Wine counterfeiters beware
Blockchain solution promises cure for $70 billion hangover.
By Neil Dowling
Global wine counterfeiting has become a massive headache that is leaving wine producers and their multi-national supply chain with an estimated $70 billion hangover as it eats into the $350 billion market.
Until now, cracking that theft has been complex, time-consuming, expensive and produced limited results.
The solution could be Cellr, a blockchain system developed by two West Australians that is embedded in the wine bottle cap and allows wine buyers to verify that the product is authentic and has not been tampered with or substituted.
Co-founder of Cellr, Chris Braine, who developed the system using Near Field Communication (NFC) and Radio Frequency Identification (RFID) with business partner Michael Mickel, says the wine industry was well placed to benefit from the invention.
But it’s not the only industry or product in Cellr’s target, with applications now being developed for the honey industry and in the future, for applications in authentic merchandising, automotive parts, handbags, perfumes, therapeutic goods and the dairy industry, especially in verifying the authenticity of baby formula.
As far as grape nectar goes, Braine says, “It’s a massive problem that affects around 20% of the world’s wine production.”
“We wanted to find a solution to help the producers, so we created a unique packaging system that allows wineries to produce digital birth certificates for their wines on the production line at high speed.
“Some of these lines run at 18,000 to 45,000 bottles an hour and our technology allows us to create a unique certificate for each of those products that is then resurfaceable anywhere, anytime around the world via the mobile phone.”
The workings of Cellr revolve around radio frequency (RFID) technology embedded in two chips in the bottle screw cap - or, depending on the bottling process, cork - that is encoded and then placed into the producer’s bottling line.
The chips are passive as they have no power system. They wait for a mobile phone with a specific Cellr app to activate the message within each bottle cap.
Braine says the chips have a long life, are durable and accurate.
Because the chips are read via a mobile phone app, they can contain messages for the viewer including competitions from the wine company, messages or information about the winery, tips on wine storage and discounts and benefits that directly improve customer engagement.
“Some of the older tagging systems we originally looked at may have a 15-20-year life span but that’s based on a lot of scans,” he says.
“We are working with NXP which is the biggest chip manufacturer in the world and it has a new DNA tags which allow us to run a different layer of security and extend the lifespan even further.”
The bottle caps have a second, perhaps more vital role – they trigger a message if the cap is opened or perforated. This is announced with a notice on the app and tells the prospective buyer – or security agent – that a breach has occurred.
The price is expected to be from five to 10 cents a cap – a figure than Braine says he would almost be happy to waive just to get the product into the global market and prevent tampering.
The idea came while the pair were working on an inventory system for wine cellars and retailers.
“We were working on counting 20,000-30,000 bottles a month which used the RF technology for its inventory management and that was by using tags that you’d physically put over the bottles,” Braine says.
“One of the beta trials we worked with was spending 10 hours a month counting their stock and the discrepancy count was huge so by the time we finished out trials, it was 28 minutes to do all that work.
“The cellars hinted that putting all the tags on was a bit of a pain and they were clunky in the shop, so we thought about building the tags into the cap. During that we researched and found counterfeit wine was huge.”
Braine says counterfeiting of wines in Australia is “not announced because the industry doesn’t want consumers to be aware of it.”
“The reason for this secrecy is there is no solution,” he explains. “So we are here to tell the world there is a solution and we can start to work together on this.”
In Braine’s research, he found one significant report on wine forfeiting in the world from international consultancy firm Ernst & Young that came out of Italy.
“This was done about three years ago and identified the market and showed that legitimate producers were losing around Euro2 billion (about $A4 billion) a year because of counterfeiting and substitution of wine,” he says.
“The French market was bigger but it wasn’t researched, and the US market is also pretty significant. The majority of the wine is going into China.”
The types of tampering range from refilling with diluted or substitute wine, to fake labels and fake bottles that are pushed into the supply chain, Braine says.
“As an example, in the south of France there was a case recently where 10 million litres of (grape) juice was driven across the border from Spain, bottled under a premium label and sold off at a premium price point.”
“There was also a case in Australia last year where 50,000 cases of the wine was found in a Chinese warehouse waiting for substitution into the supply chain.
“As the wine goes into the market, it becomes murky and no-one really has any data about it and how it gets swapped before continuing on its journey to sale.
“In November last year we looked at supply chains and there is a clean line though some but the Asian markets have ghost suppliers listed.
“It’s very difficult to check. We are helping producers get data so we can track for them where the wine is going. Now we can identify it right down to a bottle travelling through a container and to the boxes and to the retail shelves.”
It’s not only wine. In the alcohol industry, Braine says the spirits market is just as big in terms of counterfeiting and tampering.
“The last data we saw was that about 25 per cent of the whiskey from the distillers was subject to tampering,” he says.
“These thefts are coming very close to the source and not at the point of contact with the consumer. It is substituted stock.”
From wine, the business intends to move to the honey industry where it has sparked a lot of interest following sugar substitution.
“We are in talks with the honey industry now,” Braine says.
“Other industries include maple syrup. This is governed quite strictly in Quebec but there are cases including $C35 million of maple syrup stolen from a warehouse.
“The thieves then cut the syrup down and add thinners to it. That amount can double or triple the quantity of syrup - and the financial return - very quickly.
“Then we have tobacco - there’s a massive issue with that - then there’s conversation now with the dairy industry for baby formula, for example, where lives are dependent on quality and authenticity.
“I also know original parts is a big target for the auto market, including substitution such as incorporating wood fibres for use in brake pads, then there’s substituted oils, and so on.
“I’m a big sports fan and I can see benefits for the authentic memorabilia market, along with handbags, perfumes and therapeutic goods, especially TGA-approved goods.”