its infancy compared to other sectors such as finance, healthcare as well as art and entertainment. As part of this study, 65 use cases of blockchain adoption in the wine sector have been identified resulting from the literature overview, have been reviewed and analyzed. While this number may be seen as an indication for growing adoption in the sector, it must be noted that this is in comparison miniscule both in quantity and value of blockchain projects.¹

Well-known wineries such as Penfolds or Mondavi are offering their NFT-connected wines at a premium price which represents the motivation of those actors to invest in this novel asset class. Consumers, collectors, and investors can be ensured that the life cycle of the wine has been transparently secured on the blockchain. In addition, wineries have started to add value to the NFTs generating additional revenue. With the objective to extend the interaction with the brand and the product they offer perks like special bottles, physical winery visits, dinners, or even Metaverse visits for NFT-holders. As the certificate of ownership is stored on the blockchain the wine can be sold peer-to-peer between consumers or wine investors without intermediaries. The NFTs could also be traded on decentralized exchanges depending on their demand and exclusivity. A powerful motivator to invest in wine NFTs could be the fear-of-missing-out phenomenon. A growing adoption rate could result in consumers and investors to invest early to secure future trading profits.

Producers can benefit from secondary transactions through royalties when the wine is being resold as they could receive a fraction of the sales price as a compensation at every transaction. This way to create additional revenue form the same bottle of wine represents a novel business model. With the ability to prove provenance and how their wines reach the different stages in the supply chain, data management can be improved as well as to comply with regulatory demands. The fear-of-missing-out phenomenon could also apply to producers that do not invest early enough in NFTs as part of the wine offering.

While producers can benefit from offering NFTs through publicity expanding their customer segment, an important motivation to adopt NFTs among producers of fine wines is fraud prevention. The unique digital seal identifies every bottle and protects the content. This is an important aspect not only for individual winemakers but also for wine regions as they strive to also protect the reputation of the wine growing region.

In general, producers, consumers, collectors, and investors are confronted with a variety of reasons to engage in NFTs as many drivers exist for stakeholders including but not limited to publicity, customer engagement, fraud prevention, better data management, and creative business models with novel revenue opportunities.

The literature overview unveiled that a categorization of digital token use cases has not been studied yet. Consequently, the applicable use cases from wineries worldwide have been systematically classified into one of the following three categories.

4.1 Fungible tokens in the wine sector

The first category can be described as a reproduction of the different elements of a supply chain in full or in part. It refers to cases where wineries implement blockchain for the collection of data during different stages of production and distribution. Using technologies such as sensors, satellite imagery and geographical information as well as manual data entry where necessary, data is collected, time stamped and recorded on an immutable blockchain. Data can be collected at different times and stages in the vineyard, the winery and distribution channels. An example would be the Enseal/Entrust system that uses “a secure, comprehensive digital system that records every stage of an agricultural supply chain from produce, harvesting, processing and packaging” (source: Enseal, https://enseal.global). The project was launched by a group of producers in Clare Valley in Australia by Jeff Grosset and David Travers and a group of wineries from the region covering more than 100 vineyard blocks. It was originally developed with the purpose to improve fraud protection and strengthen provenance and authenticity of their products to protect the reputation of the participating wineries. In addition, the Enseal/Entrust system uses Near Field Communication (NFC) technology to provide provenance and authenticity data secured by a digital seal. For this purpose, the company developed the SaaS (Software as a Service) platform “Entrust”, and the digital screwcap “Enseal”. The model of using NFC tags in conjunction with BCT in the wine sector can be summarized as the production of a digital version of a selected number of bottles, which is intended to be sold as a fungible token. For that purpose, the bottles are identified and fitted with a small microchip under the capsules that are the protective sleeves covering the cork and top of the bottle. The microchip is an NFC tag that is programmed with basic information that can be read through an application on a smartphone. The architecture and the different elements involved have been summarized in figure 1. In this model, a digital replication of a real-world physical object describes the object through digital information with all its attributes spanning from an atomic level to the geometric level thus creating an individual entity (Grieves and Vickers, 2017). Since the NFC tag on the bottle can only store a small amount of data, the information provided on the tag in most cases only serves as an identifier. Using this identifier, information is displayed by using an application that is stored elsewhere, either in a centralized, cloud-based storage unit or as part of a decentralized network. The amount of data is predetermined and can be provided through manual data input, e.g., provision of name, vintage, and issue number, or automatically by sensors that register for instance the filling data. A consumer, investor or collector can then use a smartphone with the provider’s application to read basic information. That information is, for example, required to verify authenticity and provenance, or used to engage a consumer through the provision of essential information such as tasting profile or food pairing. The implementation of the technical element is in almost all cases done by service providers. As described above, the programming of the underlying information and tokenization can result in fungible or non-fungible tokens. In either case, certain events, or additional information such as the sale of the bottle or even the removal of the capsule, can be recorded either manually or automatically depending on the system used.

As outlined in Figure 1, the initial objective of the Enseal/Entrust project was to improve fraud protection and strengthen provenance and authenticity of their products to protect the reputation of the participating wineries. As part of a discussion with the authors, one of the initiators of the project described the objectives also to include growing datasets, optimising processes, and systems, creating new export procedures, and enhancing supply chain efficiencies. During the initial trial, however, additional benefits surfaced in the form of increased and faster legal compliance with administrative burdens through automated data management and transmission.

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Overview of the NFC/FT/NFT Blockchain model. Source: authors.

Citation: International Food and Agribusiness Management Review 27, 2 (2024) ; 10.22434/ifamr2023.0080

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Another example of the transfer of elements of the supply chain onto a blockchain based system can be found with the Argentinian winery Costaflores, Mendoza as part of the OpenVino project. Costaflores aims to create the world’s first open-source, organic wine-backed crypto asset winery. Utilizing sensors, information containing data about temperature, solar radiation, irrigation, humidity, wind speed and direction, and precipitation is collected in the vineyard. The data about the wine production from the vineyard to the bottle as well as about the tokenization of wine is recorded on a blockchain and published on the winery’s website. As an additional element, the project has created wine-backed crypto assets in the form of ERC-20 (Ethereum Request Change) fungible tokens that are linked to wine bottles. The first harvest in 2018 was associated with the MTB18 (Mike Tango Bravo) token, which was made available as part of an Initial Coin Offering (ICO) to investors between May and June 2018. ICOs, which are also often known as token sales, can be described as a mechanism that is used by new ventures to raise or increase capital. This is achieved by selling tokens to a multitude of investors with each token corresponding to a unit of value issued; they can have a wide range of applications and serve several purposes (Moxotó et al., 2021). In the case of the OpenVino project, each MTB18 digital token represents one bottle of wine produced from the 2018 harvest. This has been made available for redemption of the underlying asset, a bottle of wine, three years later in July 2021. In the following vintages new tokens were issued. The number of MTB22 tokens issued represent the number of bottles of wine allocated for tokenization in 2022. The ERC-20 tokens can be subsequently traded on the secondary online market platform Viniswap. As opposed to the Enseal/Entrust project, the objectives of the OpenVino project differs as it is two-fold: the first part of the reproduction of data collected along the various steps of the supply chain is akin to the process of the Enseal/Entrust project. OpenVino uses the fungible token to redefine the way a wine is valued by enabling the market to decide the price of Costaflores’ wines rather than the producer setting a market price.

Furthermore, other solutions based on fungible tokens are surfacing as well. The German winery Sanders & Sanders from the Mosel valley offered the first German wine token, which was backed by a limited edition of 250 bottles of Riesling representing the 2022 vintage. The ICO period for the then-called WeinCoin was set for 19 April–1 June 2022 and the token had been scheduled to be minted in June 2022, but was postponed. During the ICO period, investors were able to purchase a certain amount of WineCoin tokens through the winery’s online web store, using fiat or digital currency for settlement. The token would have provided a secure and immutable proof about the purchase of the first German WeinCoin.

The goal to provide an anti-fraud solution for wines and spirits based on Blockchain technology is at the center of the ChaiVault project. The objective is to allow potential buyers to know a bottle is authentic and view provable provenance information before purchase. This is realized without physical proximity to the bottle, by using an online ledger that can be kept private or made visible to the public for a licensed vendor to use for online marketing purposes, according to the company’s website (https://www.chaivault.com). Whenever ownership is transferred, provenance information can be updated to include new ownership and storage information.

A solution that uses a similar concept is offered by the Swiss company vinID (https://vinid.ch), which combines blockchain and NFC technology to ensure each product has its own unique and dynamically encrypted ID based on the model outlined in the illustration in Figure 1 above. Other than guaranteeing authenticity and providing provenance information, the product aims to enable supply control and inventory intelligence and promotes additional opportunities such as reaching new customer groups, increased costumer engagement, enabling subscriptions and DTC (Direct to Consumer) sales as well as premiumization of a product offering. However, vinID’s premier use case is based on non-fungible tokens.

4.2 Non-fungible tokens in the wine sector

The second category can be identified using NFTs primarily for the promotion of products with secondary benefits as well as for fraud protection measures. Most use cases for the application of BCT in the wine sector fall into this category. The basic model can be explained using the example of the Robert Mondavi x Bernardaud NFT Collection.² The Robert Mondavi Winery partnered with the porcelain manufacturer Bernardaud to create a limited series of 1966 bottles porcelain magnum bottles. Each bottle was to be offered exclusively through an NFT that consisted of a digital art encoded within the token itself. The NFT is a digital representation the underlying real-life physical asset, in this case the ceramic magnum bottle with the right to redeem the bottle after its filling on 30 September 2022. Purchase of any of the NFTs also includes a certificate that may be redeemed for a special tasting for up to 4 guests at a particular winery of the company. The NFT is transferable, and ownership is verifiable due to its public listing on the blockchain, and any eventual redemption is to be recorded.

This use case represents various other examples of wineries e.g. the German winery Dreissigacker, combining a bottle of wine with an NFT and in some cases with additional benefits such as access to special dinners, tasting or other perks such as discounts for future purchases at the respective company. A full list of companies using NFTs and this model such as Penfolds or Chateau Angelus can be found in Table A1 in the Appendix.

The objective stated directly or indirectly by most companies, other than the actual sale of the specific product, can be seen in the access to other customer groups that may not be interested in wine directly but are approached by digital assets and innovative sales practices. Other objectives are the increased protection of provenance and authenticity even though there is no direct physical connection between the wine bottle as a tangible asset and its digital representation, the NFT. While the intention of each company is the correct representation of the status of ownership on the token, it does not offer any automated guarantee as such.

NFTs also provide a secure way to represent the authenticity of wines. During bottling of the wine an NFT is minted carrying the attributes of the wine such as provenance, vintage, grape type, etc. With the vinID solution for example, consumers can verify the integrity of the seal of the wine. It is connected to the NFT to ensure that the wine is authentic, and the bottle has not been opened and manipulated since the initial bottling. In addition, producers and consumers can track the journey of the wine in the supply chain, adding further trust attributes to the product. However, for NFTs to effectively protect against fraud, the NFT technology needs to be adopted by many stakeholders of the supply chain. While NFTs have the potential to combat fraud in the wine sector, its integration into the supply chain requires knowledge exchange and cooperation between interacting firms. This category is complemented by various technology and service providers as the wineries often lack the technical expertise of producing the NFT, i.e., the minting of the token, and its launch on platforms that allow for its acquisition or the trading on a secondary market.

A subcategory of the above structure are those projects that use NFTs as a digital form of the traditional wine club model or investment portfolios such as CultX (www.CultX.com). Use cases that were examined included examples that would use new issues of wines as described earlier but give members access or subscription rights to these new bottles. Alternatively, the NFT model can be used to tokenize existing bottles of wines that have value on a secondary market with the objective to facilitate trading in such assets by offering additional services such as storage as in the case of Winechain. Further examples of service providers include EZ Lab (https://www.ezlab.it/case-studies/wine-blockchain), Blockbar (https://blockbar.com), or a generic marketplace like OpenSea (https://.opensea.io).

This category of wineries that launch NFTs for the above-mentioned purposes or provide related services amounts to almost 80% of all cases that were analyzed as part of this study (Figure 2). It demonstrates the commercial relevance compared to other models. Once the technical expertise has been acquired, the minted NFTs can represent any given amount of physical assets at relatively low cost and effort in exchange for a marketing impact that is difficult to measure though. Given that to achieve a significant marketing impact a dedicated strategy is required considering the relative inflation of such projects. Despite the authors best efforts to provide a comprehensive picture of the existing NFT projects, it is likely that additional projects would need to be added to the list to achieve completeness.

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Distribution of use cases according to categorization. Source: authors.

Citation: International Food and Agribusiness Management Review 27, 2 (2024) ; 10.22434/ifamr2023.0080

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4.3 Digital wineries as decentralized autonomous organizations

The application of digital tokens for governance purposes describes the third category. Utilizing smart contracts with predefined rules that are enacted when certain conditions apply, Decentralized Autonomous Organizations (DAOs) represent blockchain-based entities that perform predefined business processes. DAOs are operating autonomously based on smart contracts that hold digital tokens as assets or voting rights. They act without a central coordinating entity. Decisions are made through the consensus algorithm assigned to the blockchain. The application of DAOs to the wine sector is very limited and only a few use cases have been identified as this concept is at a very early stage of adoption. However, they are still considered one of the most interesting structures in respect of blockchain applications. DAOs first appeared in the finance industry, and they are said to be able to autonomously grant credits, hire people, provide services, own smart property, coordinate with other autonomous organizations, or facilitate cooperation, to name a few (El Faqir et al., 2020). While there is not a consensus on how to define a DAO, one comprehensive definition is that “a DAO is an internet-native entity with no central management which is regulated by a set of automatically enforceable rules on a public blockchain, and whose goal is to take a life of its own and incentives people to achieve a shared common mission”.³ Such governance structures that consist of varying degrees of automation and decentralization offer several benefits, which will not be further discussed at this stage but have already been subject of ample research.⁴

In the wine sector so far, such materializations only appear as hybrid solutions. The Evinco Winery DAO, for example, offers allocations of wine to token holders when NFTs are minted. Moreover, they grant exclusive access to members-only tastings and virtual events together with participation in the governance of the winery through an NFT. However, further specification of the mechanics of the structure is missing.

The Wine Estate DAO (https://wineestatedao.io) seeks a form of decentralized organization and decision making by launching NFTs to acquire a wine estate, fund DAO operations and development. Further details about the exact functioning of the operations have not yet been made available.

A combination of the use of NFTs and the division of rights of determination regarding the use of funds or the strategy of the company can be found at #NFGrapevine (https://www.nfg.wine). It describes itself as the first web3 wine community-driven brand expanding to invade vineyards across Switzerland, “where holders become co-owners” and each #NFGrapevine represents a physical grapevine from which every owner receives wine at the end of the season that is cared for by the company. In the future, owners of the NFTs are also to decide on a 15% fund set aside from the project’s revenue for future use in the grape and wine space. Potential uses for their Wine Bank include supporting charitable organizations in the Swiss agriculture space, advancing the #NFGrapevine project, or starting a new project, for which voting rights are assigned to NFT holders.

Another company that envisages the use of a DAO is World Wide Wine (https://www.wwwine.io). They seek to recreate the entire wine ecosystem on the blockchain adding elements of gamification at a later stage. Using a proprietary token based on the Elrond blockchain, voting rights on relevant decisions such as on the evolution of the project, the giveaways, the suggestions, or the use of the DAO wallet, are assigned to token holders. To do so, the token must be staked in the wwwine dApp (decentralized Application) i.e. be locked up in the company’s decentralized application, for which in turn the owner will obtain rewards or earn interest. Staging tokens for upcoming decision making seems to be the next stage, according to the roadmap available on the project’s website. All projects with reference to DAO structures have in common that they outline in varying degrees the objectives and future mechanics of the respective projects but find themselves still at a very early stage of the process. It is therefore difficult to assess how likely the achievement of these objectives is.

As a result of the above-described taxonomy, a blockchain technology in the wine sector map was created to visualize the different categories of blockchain and token use cases (Figure 3).

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Blockchain-based token use cases in the wine sector. Source: authors.

Citation: International Food and Agribusiness Management Review 27, 2 (2024) ; 10.22434/ifamr2023.0080

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Interestingly, it was found that managers of these early adopters often have a technological or information technology (IT) background which enables a faster integration of advanced IT solutions in a rather traditional industry. With the transformation of agri-food supply chains emphasizing trust and vertical coordination and cooperation, digital tokens offer a promising solution for business models and use cases alike. The potential use cases and business models can result in a paradigm shift in how consumers perceive quality, origin, and safety of the wine product, as well as creating new avenues of customer engagement.

5. Discussion and implications

Based on the extensive literature overview, it was concluded that there is a lack of research that has specifically investigated and subsequently structured token-based use cases in the wine industry represented by fungible tokens (FT), non-fungible tokens (NFTs), and tokens in Digital Autonomous Organizations (DAOs). In a recent systematic review on NFT-related scientific research, neither the wine, nor the agri-food, nor the food industry provided NFT research (Taherdoost, 2022). In 2020, 1 article on NFT was published, 5 articles in 2021, and 28 in 2022 (Taherdoost, 2022).

The research that has been identified provides for the groundwork by highlighting the potential utilization of blockchain technology, NFTs, and tokenization in the wine industry, focusing on aspects such as provenance, track- and traceability, and verification of authenticity. While the literature provides valuable insights into the application of blockchain and NFTs in the wine industry, it lacks an overarching framework that systematically structures the use cases of FTs, NFTs, and DAOs in the wine industry. The dominant literature addresses predominantly blockchain-based solutions, lacking operationalized use cases or tokenization. For example, research based on the analysis of five case studies focused on using a blockchain technology platform for counterfeiting protection in the wine industry. The authors conclude that the key factor to be considered when using blockchain technology for this purpose is the level of desired protection. However, the research does not address the specific use of tokens to provide a solution against counterfeiting (Danese et al., 2021). Biswas (2017) proposed a blockchain based traceability system for wine supply chain for the purpose to provide transparency, provenance, fraud protection. This solution is not based on tokens (Biswas et al., 2017). The results of the study not only align with the themes identified, but they also build upon them. This is specifically the case in respect to provenance, track- and traceability, as well as proof of authenticity, which aligns well with the work of Silvestri et al. (2023), that addresses how NFTs enhance the trustworthiness of provenance data, track- and traceability, and authenticity in the wine industry. By utilizing blockchain-based tokens a more secure and transparent system for verifying wine and its origins can be achieved. The findings also confirm the growing trend of using NFTs to tokenize wine as a collectible and investment product Laiz-Ibáñez and Mendaña-Cuervo’s (2022). Use cases identified in the realms of investment and collectible draw attention to the growing interest in wine not just as a consumable product but also as a valuable asset in the web3 economy. Pinpointing the results on the current use of NFTs for fraud prevention purposes, the research results support existing literature on the role of blockchain and NFT in enhancing the integrity and security of product supply chains (Parry et al., 2023). This research underlines the strategic importance of NFTs in not only combatting wine fraud but also in providing firms with an USP (Unique Selling Proposition) based on trust, provenance, and authenticity.

The application of digital tokens to business processes in that traditional industry has only just recently emerged as a potential solution to address a spectrum of challenges. The aim of inaugural use cases revolves around concepts to increase consumer trust and brand loyalty by providing reliable and transparent information about the wine product. Moreover, they serve as proof-of-concept cases to test the functionality. This is in line with existing theories and previous research focusing on transformation of the wine supply chain, tokenization, and token economy suggest that the wine industry can benefit from utilizing digital tokens in the supply chain (Adamshvili et al., 2021) which has also been identified in previous research (Galati et al., 2021). The findings also signal, that tokens have the potential to increase supply chain transparency and combat wine fraud. Digital tokens investigated in the study serve to provide data on provenance, track- and traceability, as well as on authenticity resulting in a trust-based competitive advantage of firms (Silvestri et al., 2023). By combing tokens with smart seal technologies such as vinID, counterfeiting of wine will become more difficult. Already today, the authenticity and origin of wines can be verified by NFTs, and detailed product information can be provided. This can increase consumer confidence in the quality and safety of wines. The results also suggest that the concept of trust confirm the relevant theories. However, a more detailed exploration of the theories specifically addressing challenges in the wine sector need to be revisited. In addition, the study identified potential avenues to enhance customer engagement and cooperation between firms in the supply chain. Further analysis has unveiled the potential for the use of NFTs in the wine sector, especially regarding the use of wine as a collectible. As in other asset classes the use of wine NFTs as a financial instrument has the potential to follow current trends such as creating fractional ownership funds or novel financial products. Furthermore, wine could be traded as a digital asset on decentralized marketplaces such as OpenSea or Bored Grapes enabling the sale of wine as futures (Cristaldi, 2023). However, empirical evidence is still missing and requires further research.

Besides solving current challenges in the wine industry related to proof of origin and authenticity, fraud prevention, wine collection, and investment, digital tokens at the same time are enabling an extended consumer interaction with the product. Some wineries are already using NFTs to market their wines and build a community. In this context, NFTs can be used as a gateway to special information, events, and experiences. They can thus serve as a symbol of belonging to a community created by the brand owner to promote exchange and collaboration between NFT holders. As a result, their use can improve the user experience and strengthen customer loyalty. As a next step, the fusion of NFTs, augmented reality (AR) and artificial intelligence (AI) in the Metaverse, which in its current phase is a vision or at best a concept of a virtual, three-dimensional environment, could have the potential to change the wine industry. This could offer significant benefits to both businesses and consumers. In distribution, the combination could help create a highly personalized and immersive customer experience, for example through virtual tours of vineyards, wine tastings and food-wine paring suggestions. AI, in turn, can help provide tailored recommendations. In summary, the fusion of NFTs, AR and AI in the Metaverse could offer wine producers new opportunities to foster customer engagement based on innovative marketing strategies. NFTs can thus be seen as a gateway to the emerging spatial internet.

The challenges that come with the adoption of the technology have only been sparsely emphasized in previous research (Silvestri et al., 2023) which is in line with the findings. The adoption of NFTs in the wine sector pose various challenges including but not limited to cybersecurity threats, contractual risks, intellectual property rights, and regulatory issues (Kramer et al., 2022). Evidence was found that several legal and regulatory aspects need to be considered that could impact the further adoption of NFT. For example, recently the European Parliament passed the Markets in Crypto Assets Regulation (MiCA). Aiming to provide a comprehensive regulatory framework for crypto assets across the European Union. The regulation was published in the Official Journal of the European Union on 9 June 2023 (Official Journal of the European Union, 2023).

To conclude, it was found that the results of the study are in alignment with the existing literature on blockchain applications in the wine industry, particularly in the context of enabling track- and traceability, preventing counterfeiting, and providing authentication solutions. While highlighting the links of the results to existing research, it is elucidated how the research, and the results contribute to and expands to the existing knowledge in the field of tokenization in the wine industry.

In the future, iNFTs (intelligent NFTs) have the potential to play an important role. They represent a new asset class that is based on the legacy Ethereum ERC721 or ERC1155 token and embeds an OpenAI GPT-3 (Generative Pretrained Transformer) prompt for interaction and animation capabilities. Future research should focus on investigating the impact of iNFTs, a new asset class further providing new areas of value generation.

While the study predominantly focusses on the emerging use cases that are mainly linked to the premium wine segment, the application of blockchain-based tokens to the budget wine segment might yield different results challenging the theoretical framework. Future research should expand the scope to include this segment. Although research for novel use cases continues, relevant applications of tokens in the wine sector might be missing such as digital tokens on the blockchain operating with smart contracts.

In comparison to other industries such as digital art, where customer engagement is a key concept, it was found that the token-inspired engagement in the wine sector is lagging. Managers within the wine sector could therefore engage in activities such as knowledge sharing, joint learning, and marketing campaigns focusing on utilizing tokens for the wine products.

Nevertheless, the research unveiled that there is a growing interest in the use of blockchain and NFTs in the wine industry, with several startups and established firms exploring the potential applications of these technologies. As the technology continues to evolve and mature, it will be interesting to see how blockchain and NFTs are adopted and used in different sections of the wine industry supply chain.

6. Conclusion

This article presents insights into the current state of blockchain-based token adoption the global wine industry. The study analyzed which use cases for fungible and non-fungible tokens prevail and which drivers and barriers exist. The application of FTs, NFTs, DAOs and blockchain technology in the wine industry is still at an early stage. Reasons for that are including but not limited to the lack of compelling business models, the cost and complexity associated with the potential solutions with its various platforms and solutions, and a lack of a general standard which hampers interoperability. Furthermore, the adoption of NFTs requires in-depth knowledge and capital as transitioning could require significant investments in resources. In addition, regulatory uncertainties might prevail, and price volatility of the pegged digital currencies might hamper consumer acceptance. Also, the different regulatory settings regarding NFT-based services requires skillful legal assistance. These barriers of adoption need to be addressed to enable a successful integration.

Both fungible and non-fungible tokens can solve current challenges in the wine industry related to proof of origin and authenticity, fraud prevention, wine collection, and investment, while at the same time enabling an extended consumer interaction with the product. Scholars can build on the results and managers can obtain insights for potential considerations towards participating in the decentralized web3 economy.

The study makes a significant contribution to the current debate on the adoption of blockchain technology as well as fungible and non-fungible tokens in the wine industry. By analyzing 65 token-based use cases, the research demonstrates the continuing growth of NFTs and their specific applications in the wine sector. This knowledge about practical applications closes a research gap, as extant literature often lacks detailed wine sector specific use cases. The study also found that the applications predominantly reside in the downstream supply chain and proposes areas that are based further upstream where token-based use cases could create value. Furthermore, we have introduced a taxonomy for token-based applications which offers a transparent framework that stakeholders in the wine and other industry can use to visualize, compare, and assess the different categories of applications. Moreover, the research contributes to the ongoing debate on mastering wine specific challenges such as fraud prevention and guaranteeing authenticity. Finally, the study pioneered in identifying an emerging area of growing interest in the realm of sales: applying digital tokens to enable and deepen consumer engagement by extending the time of interaction with brands and products. This has the potential to open new avenues for interactive marketing and brand loyalty in the wine industry, suggesting a new path for future research. For these reasons, the study provides a bridge between the technological potential and its practical application. It provides nuanced insights that are likely to be utilized by managers in the wine industry. The study therefore enhances the understanding of the use of digital tokens in the wine industry, providing both theoretical and practical insights that could help shape future innovation and strategic planning regarding the use of NFTs and blockchain technology not only in the wine industry but also in various agricultural sectors.

It is suggested that future research addresses potentially new areas of investigation, including but not limited to the potential of tokenization in the entire wine sector, novel use cases in wine tourism and auctions, and the use of digital tokens with smart contracts, enabling automation of transactions. Furthermore, the governance architecture of those automated processes needs to be investigated in more detail. Moreover, it appears that the field of extended consumer interaction enabled by NFTs is under-researched. The concept of extended consumer interaction through digital tokens complements the broader narrative of how disruptive technologies such as are reshaping consumer experiences in the wine industry. This area can be linked to the evolving nature of consumer engagement and how digital technologies are creating new avenues for interaction between wine producers and consumers.

The study has certain limitations due to the early stage and rapid development of the use of digital tokens in the wine sector. It represents the initial research on the use of digital tokens in the wine industry. First, it is acknowledged that the study presents a limitation in the way that it predominantly concentrated on the application of tokens and blockchain technology within the higher priced wine segment. The budget segment represents the majority of wines, and the applications of tokens there is an area of future research which holds the potential to increase the understanding of the potential of tokenization within the entire wine sector. Following the completion of the study, more token-based use cases could have entered the market which may result in potentially short-lived conclusions.

The authors trust that this study will serve as a foundational reference within the realm of digital tokens in the wine industry.