Bettina BlassWhen interest rates on savings are low, investors in America or England increasingly look for investment alternatives. This can be art, a classic car, gold or wine. But everything that has a value is often counterfeited. This also applies to wine – and makes it more difficult for investors. After all, you can’t always tell at first glance whether the contents of a wine bottle live up to the promise made on the label. The purchase price of a wine is also no guarantee of the contents.
Being able to trace the path of the wine
A look at Europe to Germany shows how wine merchants can address the issue. Annie Höger, Managing Director at Liquid Grape in Hamburg, and her colleague Henrik Maass therefore rely on personal contacts with the winemakers and traders. Liquid Grape is a company specializing in wine investments. For the two, the personal contacts bring another advantage in addition to the certainty about the quality of the wine: “We are usually the third parties in the exploitation chain. So we can track the path of the wine well and are sure not to buy counterfeits,” explains Höger. She wrote her bachelor’s thesis in International Wine Economics at Geisenheim University. The topic was “Qualitative Analysis of the Reasons for Wine Faking and Possible Solutions against it”. Accordingly, she knows the subject well.
How retailers exclude wine fakes
Wine counterfeiters use various tricks to increase the value of wine in a forbidden way. According to Annie Höger, there are two main things to distinguish:
- There is cheap wine that is classified higher in order to achieve a supposedly more valuable price.
- Wine bottles are copied along with labels and possibly even the seals – but do not contain the promised contents.
“Since not every bottled bottle is eligible for an investment in wine, the counterfeiting problem in our industry is more on the copied bottles,” says the expert. This helps limit the risk of coming into contact with counterfeits. “After all, it takes a lot of effort to copy an entire bottle.” She also safeguards herself by paying attention to embossing and numbers on the label: German quality wines, for example, have an inspection number and can be traced back to the vineyard site, as “Spiegel” writes. Annie Höger also has invoices shown to her or takes random samples. “Furthermore, the younger wines almost all have seals, QR codes and other secret signs. This makes it even harder for counterfeiters to make their craft,” she says.
NFC chip protects even more reliably
She is also looking forward to new technologies that will protect her and her industry even better from counterfeiters: for example, seals with NFC chips have been available for some time. NFC stands for Near Field Communication. Such a chip is also contained in smartphones or checking cards, for example, and enables contactless payment. Attached to the wine bottle, it transports, for example, information about the supply chain, the identification number of the wine, and also whether the bottle is still closed or not.
Data is stored via the blockchain
This works because the winemaker stores the corresponding data via blockchain technology. There, they can no longer be changed. Counterfeiters know that, too. If they try to remove the seal in order to fill the bottle with inferior content, the seal is destroyed. It can no longer be read. So the buyer knows that something is wrong with the bottle – before he buys it.
Like ETCs, wine tokens are backed by physical collateral. I think it is questionable whether delivery will actually take place in the event of a crisis.
Stefanie Kühn, investment adviser from Grafing near Munich
Blockchain maps important wine information
“The system via blockchain has clear advantages,” says Annie Höger. “After all, it gives the winemaker an overview of how many of his wines are still on the market. But then the technology must be compatible with the Basic Data Protection Regulation.” In addition, the NFC seals could transport, for example, the history of the wine, decanting tips and the correct storage temperature. Information that is also important for increasing value. This is undoubtedly added value for the customer. “However, the value of the wine must be in relation to the extra cost of the technical protection,” says Höger. “For individual winemakers, the technology is certainly already useful today, but for others it is too costly.”
Counterfeiting of a different kind: does tokenized wine exist?
Even investments in wine tokens, which investors in America, England and around the world daily, are not safe from counterfeiting despite tokenization. Investors can secure a fraction of a very expensive bottle of wine via tokens. Since the blockchain is involved in the tokenization process, the bottles’ protection against counterfeiting is obvious. However, these investments pose a different problem for the investor: does the wine I am investing in really exist? Or have I stumbled upon a website run by fraudsters that only pretends that I am investing my money in wine? We heard about such platforms in connection with investing in cryptocurrencies, for example.
Total loss with ETCs is possible
This concern is not completely unrealistic for another reason: Ultimately, an investment in wine tokens is similar to an investment in gold via so-called ETCs. ETC stands for Exchange Traded Commodities and works like an ETF, i.e. an “Exchange Traded Fund”. Accordingly, ETCs are exchange-traded commodity certificates, i.e. debt securities. This construction also lies behind tokens. “Most gold ETCs are backed by physical gold,” says Stefanie Kühn, an investment advisor from Grafing near Munich. “But I think it is questionable whether the delivery of the gold will actually take place in the event of a crisis,” Kühn says. So a total loss is possible.
Investment fraud: investor trust abused
Another example: in 2019, an investment fraud became known in which investors had invested in gold by means of a monthly savings plan. This was supposed to be held in safekeeping by a security service. However, when the public prosecutor’s office inspected the company, the deception was exposed: There was less gold in stock than should have been available in purely mathematical terms. The investors had trusted that the gold they were investing in would be there. Just as they have to trust in an investment in wine tokens that the wine really exists. And that it stores value. Stefanie Kühn: “The blockchain can provide appropriate transparency here – provided that the deposited information corresponds to reality.”
These companies are turning to blockchain for wine
Number of companies are offering solutions based on blockchain to make wine tamper-proof. A selection: Authena, Zurich, Switzerland: focuses its work on the agriculture, pharmaceuticals, cosmetics industries, among others. Everledger, London, UK: offers solutions for insurance companies, the luxury and art industries, for example Symbol from NEM, Gibraltar: has been on the market since March 2021 and works with a kind of modular system to quickly solve conventional issues VeChain, Shanghai, China: was the first blockchain service provider worldwide to be awarded five stars by TÜV Saarland. VinID, Goldach, Switzerland: is part of CollectID. VinID specializes in Fine Wine, CollectID in luxury goods and the sports industry
FAQ – Frequently Asked Questions
Quality wines can often be recognized by corresponding seals and embossments on the label. However, counterfeiters can imitate these. Currently, the best protection against counterfeiting is a so-called NFC label with storage of the associated data in the blockchain. The information there cannot be changed. And the seal is usually no longer readable if it is removed to replace the bottle’s contents.
In principle, an NFC label can transport any information and map it via the blockchain. Important is the identification number of the wine, information about the supply chain and whether the bottle is still closed. In addition, the history of the wine can be stored there, as well as information on the correct storage temperature, for example.
Fraudsters fake investment portals on the Internet and offer tokenized wine. They build websites that promise to invest investors’ money in wine tokens. Instead, they siphon off the money after the deposit. Therefore, pay attention to the imprint: Is there one? Are there comprehensible address details? Research the Internet for the experiences of other investors. If necessary, ask an expert to help you assess such an Internet site. This could be a consumer protection agency, for example.
