Grape of the Week

🐦 Merlot

⚡️ TL:DR: Merlot has over 600,000 planted acres world wide, and the 2nd most planted wine grape after Cab Sauv! It’s the most widely planted grape in Bordeaux, and top 5 in Italy where it’s known to contribute to the Super Tuscan blends.

🗣 Pronounced: “mer-low”

🌈 Color: Red.

🍇 What is it? A widely planted red grape, commonly blended with Cabernet Sauvignon. The name Merlot is derived from the French term 'merle', or ‘blackbird. 

Merlot’s a chameleon. It changes drastically depending on where it’s grown but you can count on this varietal always being fruit forward with a luscious profile of mostly blue fruit - plum and blueberry, with some black fruit (blackberry, black cherry), and if Merlot is very ripe then expect dried fruit notes such as figs, or fruitcake. Merlot too can be floral - violets and lavender. There can be herbal aromas of tomato leaf, mint and fresh herbs, mixed with licorice and pepper. Merlot is generally medium to full bodied with firm tannins. 

Single varietal Merlot is more commonly found in the ‘new world’ such as USA, Chile and Australia! In its home of Bordeaux region of France, Merlot is blended with Cabernet Sauvignon, Cabernet Franc, Petit Verdot and Malbec.

Merlot and Cabernet Sauvignon are the dominant varieties in ‘Bordeaux style’ blends. They make perfect dance partners - Merlot with its noticeably lower tannin and acidity, is more fruit forward, and luscious in feel, providing mid-palate fruit to counter balance the tannic frame of Cabernet.

📍Place of Origin: Bordeaux

🌎 Today's Major Countries of Production: France, Spain, Italy, USA, Chile, Australia

🍕 Pairing Tip: Grilled Meat - anything on the BBQ . Softer styles can work with poached salmon or mushrooms with radicchio.

🤔 Fun Fact: many believe the sudden of Merlot sales in the 2000’s was due to a line in the cult wine film “Sideways”. Paul Giamatti said, “No, if anyone orders merlot, I'm leaving. I am NOT drinking any f****** merlot!". Paul, we know you were in character, but let’s give merlot a chance!

On Value Prop: Part 1 of 3

I was having a coffee with the head of insurance operations at a large carrier. She was well aware of the work that I do at MassMutual and the type of support I provide for our early stage technology companies. So when I asked her about her biggest challenge, I assumed she was going to tell me about a $100M+ problem she was trying to solve, given the breadth and depth of her operation. She answered with a bit of frustration and a bigger sigh, “I have $10M of outstanding debt that needs to be collected.” This was a bit surprising, to see someone with such a wide scope, focus on such a seemingly small problem (but that is why she is great at her job). She concluded by saying that if a seller approached her and said they could reduce this problem even by 5% of the total debt, she’d meet with them in a heartbeat. Why? Because every dollar saved would go to the bottom line, enabling her to achieve her goals.

So why is this post on value prop?

Well, she aptly defined her business challenge and she also defined what she would need from a technology solution to make her buy, and more importantly, buy fast. This is what a powerful value proposition does. It opens doors quickly. Depending on your role, I believe that rather than making more calls or sending out more e-mails, a better strategy is to analyze what you can change about your process—starting with your value proposition.

What is a Value Proposition?

A value proposition is a simple and clear statement that summarizes what tangible results a customer can expect if they choose to use your product or service. It will speak to the targeted buyer’s challenges as well as the outcomes they’ll realize when it makes the case for your company as the problem-solver.

Your product or service is a tool in the buyer’s tool belt. Buyers only care about the results it can deliver, and a strong value proposition will convey that message. It lets them know that your solution can help them achieve their objectives.

A great value proposition should highlight what makes you different from competitors and are built around tangible, measurable business outcomes, but it should always focus on how customers define your value. Clearly articulated value props can be used to have conversations around brand strategy, launching e-mail campaigns, and catchy marketing material to highlight the buyers’ primary business challenges and how your product is an effective solution set.

It is important to stay flexible though. Your value proposition cannot and should not be a one size fits all mentality. You’ll have multiple ones depending on:

• The Buyer: people in different job functions care about different things, even when they are evaluating the same service.

• The Organization: different industries, different financial situations, macro tail or headwinds will shape priorities
  

• The Product: if you have more than one product, they will have different value propositions.

I personally value and welcome a cold inbound e-mail where the sender has clearly done their research, and customized their value prop towards my specific need. Customization takes time and energy, and ultimately elevates the communication and subsequent conversation.

You will be a stronger seller if you are thoughtful about how to customize your company’s value prop. You’ll have conviction, you’ll work smarter to get into accounts, and you’ll be less discouraged by rejection (or perhaps have more patience with the sales cycle).

I’ll challenge you think about what your value prop is, how you communicate it, and if it could be better. I love Hubspot’s article here on how to craft an effective one.

Grape of the Week

Sauvignon Blanc aka Savvy B

Pronounced: "saw-vin-yon blonk"

🌈 Color & Style: White varietal, light to medium minus body, and fruity AF.

TL;DR: It is New Zealand’s pride and joy, and their best known export, after sheep!

 🍇 What is it? Sauvignon Blanc is a popular white grape varietal known known for its high acidity, which makes the wine very refreshing. It can be easily recognized by its tropical and citrus fruit flavors like gooseberry, lime and passionfruit in addition to grassy, herbaceous, and asparagus flavors. You might ask “why does my wine taste like vegetables or grass”. There are hundreds of compounds in wine and grassiness comes from a compound called aldehydes and vegetable flavors like green pepper or asparagus come from compounds called pyrazines. I will also note that Passionfruit aromas are very common, and typical of Marlborough, New Zealand. If you’re ever blind tasting a wine, and you smell pronounced passionfruit, my $ is n Marlborough.

There’s also a style of barrel-fermented Sauvignon Blanc known as fumé blanc, which trades in some creaminess and can look rather rich and full-bodied.

📍Place of Origin: Most likely, Sauvignon Blanc came from France, and likely the Loire Valley, where it is still a hero (especially in the region of Sancerre).

 🌎 Today's Major Countries of Production: Marlborough in New Zealand, Margaret River, Yarra Valley & Adelaide Hills in Australia, Northern Italian regions like Friuli and Trentino, Maipo Valley & Colchagua in Chile, Elgin & Paarl in South Africa, and California. You’ll also find Sauvignon Blanc made in France in the Loire Valley (aka Sancerre) and produced in Bordeaux, but it is often blended with Semillion as the 2 of 3 common varietals in White Bordeaux production.

🍷 Winemaking is generally protective, meaning the producers want little or no oxygen interaction to preserve the freshness and fruitiness of the wine.

• There is one wild style of Sauvi B production in the United States. You may see Fume Blanc which refers to the oak aging of Sauvignon Blanc. This style was coined by Robert Mondavi, who was the first to open a large-scale winery operation after prohibition ended. US consumers generally thought Sauvignon Blanc was inferior to other varietals as it was traditionally served sweet and often labelled as “sauternes”. He rebranded Sauvignn Blanc and successfully changed US perception of the varietal due to the unique taste of Fumé Blanc.

 🍕 Pairing Tip: The most perfect salad wine. Salad, fresh seafood, cooked seafood, BBQ white meat. All of these things pair with Sauv, but caution with tannic reds as the high acidity and herbaceousness of young Sauv can make for huge palate clashes. One of the more fun matches is goat’s cheese, with the tang of a great chèvre chaud (a warm goat’s cheese salad) just magic.

 🤔 Interesting to Note:

• Sauvignon Blanc is the parent of Cabernet Sauvignon, with the theory that Sauvignon Blanc crossed with Cabernet Franc in Bordeaux. Cabernet Sauvignon has elevated pyrazines (notes of green pepper) that are key to Sauvignon Blanc!

• My favorite Sancerre is Silex. It’s a steep price, but 1000% worth it.

On the RFP Process

I have personally spent countless hours responding to RFPs, and have a complicated relationship with them. They are crucial, but let's be honest, they are a real headache for both sides – those issuing and those responding.

When I was leading sales at an early stage start-up, I had mostly daunting experiences with the RFP process. I’ll highlight one experience:

• I responded to an RFP by a large EHR vendor. The work description wasn't great, the company had an endless Wishlist, and did not disclose a budget or budget range. I lost the business. I asked for feedback in the spirit of learning. I got back:

  • A total of 22 firms bid for the project

  • The range of bids was $250,000 to $800,000. We bid $500,000.

  • The average bid landed $325,000.

  • The winning bid was $265,000.

  • No disclosure on how we scored.

This is a huge problem. The project specifications in the RFP were unclear and that resulted in a massive disparity between the lowest and highest bids. I (along with the 21 other firms) had to guess the scope and budget limits, which ended up being a resource drain for me and my CEO. While I recognize we had a choice to reply, it doesn’t necessarily mean that this process should be as difficult. There is so much room for enhancing the RFP process, making it a win-win for both sides.

I wouldn’t go so far to say that RFPs are universally dreaded everywhere (but, maybe?). I will say that the process is bureaucratic, and drowns potential suppliers in lengthy excel sheets complicating the process rather than streamlining it. RFPs fail to test suppliers for a thorough understanding of a requester’s business processes, its market, or its challenges in that market, and generally, are bogged down by unnecessary details and feature lists that overlook the real needs of the organization. This means that the business unit looking for a solution, the procurement team, and the potential suppliers have misaligned incentives.

As someone who supports 40+ startups, often helping them through the RFP process, I have seen, on more than one occasion, that large Fortune 500 companies are buying the wrong solutions because the RFP fails to address the actual business challenges. In this role, I have seen our portfolio companies get approached by large organizations responding to old RFPs that they submitted because the technology chosen did not meet the expectations of their ongoing partnerships.

Rethinking the RFP process beyond just a routine administrative chore could lead to significantly better outcomes. By focusing on strategies to attract higher-quality proposals (vs quantity), companies would likely see better outcomes and better partnerships formed as a result.

I am making a case for a business-centric RFP process:

1. FOCUS ON BUSINESS GOALS AND OBJECTIVES

   • Start with clarity. Instead of a feature-centric RFP, start with an understanding of the organization’s goals. Ask the business unit leaders, what are the key challenges? What should success look like?

   • Align solutions with objectives. There needs to be a clear emphasis on what goals and objectives a business leader has for their department or company that are more robust than just features.  

2. UNDERSTAND WHY THERE IS A NEED TO CHANGE

   • Identify the “why”. Let’s empower our teams to do truly understand why their solutions or processes are deficient.

   • Communicate the “why” to potential suppliers with context. Providing suppliers with contextual information on the real issues helps them to tailor their proposals rather than guessing.

3. Engage with the Supplier.

   • Promote Collaboration. While I recognize that this process can be time consuming for all parties involved, I imagine if we increase the interaction between suppliers and clients, and encourage a flow of ideas and information. Could we encourage vendors to share how similar companies are using their technology? The process should encourage vendors to share their expertise, insight, and solutioning capability.

4. Remove Feature Checklists.

   • Problem Solving should be first. Large companies sending out RFPs need to be laser focused on how potential solutions can solve key business challenges, meets the org’s strategic goals and desired outcomes versus than the number of features they have

A redesigned RFP process can have many benefits.

If we change the approach to the RFP process in such a way that the business unit, procurement team, and potential suppliers have aligned incentives, we would encourage and invite creative solutioning to address the business problems that have been uncovered. Problem-solving and innovation are core to most startups.

• Change the “What features do you offer?” question to “How would you solve this problem?”

A more targeted RFP can save everyone involved time and resources. Right now, there is a lengthy process that identifies 5-20+ suppliers required to present their solutions. If you presume that 10 people/resources take part in each demo, that is a huge chunk of manhours on all sides. However, if we focus on identifying 3-5 suppliers, encouraging more meaningful collaborations (+ building trust) between the parties, I bet that more desired outcomes will be achieved.

All in favor of revamping this process, say I! I. Transforming the RFP benefits both the issuing companies and the vendors responding, improving efficiency and promoting collaboration in the process, paving the way for a solution that genuinely meets business needs.

To my procurement teams that I am grateful to work with, have you thought about shifting the focus from a feature-driven approach to a problem-solving one?

To my sales teams, if we can get procurement to revamp the RFP process, could you commit to providing more relevant, effective solutions?

Grape of the Week

Chardonnay

TL; DR

Chardonnay - the world's most popular and widely planted white variety, in styles that range from rich and oaky to crisp, mouthwatering, and mineral. It has an almost preternatural ability to both express the land in which it's grown and showcase the style of the winemaker

WHERE DOES IT COME FROM?

There is a small township in the southern Burgundy subregion of the Mâconnais called Chardonnay fka as Cardonnacum, and is recognized as the original home of the grape.

Some would say that Burgundy is the best known region for the grape. What I often get is “ew, I hate Chardonnay” because most people drink the butter bombs coming from California but don’t recognize that White Burgundy like Chablis is just a different expression of Chardonnay. There are excellent examples that are not so buttery coming from California and other places including Oregon, Australia, Argentina, South Africa and Chile.

WHO'S FAMOUS FOR IT?

France - Chablis and other regions in Burgundy

Australia - Yarra Valley, Margaret River

USA - Napa Valley, Willamette

Argentina - Mendoza

South Africa - Stellenbosch, Hemel-en-Aarde

WHAT DOES IT TASTE LIKE?

There is so much variation. When grown in cooler areas (Chablis) or harvested earlier in the year, the acid is retained making the final style of wine vibrant. If it's planted in a warmer climate, or allowed to ripen for a longer period of time, the final style of wine is often fuller bodied with notes of tropical fruit like mango.

Given that Chardonnay is a neutral grape varietal (not aromatic like Sauvignon Blanc), the grape is a perfect candidate for oak ageing. However, the level of oak contact often depends on the producer and their vision for the final style of wine. 

The level of oak contact is one characteristic that contributes to the “fullness” of the final wine, but there is a complex process called Malolactic Fermentation. It is the conversion of malic acid to lactic acid leading to a reduction in acidity and the production of aroma and flavor compounds, including Diacetyl, which results in the buttery flavor. This process can be stopped or encouraged depending on the winemaker’s vision for the wine as well. It gives a softer, creamier mouthfeel. Here are some expressions:

• Chablis - green apple, flint, stones, lots of acidity

• Other Burgundy - melon, white peach, lemon, almond, brown spices

• New World (Australia, Chile, South Africa and USA) - peach, apricot, hazelnut, butter

WHAT FOODS SHOULD YOU BE PAIRING IT WITH?

Unoaked styles shine with fish and seafood, whereas the oaked versions can handle poultry, richer fish and soft cheeses.

Fun Fact:

Chardonnay's rise in Burgundy is attributed to the Queen and the wife of Emperor Charlemagne. As he aged, his hands became less steady, and he would spill his beloved red wine in his flowing white beard. She was so fed up with the stains, she demanded to cultivate white grapes on their estate (now known as the grand cru plot of Corton-Charlemagne).

Grape of the Week

Cabernet Sauvignon

About:

Cabernet is a complex grape that can be difficult to grow. It is ageing potential due to its naturally high acid and tannin. The wines can have a high intensity of fruit flavor but generally balanced out by herbal or “green” flavors. Higher quality wines tend to be aged in oak where lower quality wines will be aged in stainless steel with oak chips or oak staves to impart flavor.

Traditionally, Cab Sauv is full bodied with notes of dark fruit like black currant, blackberry, and the herbal or grassy notes like cedar, tomato leaf, and spices from oak like vanilla. The wine will have high tannins (the drying sensation) with enough acid to help support the fruit forward characteristics.

Origination:

Cab Sauv originated in Bordeaux during the 1600s as an accidental crossing between the red grape, Cabernet Franc and the white grape Sauvignon Blanc. DNA testing at UC Davis only discovered this relationship in 1996.  

Who’s famous for it?

Cab Sauv is a true globetrotter, one of the most widely planted grapes in the world. It’s famously planted in the Bordeaux region - the Cab Sauv dominant blends are located on the “Left Bank”, and we can thank Bordeaux for Cab Sauv’s rapid expansion as the region does an excellent job marketing its wines. The wines will generally be earthier and spicier with firmer tannins than most other Cab producing regions.

Chile has a perfect soil and climatic conditions for growing. Compare to Bordeaux, Chilean Cabs have fuller body and softer tannins, which makes them more approachable in their youth. There are also spicier notes on the palate, making Chilean Cabernet more exotic. Some of my favorite Bordeaux style blends are coming from Vik in Cachapoal Valley.

Italy uses Cab in their Super Tuscan blends. A Super Tuscan is a term used to describe red wines from Tuscany that may include non-indigenous grapes. Some major ones include Sassicaia, Ornellaia, and Tignanello.

Australian Cab is recognized by its unique menthol characteristic, likely attributed to the vines being planted near Eucalyptus trees. Some of the best wines come from Coonawarra.

Let’s not forget Napa Cabs. Home to many wines regarded as ‘cult bottles’, elevated to a status that rivals Bordeaux. Compared to it’s French counterpart, the wines are much richer and more fruit forward, with overt notes of vanilla.

China is perhaps the most interesting wine region, with Cab emerging as the star. Many of the largest brands are purchasing land in China to grow grapes. I had the fortune of trying wine from LVMH’s Chinese winery called Ao Yun, where grapes are grown in the foothills of the Himalayan mountains in the Yunnan Province.

Pairing:

Pair the wine with rich meats like grilled steak and roast pork, but the cooler climate Cabs can also pair well with roasted veggies like red pepper, spinach and eggplant.

Learning About Wine: Part 3

On Grape Growing

Wine grapes don't grow everywhere, they are fickle when it comes to their favorite spots and where they take root makes a substantial difference in the final style of wine produced.

I am covering the wine grape growing environment including what grapes require to grow their best, what makes certain region better for winemaking, what to expect from grapes depending on climate, and the stages of grape growing!

 For grapes to grow, a vine needs sufficient heat, sunlight, nutrients, and water. If too little of any of these, the vine may die and with too much of these, the vine can produce grapes that are unbalanced. See more details below:  

Heat: If the temperature falls below 50F, it is too cold for the vine to grow. Vines go dormant in winter and start to perk up and begin to bud in the spring when temperatures start to rise. If there is too much heat, the sugars in the grape increase, while the acid falls dramatically resulting in an overly ripe/jammy/cooked fruit character and flabby (acids are important in the overall balance of the final wine).

Sunlight: Sunlight is required for photosynthesis. Photosynthesis in grape vines is necessary for the production of sugar, and sugar-based elements that give grapes their color and flavor. It is a biochemical reaction which combines water and carbon dioxide using the energy of the sun to form sugars in the grape vines. In some extreme cases, intense sunlight can cause sunburn on the grapes (resulting in bitter flavors) so some wine growers will use the leaves of the vine to shade and protect grape clusters. 

Nutrients: Nutrients are an important factor to grow grapes and affect both the number of grapes produced by a single vine as well as influence the grape quality. The main nutrients a vine needs are Nitrogen, Potassium, Phosphorus, Calcium and Magnesium. The vine acquires these nutrients from the soil. If there are too many nutrients in the soil, the vine will produce a lot of greenery resulting in grapes with little concentration of sugars and acids.

Water: The vine needs water to help with photosynthesis and to swell the grapes up to a perfect, juicy, ripe plumpness. Rainfall is the most important source of water. In dry regions — when local laws permit — irrigation and sprinklers can be used to ensure the vine receives sufficient water. If there is too much water (in addition to nutrients), grapes can become diluted in flavor, sugars, and acids OR can be prone to water logged soils that can cause damage to the vines roots or increase disease pressure.

 Climate

In general, year-round weather conditions are referred to as the climate.  Winemakers know that wine grapes grow best in climates that aren’t too tropical, too arid, or too cold! Most suitable climates are found between 30° – 50° latitudes, both north and south. This means countries like Australia, Argentina and South Africa in the Southern hemisphere, and more well known growing areas like the USA, France, Italy and Greece in the Northern Hemisphere.

Cooler, dry climates produce higher acid wines (“crisp”) with fresher fruit flavors, whereas warm climates tend to producer lower acid, higher alcohol wines that have a fuller body with riper fruit flavors.

Cool Climate

Regions with an average growing season temperature below 16.5℃ are generally classified as cool climates. These would be regions such as Mosel (Germany), Niagara Peninsula (Canada), Tasmania (Australia), and Chablis (France).

 Wines from cooler climates tend to be fresher with higher acidity, lower alcohol, lighter in body and focused on clean pure flavors. Some famous grapes and styles that perform particularly well are Riesling, Cabernet Franc, crisp Chardonnay styles (such as Chablis), structured Pinot Noir, and many sparkling wine styles.

Moderate Climate

 Moderate climates include regions with an average growing season temperature between 16.5℃ and 21℃. These include regions like such as Oregon (USA), Adelaide Hills (South Australia), Margaret River (Western Australia), Bordeaux (France) and Piemonte (Italy), and the Central Valley (Chile).

Moderate climates have more heat to grow certain grape types that cooler regions are too cold to fully ripen. They generally produce wines that are ripe, juicy and medium in body. Grapes that perform well in moderate climates include Syrah, Sauvignon Blanc, Cabernet Sauvignon and Merlot.

Warm/Hot Climate

 Warm climate regions generally have an average growing season temperature above 21℃ such as the Barossa Valley (Southern Australia), Napa Valley (USA), Mendoza (Argentina), and regions in Sicily & Puglia.

Warmer conditions often lead to the boldest and fullest bodied wines. They often have riper fruit flavors (instead of clean or crunchy fruits, more developed and sometimes even jammy), higher alcohol, softer acidity, and a fuller mouthfeel.

Grapes like Nero d'Avola, Grenache, Malbec, Primitivo/Zinfandel and Viognier do well here, however Cabernet Sauvignon, Chardonnay and Shiraz also have famous and well-loved warm climate expressions. 

CLIMATIC Factors

Beyond the overarching climate of a region location, the exact planting of a vineyard is a highly considered thing and there are a few factors at play like soil type, drainage and weather conditions, as well as site-specific climatic factors such as altitude, latitude, aspect, proximity to large bodies of water and wind patterns (think La Nina vs El Nino). This is complicated as these climactic factors can provide cooling or warming influences in places that are considered cool, moderate, or warm depending on the factor itself!

Altitude: The temperature becomes cooler as altitude increases. 

Latitude: Temperatures are warmer closer to the equator and cooler closer to the Poles.

Aspect & Slope: Vines on a slope facing the sun get more heat and light. In the Northern hemisphere this means that south-facing slopes get more sunlight, whereas in the Southern hemisphere, north-facing slopes will get the most sunlight. 

Proximity to Water: Cold ocean currents can have a cooling effect on coastal regions (South Africa). Warm ocean currents can have the opposite effect (Bordeaux). In other areas with close proximity to the ocean, lakes, or rivers, a temperature moderating effect can occur. Water can moderate temperatures during the night and day, providing cooling breezes during the day, and temperature moderating warmth in the evenings. 

Wind Patterns: can provide cooling or warming influences, can increase evapotranspiration resulting in water stress, strong winds can stop photosynthesis or disrupt flowering and fruit set.

The Vine Cycle

Growing grapes is full of interesting quirks, amazing skills, knowing when to let Mother Nature take the lead, and age-old techniques which keep that sense of wonder alive. But in general, the life cycle of the vine can be broken down into several key stages during the year. 

Winter: The grapevine, like most summer fruit-bearing plants, lies dormant over winter, and sheds all its leaves. The roots source nutrients from the soil to keep the vine healthy and alive during the cold months. Growers may try to moderate the the temperature to give vines a higher chance of surviving during the cold months like “grounding up”.  Winter pruning occurs - the cutting of the previous year's canes (small vine shoots) to set the availability of shoots for the coming season.

Spring: Leaves and buds appear, and the vine comes to life! Small shoots will come off the main trunk and small flower buds will pop up along the vines – the buds eventually turn into grape bunches.

Summer:  Veraison occurs, this is where the young grapes turn from unripe and green to their true color! Flavors develop and harvest approaches.

Fall: grapes are harvested at various points (some as early as September or as late as the end of November). There are several methods to identify harvest time but most winemakers rely on a combination of taste, skill, awareness, and scientific testing to define exactly when the day (or even hour) for harvest should take place.

Learning About Wine: Part 2

On Winemaking:

There’s a ton of winemaking history – historians argue that winemaking first started in what we now know as Armenia around 10,000 years ago with winemaking equipment dating back to 6000 BC. Imagine just stumbling upon a barrel of rotting grapes that made this great, intoxicating drink that was (for the most part) probably safer than drinking water? What a dream…

I love being able to appreciate a part of an unbroken chain of history that is constantly adapted with each passing age, improved on, and altered to suit new styles, preferences, and trends. Industrialization has had a massive effect on commercialization and standardization of wine. It’s more sanitary, and the number of varietals and styles has grown substantially due to modern farming methods. In the last decade though, there has been a resurgence of winemakers adopting more traditional winemaking techniques. It’s a perfect blend of art and science.

So, wtf is wine? It is just fermented grape juice. I have created a fun infographic and also wrote a brief overview of the winemaking process:

To Note: this is a non-exhaustive overview. Many steps like grape or wine transportation, grape reception, and must modification, maceration, stabilization, fining, filtering among others are not included at all or briefly discussed.

still wine

The Grapes

Grape growers aim for grapes that are as perfect (for the style of wine) as possible before production begins. Once the grapes are healthy and at their optimal ripeness, they are picked and then brought to the winery. Ripeness happens at varying speeds, depending on a ton of factors including the varietal, the soil, the location of the vineyard, and other climactic influences like proximity to a body of water, aspect, timing of rain, wind patterns, etc.

Harvesting

Once the grapes are fully ripe, it is time for them to be picked. There is a range of technical equipment used in wineries to save time (and cost) but handpicking is still common practice in some of the world’s best regions. The grapes will then be chilled to avoid too much oxidation and sorted depending on quality. Most wineries will remove grapes which have withered on the vine (others make wine exclusively with rotten grapes), and the stalks/stems will sometimes be removed.

Crushing

After sorting, the grapes will be ready for crushing. It is the application of sufficient pressure to grapes that breaks the skins, releases the grape juice making it available for fermentation.  The importance is to apply pressure that is gentle enough to not crush the seeds which can add bitterness to the wine. Many countries still practice crushing by human feet in a lagare – a shallow vat – where entire communities sometimes get involved in the process!

Here is where you see a radical difference in the way white, red (and even rose) wines are produced. Red wines get their color, tannin and body from the skins, seeds and stems and will often remain in contact with the juice for these qualities to be present in the final wine. The length of skin contact depends on the winemaker.

White wine is pressed and, in most cases, immediately separated from skins and seeds meaning they do not “macerate” and left to ferment. Some whites can have skin contact: orange wine as a category, aromatic whites like gewurztraminer or Riesling, and to make it even more confusing: red grapes with no skin contact produce white wine. My favorite white pinot noir here.

Pressing

The grapes are pressed to release the juice and to separate the juice from the skins and seeds. This step takes place at different times depending on the style of wine being made, whether it be white, red, rosé or an orange wine. 

In white winemaking, the grapes are almost always pressed to extract the juice from the grapes and to separate the skins from the juice before fermentation. In red winemaking, the grapes are typically crushed before fermentation and pressed after the desired number of days on the skins or at the end of fermentation. In all styles of wine, care must be taken to not over press the wine. This can result in undesirable characteristics like bitterness. Yuck!

Fermentation

Fermentation is a natural process that occurs in all soft fruits after they have fallen and started decomposing (see: drunk animals in the wild). It is essentially a chemical process where sugars slowly turn into alcohol.

Both white and red wines require yeast to kick start and control fermentation. Some wineries use specially cultured yeasts or ambient/wild yeast. There are advantages and disadvantages to both but: the former is more reliable during fermentation and the latter can add complexity to the wine as different yeast species produce different aroma compounds.

You can ferment wine in stainless steel vats, concrete eggs, or wood barrels. Each help achieve a particular style of wine and have advantages and disadvantages.

Red wines require the most attention during fermentation. During fermentation, CO2 is created causing the skins to resurface at the top of the vessel also known as the “cap”. The winemaker, several times a day or week, manages this by “punching” the cap down or “pumping over” juice. There are a few more ways to fuss around with the cap as well.

Rose wine is a hybrid of both red and white winemaking. Essentially, it is made similar to the steps for white wine but with red grapes. Red grapes will be harvested and crushed like white wines, but only spend a brief time on the skins (5-12 hours as opposed to red wine that can spend several days on the skins) to get just a slight touch of color before being taken off of them. There are a few other ways to make wine including the saignee method and blending of white and red wines.

Maturation

A highly variable step in the winemaking process: wine can either be finished and packaged relatively quickly or it may be matured for a period of time before it is bottled!

Some countries, regions and sub-regions have strict laws and regulations dictating how long their wines must be aged for before being released (Ciao Italia!), other places leave it up to the individual vintner (Hello, California)!

Young, fruity or aromatic styles that have been protected from oxygen through winemaking (New Zealand Sauvi B or Pinot Grigio represent) are likely kept from oxygen during this stage to retain primary aromas and stored in stainless steel, kept protected by SO2 or blanketing with an inert gas such as Argon. They are finished and bottled shortly after fermentation. Most wine is made this way.

Oxygen doesn’t play a huge role in the aforementioned styles of wine, but it plays a significant role in maturation (exposure to Oxygen during maturation is the only way a wine can age effectively!) and will have an influence on the style and quality of wine. The method of gaining slow, gradual exposure to oxygen is to store wine in small wooden vessels. It leads to the development and concentration of flavors such as dried fruit, nuts, earth, wood, vanilla, tobacco, and leather flavors, the softening of tannins, and the concentration of acid.

Wines can mature in stainless steel or concrete, but the most common is an oak vessel. There are different types of oak: American, Hungarian, or French that vary in price, size and flavors they impart. Winemakers will also consider whether they want brand new oak barrels or barrels that have been one, two, three or four uses and the level of “toast” which is essentially the temperature and length of heat exposure the barrel has endured. Finally, the winemaker will also decide on the length of time in wood but generally, the longer the wine is aged in wood, the greater the extraction of compounds and exposure to oxygen. Oak aging is expensive so many commercial brands will add oak staves and oak chips to impart oak flavors: you’ll see this is a 99Crimes where the wine is ultra fruity but there are robust notes of vanilla and spices that are not quite as integrated as you would hope!

BOTTLING

After several tastes, additions, and opinions, the winemaker determines that the wine has reached its optimum expression in the barrel then it is time to be bottled. Bottling varies from country to country: think of a bold Bordeaux bottle versus a tall, thin bottle for Riesling. Legally, wines may be required to further age in the bottle or a winemaker can release it to consumers to be “cellared” in atmospherically appropriate rooms for decades before consumption.

Sparkling wine

Sparkling wine is also fermented grape juice but there are a lot of ways to making sparkling wine. Here they are:

Traditional Method

AKA: Methode Champenoise / Champagne Method / Cap Classique

Surprisingly this method is not the first, but generally considered the best. The Champagne method, which, thanks to the French wine regulatory bodies, it must legally be called the traditional method outside the Champagne region, is the classic sparkling vinification process. It is expensive, labor-intensive, and time consuming.

The traditional method requires a secondary fermentation to take place inside the bottle. So a base still wine is made, put into a bottle, and then a mixture of sugar and yeast (known as the liqueur de tirage) is added which kicks off a second fermentation resulting in CO2 and, of course, BUBBLES in addition to more alcohol and dead yeast cells aka lees (yum)! The wine ages on these lees for a time, creating texture, richness and complexity in the wine with flavors of cherry, almond, biscuit and toast.

Before the wine is ready for consumption, winemakers will remove the lees by a process called riddling or remuage as the French would say. They invert, and periodically rotate, the bottle until the sediment settles at the neck of the bottle. When the cap is removed, the bottle’s pressure forces the sediment out, at which point a mixture of sugar and wine called dosage can be added along with a final cork.  

Ancestral Method

AKA: Petillant Naturel / Pet Nat

The OG methods that produces the now very popular pet nat style of wine.

Tank method

AKA: Charmat Method

This process begins almost exactly the same as the traditional method with the creation of an uncarbonated, still base wine. This wine is mixed with the liqueur de tirage, and then put in a large stainless steel pressure tank. The yeast and sugar cause a second fermentation in the closed tank, which is held under pressure so the carbon dioxide from the fermentation is forced into the wine taking anywhere from 2-6 weeks and bottled thereafter(much less time consuming).

The wine is fresh and fruity (think: La Marca Prosecco). This is the style you want to brunch with. It’s less labor intensive which means it’s more affordable.

Carbonation

This is the simplest method producing the simplest style. A still base wine is made and CO2 gas is forced into the wine. Since the bubbles aren’t fully integrated, the “mousse” (aka the stream of bubbles) doesn’t last very long and feels coarse on the palate. NFI who uses this method.

The End…

The more I study wine, the more complicated it gets. These blogs are hugely helpful to me as I study and hopefully helpful to you as you explore the wine world!

Learning About Wine: Part 1

ON TASTING:

I’ve been asked several times to share how I assess wine. While my experience is based solely on WSET criteria, I’ve created a quick guide for my wine lowers.

It starts with sight:

• Take a good look at the wine, its color, rim variation (the color from the center to the rim of your glass), viscosity, and the wine's clarity.

• Color is a great indicator for the wine in your glass – it can help you narrow down grape type, winemaking techniques, the age of the wine and more.

Next is the nose:

• If you’re drinking an excellent wine, a lot of what you taste in the wine, you should also be able to smell. Our olfactory receptors are one of the most important sensors when it comes to how we experience taste.

• Put your nose in the glass and breathe deeply. Are the aromas fruity or savory? Do they remind you of anything? Does it smell sweet (like ripe fruit), floral, earthy, herbaceous? Does it smell rich or fresh?

• Swirl, Sniff, Think. Are the same notes still there?

• Categories: Fruits, Flowers, Herbs, Spices, Oak (vanilla, baking spices, etc.) or winemaking characteristics from lees ageing or malolactic fermentation (cream, dough, butter, etc).

Tip: if the wine is feeling muted or not giving you a lot to smell, give it a swirl. This introduces more oxygen into the wine which can help release aromatic compounds. The temperature of wine can also affect how it expresses its aromas.

Finally, the good part, palate: begin with a moderate amount of wine to avoid overwhelming your palate. Swish (don’t gargle), let it come into contact with all parts of your mouth, and breathe in some air. 

• Do you taste a wide range of flavors, are they lingering after the wine is gone? 

• Most (and best) of all, did you enjoy it? If so, why, or why not?

• We’re looking for texture, flavor, tannin, alcohol, length, complexity, balance texture

It took me a long time to find the exact words to describe the wine but the point is, think about the wine and try to describe it the best you can.

Wine Structure:

 The structure of a wine can be overshadowed by talk of aromas and flavors but is still super important in assessing wine. It is the framework that sets the stage for assessing the quality of the wine, how it will age, how it will best pair with foods, and can indicate things like the origin of the wine, grape type, and vintage. The five main structural elements are sweetness, acidity, tannin, body, and alcohol. These can only be assessed on the palate.

SWEETNESS

The amount of sugar in a wine after fermentation.  

Sweetness in a wine tastes... well, sweet. But not all wines that "taste" sweet are sweet. I tend to have trouble explaining to people that very ripe fruit flavors in a wine can make the wine seem sweet even if the wine is dry (aka not sweet). 

Sweetness in wine is simply how many grams of sugar remains in the wine after the fermentation (aka residual sugar or "RS").

A great indicator to determine if a wine is sweet vs. ripe fruit flavors is stickiness or sweetness lingering on the lips. Sweetness can be detected and measured on a scale: Dry, Off-Dry, Medium-Dry, Medium Sweet, and Sweet with the g/L of residual sugar increasing. You can deep dive here.

 Acidity

The tangy, sour taste that makes wine feel fresh.

A wine that has high acidity feels crisper, tart and refreshing. A wine with low acidity will feel softer and rounder on the palate. You can determine the level of acidity in a wine by how much the sides of your mouth water after a sip of wine. The more saliva your mouth generates, the higher the acidity! 

TIP: Often the best food and wine pairings are wines that contain high levels of acidity. Acidity compliments both rich and fresh foods.

Tannins

 Compounds that give wine astringency and texture. 

Tannins in wine are compounds from the skins, seeds and stems of the grapes. They contribute bitter and astringent flavors but also add textural components to wine.

You can detect tannins by a slight bitter flavor and how drying a wine feels on the palate. You’ll feel the most impact on your gums. Drink black tea or eat dark chocolate - they have a similar feeling.

Tannins are important for red wines as it improves their ability to age. Highly tannic wines are perfect to pair with foods higher in fat and/or protein.

ALCohol

The % of booze a wine has in it.

At lower levels, it’s hard to notice the ‘flavor’ of alcohol, but once you have a wine of at least 13%, you will feel a warming sensation toward the back of your throat. Tilt your head back, hold some wine like you’re about to gargle: the hotter it feels, the higher the level of alcohol it is.

Tip: do not pair high alcohol wines with spicy food. The alcohol amplifies the spice/heat in the food.

Climate and varietal can have an impact on the alcohol potential of a wine.

Body

 How rich or round a wine feels on the palate

 The body of a wine is generally a combination of the alcohol level and winemaking techniques such as oak barrel ageing and malolactic fermentation. Wine that is full-bodied will hold more weight on the palate, they are powerful wines with lots of impact. Whereas light-bodied wines on the other hand will be quite delicate and often fresher. I think about the palate weight difference between skim milk (light body) to whole milk (medium body) to full cream (full body). 

Wine Flavors:

Sometimes my tasting notes are wild and over the top. I hear myself say freshly picked chives… overripe peaches…. corpse flower (a favorite of mine from my tasting group)… and I laugh. I get it. I am hyper aware of how absurd I sound but there is a method to my madness.

While the descriptions can feel superfluous, it actually helps me commit the wine to memory, so I have a frame for reference when trying similar styles. I’ve highlighted some categories that help you imagine where the flavors of any given wine might lie.

• Fruit Flavors: various fruit families such as citrus fruit, stone fruit, tropical fruit, etc.

• Spice: pepper, anise, cinnamon, nutmeg

• Vegetal: grass, green or red pepper, tobacco leaf, tomato leaf

• Farmyard: cheesecloth, sweaty horse

• Floral: roses, violet, cherry blossom, orange blossom

• Mineral: rainwater, river stones, crushed gravel, flint, salt

• Dairy: sour cream, yogurt, butter

• Oak: vanilla, coconut, nuts, toast, spice

• Earth: soil, clay pot, forest floor, mushroom

• Herbs: thyme, oregano, tarragon, rosemary

WTF DO THE Flavors MEAn?

Once you understand the different flavors, it’s useful to understand where and why these flavors exist. Why does Cab Sauv taste different in Bordeaux than in Australia? What about the stylistic difference between Pinot Noir from California vs Burgundy? Most of the time the answers are related to winemaking traditions of the region, climate, and local laws. As you start to taste more wine, it’ll be easier to identify these details.

Climate: is the easiest place to start to identify why a wine may have a certain flavor or structural components. A large number of growing countries have relatively cool climates (Germany, Austria, France, some parts of Italy) especially compared to Australia, California, etc. The cool growing season leads to a slower accumulation of sugar and retention of acidity which leads to wines that are less rich.

• There are a few technical factors here but the main point when assessing a wine is having an understanding of the climate (maritime, continental, Mediterranean), temperature (hot, cool and in between) to help you answer the questions above. A quick note is that each region will have climactic influences like unique wind patterns, rain shadow, forests, mountains, proximity to oceans/rivers, etc. which impact the final style of wine as well.

The Grape: wine grape varietals produce different flavors just like a red delicious apple vs a granny smith would. For example, Cabernet Sauvignon typically has notes of black fruit (blackberry, black plum), violet, and green pepper or mint. Nearly all Cab Sauv’s will taste similar across countries but the intensity of certain characteristics also depends on winemaking techniques.

Winemaking Techniques: techniques vary country to country based on local laws, winemaking tradition, etc. but the key is the amount of oak used, the age and toast level of an oak barrel, time spent in, etc.

That’s my story. Feel free to drop some questions.

Wine Sales: Which D2C model will win?

Source: CB Insights

There is no doubt that direct-to-consumer (DtC) is the growth engine of the wine industry. 

While overall wine sales in the U.S. generally hover around 2-3% annually, DtC wine sales are up double digits and now represent approximately 4.5 billion in annual sales.

With states easing restrictions to allow DtC shipments and with a proliferation of web and mobile based services offering wine delivered to your door, it is easy to see how the growth trends will continue.

The question, therefore, is what business model will emerge as the winner?

There are multiple variations of the DtC business model, but when you break them down there are basically 3 differentiating models:

1. No Commitment Required (NCR) - as the name would suggest, buyers simply take advantage of the deal and/or inventory available at the time of purchase, with no obligation to make any future purchases.  This is much like the traditional e-commerce model pioneered by wine.com in the original dot-com era and now include variations ranging from flash sites such as Gold Medal Wine Club (fka Lot18), Garagiste, WineAccess, Last Bottle and SommSelect, to more ingenious options like Underground Cellar, WineBid and Vinfolio. Note: I have excluded Amazon and eBay from this category even though both have tried (multiple times) to get into wine.

2. Commitment Wine Clubs (CWC) - unlike the NCR model, the commitment clubs are based on a subscription model. The terms of the subscription may vary from monthly to quarterly or even annual shipments, but the basic premise is to generate recurring revenues, much like Blue Apron does with meal kits. Some examples include Winc, Tasting Room (now part of Lot18), Uncorked, Bright Cellars as well as wine clubs sponsored by media outlets such as Wall Street Journal and NY Times.

3. Membership Wine Clubs (MWC) - unlike the CWC model, there are generally no automatic shipments of wine, however members pay a fee (typically annually or monthly) with the membership proceeds used to subsidize wine purchases and/or shipping costs.  This is much like a Costco membership or Amazon Prime account. Some examples include Splash Wines, Naked Wines and Plonk.

Despite the variety of options across these three business models, I have yet to see a real winner emerge.

Yes, there are some thriving businesses listed above, but nothing that even compares to the consumer direct brands from other industries.  Where is the Warby Parker, Dollar Shave Club, Chewy, Bonobos, Casper or Everlane of the wine industry?

Surely in a $38B annual industry, there will be at least one dominant brand to emerge in the direct-to-consumer wine business.

There are several unique qualities of wine that make it hard to conquer in the direct-to-consumer world: wine is heavy, temperature sensative and expensive to ship, it is a consumable and therefore does not lend itself well to returns, and is mired in antiquated regulations.

That said, all of those problems are solvable. Companies like Casper and Wayfair ship heavy goods, Blue Apron ships perishable consumable foods every day, and a variety of third party services like ShipCompliant make navigating the regulations easier than ever.

So back to the question of what business model will emerge as the winner, in the end, it may not be the model that defines the winner, but rather the characteristics that have made other DtC businesses successful.  The winner(s) will likely incorporate the following:

• Free shipping - this has become almost the ante to be a top DtC player and many of the wine companies listed above already offer free shipping (typically with a minimum purchase).

• No haggle returns - you obviously can't return an opened bottle of wine, so this means when a customer complains, the winners will give the customer a credit, no questions asked.

• Loyalty programs - the goal is to create lifetime value (LTV) and the winners will utilize innovative loyalty programs to maximize repeat purchases and minimize subscription churn.

• Improving quality of wine sourcing - the mistake that others have made is starting off by offering name brand wines at low prices, only to shift to lower quality private label brands over time - consumers will notice and churn will follow. Winners will constantly up the quality levels through scale.

All the other features like large wine content libraries and online cellar tracking features, etc. are all "nice to have" but not what will truly define the winner. And please, let’s all finally agree that AI to curate your tastes is just a terrible idea.

Given the DtC growth trend in wine, and the good examples of DtC brands to follow in other industries, we will see one or two household names emerge in the wine category... it is just a matter of time. The companies that focus less on the business model and more on delivering superior quality wine with exceptional service - the hallmark of all the great DtC brands - will be the winners.

Untold Truths in the Wine Industry

Below are 3 statements that you will likely never hear someone in the industry explicitly say, but if you're in the business you have surely seen some examples of these "uncomfortable truths."

1. Distributors are f*cking lazy

Yes, I said it. We all know it. The fact is that distribution is caught in between two very different business models and this dichotomy often manifests itself in the form of "lazy" behavior.

The first business model of a distributor is a pure logistics operation - moving bottles FOB from the supplier's warehouse to the retailer. The second business model is a sales and brand management operation - building up brands in the local market with retailers and consumers.

These two operations require dramatically different skill sets and focus, however the logistics component is not an optional activity (distributors have to move bottles in order to create sales) whereas the brand building is often seen as discretionary activity. 

Brands often see a lack of effort in brand building as "lazy" and have to resort to tactics ranging from sales incentives to the squeaky wheel approach in order to get distributors off their ass.

The point is, given the choice between representing a product with a strong brand vs. taking an unknown brand and building it, distributors will almost always take the former.

If you're a brand and either trying to get distribution or frustrated with your distributor, just understanding this is the reality of our lovely 3-tier system. 

2. Anyone can create a good $40+ domestic wine and we don't need any more of them

I personally love Pinot Noir and I love what many wineries in California and Oregon are doing to make truly fantastic Pinot. 

But, the wine industry doesn't need another $40+ Pinot. And the industry doesn't really need another $40+ domestic Cab, Chardonnay, Merlot or Rhone blend either. There are simply too many of them out there because they are too easy to make.

I am not downplaying the masterful work of many winemakers, but what I am saying is that if I went on the hunt for $4,000/ton grapes I will likely find some options from fantastic vineyards. Then if I seek out a talented winemaker willing to take on a side project at the right price, I will be able to put those grapes in good hands.

The resulting wine will be of very good quality and the economics will work out such that it will most likely price in the $40 retail range. 

There are just too many of these new labels out there and even a 90+ score doesn't do much anymore. Ultimately at this price point the differentiation and success will be on the branding and marketing side, not necessarily the quality of wine. 

3. Your growth expectations are probably unrealistic

Let's remember that wine is a very mature industry and aggregate growth is in the 2% range annually. Even if we isolate the premium segments, we are still in single digit growth territory.

When you build a business plan that calls for 20%+ year-over-year growth, you therefore assume that you will be outperforming the industry in a big way. Mathematics tells us that for every company/product that grows 20%, another company/product must be declining.

The problem is, you never hear anyone saying "we plan to grow by -10% this year."  It reminds me of the surveys of automobile drivers where something like 90% of people say they are an "above average" driver. 

There are of course certain categories that grow much faster than the overall market. Rose, sparkling wines, can wines... but if you're not in one of those categories, what assumptions are you using to arrive at growth rates that are multiples of the overall industry?

You may want 20%+ growth, but the market likely cannot support that. For brands, you might get frustrated with your distributors and call them lazy. For distributors or retailers, you might overstock and get backed up on inventory.

The result? Brand dilution. Wines get put on discount, closeout or flash sites to generate cash for the next vintage.

A better suggestion - develop a business model based on assumptions that are more grounded to the reality of the industry rather than a desired growth number.

There is still hope

Unless you're planning to take a new $40 retail wine to market through the distribution channel and grow 20%+ per year, there are ways to put better odds in your favor.

The first step is just acknowledging the "uncomfortable truths" in the industry and using these to influence your strategy.

Blockchain & Wine Fraud

A (not so) timely article on wine fraud as I am a few months late on this post: China’s Jiangsu province police dismantled a major cross regional fake wine production ring with counterfeit bottles of my favorite Penfold’s that was worth nearly $1.6million.  This isn’t new – the wine industry has been a victim of fraud for centuries. Even the world’s first wine critic during the Ancient Roman times, Pliny the Elder, bemoaned “today, not even our nobility ever enjoys wines that are genuine. So low has our commercial honesty sunk that only the names of the vintages are sold, the wines being adulterated as soon they are poured int the vats” (Pliny the Elder, Natural History). Counterfeiting grew so rampant that producers looked to protect their reputations with the system of Appellation d’Origine Contrôlée, a certifier of origin in France with other like-minded organizations globally that verify wine today.

More recently, the world learned of Rudy Kurniawan. You can learn more by watching Sour Grapes or you can read the book In Vino Duplicitas:

• A TL;DR – in 2006, our boy Rudy was the go-to for good wine. The young twenty-something charmed his way into the inner circles of critics and collectors. He made a name for himself as a wine expert – hosting lavish tastings, spending $1million a month on fine wine. He loved Burgundy (can’t blame him) and sold over $35million worth of his wine through the wine auction house, Acker Merral & Condit. Silly boy drew too much attention. Kurniawan claimed to be selling Domaine Ponsot’s a coveted Clos Saint-Denis. While the labels looked authentic, the years weren’t. He was consigning bottles 40 years before the estate started producing it. That landed him behind bars and a hefty multi-million dollar fine. Yikes!

To frame the problem, of the $374 billion of wine sold worldwide each year, $60 billion is estimated to be fake. The situation will worsen. As mentioned in Wine Investing 101(link back) Knight Frank has deemed fine wine to be the best-performing collectible, outpacing classic cars, jewels and even art—making the industry ripe for fraud. To make matters more complicated, wine fraud is rarely caught, and even when caught, carries an incredibly light sentence compared to the dollar values of the crimes. As a result, wine fraud in the forms of counterfeiting and theft are on the rise globally.

 How Verification Works Now & Sole Solution to Fraud

Sommeliers, vintners, collectors and other connoisseurs of the stuff go to great lengths to determine authenticity. From the weight of the bottle to eyeing anomalies in the year of production, right down to inspection of the bottle glass, the stamp on the cork and the label glue, the tiniest discrepancy can be the biggest red flag. However, every year thousands of bottles of counterfeit wine slip the net… because wine forgers also go to great lengths. Manufacturing a brand new bottle of burgundy disguised as a 60-year-old vintage is no easy feat. It isn’t always about the bottle’s aesthetic either; the taste is just as, if not more, important. Fraudsters have been known to recreate every single note, using a hybrid blend of wines that mimic the flavor of an original — like modern-day alchemists creating gold.

QR codes have long been the standard to tie the physical bottle to the digital. The problem is that they can be created by anyone and fake codes cannot be distinguished by consumers. Counterfeiters simply copy the landing page or app from a real QR code and redirect users to a fake URL via their own QR codes – in a process called spoofing or ‘click-jacking’.

 What is Blockchain?

Enter blockchain. How it answered some of the authentication challenges in wine came from an entirely different industry with an entirely different product –diamonds. Nonetheless, the process of capturing the descriptive characteristics of a particular stone, and recording them in an indelible, tamper-proof, timeless, and distributed digital ledger, is analogous to the work with, and desired solution for, bottles of wine. As cut, clarity, color, weight, and laser inscriptions are the uniquely defining features of a gem, so glass, label, ink, glue, foil, fill level, engraving, and other markings identify a particular bottle. As conflict and synthetic stones sully the supply chain of the diamond trade, fraudulent bottles of counterfeit wines damage the wine market.

In its simplest definition, blockchain is a digital ledger of transactions. When a transaction occurs, a record of it is added to every participant’s ledger, or block in the chain, across a network of computer systems. This decentralized form of recordkeeping makes it difficult for individual parties to manipulate the results. It creates a time-stamped record of every single transaction and addresses the quandaries of immutability and longevity for the electronic portion of the solution. There are both private and public blockchains

There are both private and public blockchains.  The similarities for both include:

• Decentralized peer-to-peer networks, where each participant maintains a shared digital ledger

• “Replica” ledgers synchronized through a “consensus” protocol

• Guarantees for the immutability of the ledger

 6 Reasons to Use Blockchain to ID Counterfeit Wine

1. Tokenizing the asset at the source: once the wine is tokenized, distributors will gain value from your investment as it is possible to view the entire chain of custody through to the end customer (or consumer).

2. Play the long game: Measures taken today to mitigate fraud will have a lasting effect on future and growing generations of asset buyers and their interaction with a brand. As bottles age and increase in value, the true benefit (such as increasing the value of genuine bottles and tracing the number of bottles in circulation) of these measures will become apparent.

3. Visibility of the chain of custody: this enables a better understanding and effective management of distribution partnerships, stock management and sales/marketing resources globally.

4. Create a gold standard for a brand to reduce fraud risk for customers: To deliver market confidence to buyers, brands need to quickly process data that is trusted from the source. It is imperative that this standard is verifiable by the consumer, not only by specially qualified auditors (such as auction intermediaries) who are currently barriers to high-frequency stock movement, liquidity, price competition and accessibility.

5. Grow your customer base and market reach: Gen Y and Z by transacting through a faster, flatter mobile settlement platform that integrates supply chain and brand. Sales speed drives consumption (and trade), creating demand (and possibly liquidity).

6. Communicate more effectively with your customers: By knowing who they are, where they are and leading them to your brand. Control and customization are two prevalent behaviors to take note of with all consumers in Gen Y and Gen Z. Tokenization delivers control to the consumer because it removes the need to use trusted sources as intermediaries. Commercial transactions can still be channeled through current global distribution systems, but no one relies solely on the supply chain to be watertight anymore. Customization is delivered by creating choices for customers around supply chain flexibility: does the stock need to move? Are there equivalent tokenized units available locally?

 What challenges exist when applying blockchain to wine? 

• As with other products, a layering of physical – not just digital – protection is needed.

• A fundamental limitation of authentication had been that authenticity is valid only one time –in and of the moment of issuance.

• Many of the traditional tools have showed themselves to be vulnerable in their track-and-trace abilities. Because of this uncertainty, each time a bottle is presented for sale, it must be reassessed—painstakingly examined anew. While this churn is in theory good for the secondary market, it is not ideal for sellers, buyers, and consumers. Not only is authentication time consuming, but it is also costly.

Some solutions and their limits:

Challenge 1:

There absolutely needs to be a way to tie a physical or electronic document of authenticity to a specific bottle for the duration of that bottle’s life. Once either leaves the room, how does one prove that any certificate of authenticity, or authenticated bottle was once certifiably linked? Moreover, how to prove that neither has been altered. For wine, protection includes rendering a bottle tamper-proof. Bottles are easily emptied, then refilled. Not only are corks removed and replaced, but needles are often used to drain, then substitute the original wine, leaving almost no visible evidence of the swap.

An Idea on how to tie the physical with the digital:

• a thin, plastic covering, with several highly sensitive, layered, and serialized security features placed over the top of the cork can provide the physical component necessary to fully securing a bottle in the blockchain. Not only would this cap show proof in a case of tampering by either cork removal or piercing, but it would also allow tracking of the bottle’s location. The combination of these methods creates a permanent, indelible record that ensures authenticity of older wines in the secondary market and tracks provenance for a new wine as it moves from producer to direct consumer.

• This must happen in partnership with the bottle manufacturers, cork producers, labeling. Super early in the supply chain. There are many solutions like WiV and Blockbar that “tie the physical bottle to an NFT on blockchain” but there is nothing to prevent fraud before these companies get the wine to their warehouse or during their buying process.

Challenge 2 & 3:

We can digitize the wine supply chain on a blockchain to create a system that can verify the authenticity of any wine from the vineyard to the retailer.  At each stage of the supply chain the transaction is recorded as an immutable block in the chain which is transparent to all actors in the supply chain.  The huge advantage lies in the fact that transactions cannot be altered as any attempt to defraud a transaction becomes immediately transparent

• Limitation of Wine Traceability Solutions: molecular analysis of wine is possible via a system known as Raman spectroscopy and can expose any wine. The caveat is rolling out this process on a broad scale would be both costly and inefficient. The same goes for centralized databases already in use for tracing wine. Due to the issues inherent within centralized databases, the scope for corruption and subversion is relatively broad.

A blockchain that can track many transactions per second, enabling raw materials and their end products to be traced efficiently. From grape to bottle to the journey on to its destination, everything tracked through this chain is recorded on an immutable blockchain, ensuring authenticity at every stage. Smart contracts ensure data privacy while requiring confirmation of authenticity before payment is released incentivizing supply-chain intermediaries to verify authenticity independently. The approach can similarly be extended between retailers and customers closing any remaining gaps in the supply chain. It could go even further with IoT sensor data to include PH balance, chemicals, pesticide usage, ripeness, temperature, moisture content.

• Limitation: For this to work, the entire industry would have to track “notes” on itinerary or product including bottle, box, crate, or pallet of wine tracking; serial-number tracking and access to IoT sensor data. However, this doesn’t solve the wine in private cellars or at auction now (or even 5-15 years from now).

Interesting Approach: Vinsent partnered Laava Smart Fingerprints®, which are unique per bottle trust marks. They seem better than a simple QR code.  Once a bottle is “Vinsent Certified” using the Laava Smart Fingerprint®, consumers can simply scan the Fingerprint with their iOS or Android phones and see a certificate of authenticity recorded on the Ravencoin blockchain. Each bottle has its “token” residing on the Ravencoin blockchain.

Blockchain Can’t Block them all:

While these solutions may tackle the issue of counterfeiting between merchants and retailers, there’s little in the way of stopping refilling once on the private market. There’s hardly anything blockchain can do in this regard. One missing piece of the puzzle for blockchain in the use of wine verification is another actor to secure the bottle and ensure that it hasn’t been opened and replaced with something else. There really are no safety systems which can’t be subverted – the goal of blockchain-based traceability is to make counterfeiting more difficult and expensive so that it will be less profitable and, eventually, not worth the risk. Another unique alternative could be a mandatory KYC-centric app introduced in private purchases, a stage where the most counterfeit refilling goes unimpeded. You would have established, verified identities for merchants, brokers, and consumers with blockchain tied to unique labels and seals, along with non-fungible tokens you could have an immutable record of provenance that could not only prove at point of purchase but at point of opening. With KYC-verified customer ID coupled with blockchain’s immutable ledger, not only does the counterfeiter run the risk of capture, but subsequent reseller’s chance reputational damage. Really, the hope is that there is a reduction in counterfeiting numbers by leveraging technology.

Blockchain Companies focused on Wine:

There are several blockchain partnerships to optimize the global supply chain like IBM and Maersk. The following are focused on wine:

• Ernst & Young: Their Ethereum-based blockchain tracks and offers consumer information for Italian wine.

• Cantina Volpone: Their Falanghina IGP wine is the world's first blockchain-certified wine. Importers, wholesalers, distributors, and consumers can track harvest date, fermentation tank, lot production, bottling date, and water consumption as well as all vineyard interventions and winemaking processes by scanning a QR code on the bottle with their phone!

• VeChain - Shanghai's Direct Imported Goods (DIG) partnered with Price Waterhouse Cooper (PwC) and BitSE to deploy an Ethereum-based platform for imported wine distribution in China, where wine fraud, quality and safety concerns are huge.

• Tencent & Changyu Pioneer Wine: the traceability was designed to improve the country’s wine industry standards. They would work through the issuance of a unique certificate recorded on a blockchain platform. Curious consumers would then be able to check the authenticity of the product by scanning a QR code on the bottle which would display relevant information.

• Everledger: anti-tamper bottle closures enhanced with the Internet of Things (IoT) and distributed ledger technology (DLT). More on China here.

• Cellr: embedding near-field communication (NFC) and radio frequency identification chips in bottle caps. By scanning Cellr-enabled bottle caps with a mobile application, consumers can check the bottle’s provenance and producer.

Counterfeiters will continue to be a threat. Technologies including blockchain are emerging to address this issue in the digital world. It offers producers, sellers, buyers and consumers of wine protection and traceability from bottling line to wine glass. Consumers can also benefit. Shoppers could ensure that producers are exactly who they say they are when it comes to biodynamic practices, sustainable farming, and Sulphur use. They could also pinpoint the exact vineyard plot from which the wine in their hands originated. Collectors could verify that the bottles in their cellar aren't counterfeit. In my opinion, the real game-changer occurs when we have technology that can also verify the provenance of the physical counterpart and be able to connect the two. The journey towards ensuring both the physical provenance and digital ownership will lead to reduction in illicit trade and the ability to restore trust in the industry!

On DeFi and NFTs in Wine

I truly believe that blockchain will eventually change the wine industry. Over the last 5 years, Bitcoin surged to new highs and more corporations are making the push into blockchain. There are more practical use cases for crypto today as evidenced by the growing institutional adoption and it has even made its way to center stage in the Ukraine – Russian citizens digital showdown: crypto donations to the Ukrainian army and Russian utilizing crypto to avoid the impact of sanctions. Most corporate blockchains have been a failure (with the exception of companies like IBM, AWS, MSFT) – there has been a lack of product-market fit for most use cases. For any new technology to succeed, product-market fit is a must. Users need to understand the real value of moving to a new model, especially one that is more technically sophisticated than the familiar solutions that exist today.

IMO, two areas within blockchain technology have emerged with true product-market fit: Decentralized Finance (DeFI) and Non-Fungible Tokens (NFTs). I am exploring a combo of these two areas because it’s where things get interesting and why I think there is a compelling use case for the wine industry.

• If you need a 101 on DeFi or NFTs, check out Investopedia here and here.

In Wine Investing 101, I outlined some of the challenges within the high-end collectible wine market. I’ll dig further into those and offer a solution built on a public blockchain, using concepts from DeFi and NFTs. The high-end collectible market is the niche market segment we’ll start off with, as with most disruptive technologies, it will eventually move to a more mainstream market.

If the names Screaming Eagle, Sine Qua Non and Harlan Estate sound familiar, great! If not, they are very popular and very exclusive California wineries that have waiting lists of 10+ years just to buy the wines at the winery released price (WRP – I’ll circle back to this). For the most part, buyers will never drink these wines, which is sad to me but so be it – they will be held for investment or collection purposes and later resold at auctions or online wine exchanges.

• Challenge 1: the transaction costs are high and there is little liquidity. Remember, wine auction houses charge around 15-30% of the sale price in fees to buyers and sellers. In addition, packaging and shipping these wines to auction houses is expensive and settlement is time-consuming. More time + more money = very inefficient. You all know my wine collecting story – I am sitting on some bottles that I’d love to sell one day but there are barriers to entry, and I am forced to HODL.

• Challenge 2: and we circle back to winery released price (WRP). Wineries set their prices according to demand but on the secondary market, things change – many of the wines command a huge premium. Wines are bought at WRP and immediately sold at a higher price. I’ve heard of some buyers even selling their spots on those wait lists. This excess premium and secondary market activity is lost value for the winery. I’d draw an analogy to when a company IPOs – company sets a price of $10/share, it opens up for trading on the exchange at $25/share – the true market value was $25 and the extra $15 went to the bankers and investors who were “on the list” for the IPO.

Enter DeFi. It’s a better solution to solve for market inefficiencies. Several of the core principles can address these problems:

• Decentralization: no middleman entity has the power to set prices or control supply and demand.

• Transparency: transactions are visible and stored on the public blockchain, so it enables efficient price discovery.

• Immutability: transactions are securely recorded and cannot be tampered with. Remember: provenance.

• Composability: highly programmable smart contracts that create new transaction mechanisms.

Let’s envision what the wine market would look like after applying these principles:

The winery issues tokens to members on its mailing list each time a new release of wines is ready – let’s call the token $WINE. The tokens are minted, and the mailing list members purchase them and will redeem it for wine later, replacing the antiquated mailing list concept. If the holder of the token decides to sell it, rather than redeem it for the wine, a more formal decentralized exchange with price discovery is where the transaction would happen. The winery may not see an obvious value (just yet). Bear with me…

Using smart contracts – what if every time these tokens traded on the open market, the winery received a percentage, like a royalty structure and how some NFT art is designed. Someone with a token to Harlan Estate Cab sells it on the exchange for 4 ETH (worth about $9600 today), the winery would receive a % of the 4 ETH. If the tokens have not been redeemed for the physical bottle (i.e burned), the winery will get a transaction fee every time the bottle trades hands – an incredible incremental revenue stream and more efficient secondary market for all parties. The sellers create liquidity without having to worry about shipping and storing wine and the buyers benefit from the provenance on the blockchain and flexibility of reselling or taking possession. But wait….

Enter NFTs: an NFT is a one of a kind asset in the digital world. We all know those serious collectors love to show off those dope bottles in the cellar. An NFT would give people the chance to show proof!

Let’s go back to the winery because we’re not done adding value for them. Since they control the product, we must start there. Once the $WINE token is redeemed (and done trading on the secondary market), the holder of the token takes possession of the wine and receives an NFT from the winery. The NFT contains an image of the bottle and a unique identifier guaranteeing provenance for the wine. Wine fraud is a $3.2B problem and growing (up from $3B in 2021). There isn’t a great solution introduced to date, there are expensive consultants but nothing really tech forward. I’d love to see a solution that makes it more interesting to the buyer of the wine via NFT. They’ll have some value as a collectible depending on the scarcity of the wine but it can go further. Using the concept of composability, an NFT could unlock special experiences – think exclusive tastings at the winery or other special offerings like a “meet the winemaker”. Wineries get a new channel for creative expression to develop experiences that are on brand, improving the customer experience, and a deeper connection to the holder of the wine. Tokens would be more valuable and tradeable and the experience would be gamified for the consumer.

Once the $WINE token is burned and the holder receives the wine and NFT, a healthy secondary market can still exist. If the holder of the wine wants to sell, the NFT provides proof of ownership and provenance. This could allow wine storage facilities to inventory wine and release bottles upon proof of the NFT, at which point its movement is recorded on the blockchain enabling full transparency for future buyers. There are so many other ways to create economic value for the winery (especially when you disrupt the 15-30% transaction costs imposed by the middlemen).

I’ve mentioned VinoVest a few times already (although I am bearish on the company generally). It allows investors to gain exposure to wine as an asset class, but they are not only based on traditional finance structures, the relationship-based allocation (a la Dustin Wilson from Somme and other advisors of a similar status), and their inability to deploy capital effectively does not bring any value to the wineries or do much to add value or enhance the experience for the consumers. They are a new middleman with a shinier jacket (VC funding and great marketing).

I don’t want to go through this idea without sharing some of the hurdles in the industry that can impact the full-scale adoption of blockchain.

• Globalization: the wine world has been operating at an international scale for hundreds of years. The ecosystem consists of large corporations to small farmers and is very fragmented. Trust and education will be important as well as respect of centuries old traditions.

• Long Term Viability and Sustainability: no one can be completely sure of cryptocurrencies’ long term viability. Crypto mining, or the process of keeping the blockchain ledger up to date and adding new currencies to circulation, might necessitate the employment of huge, advanced processors that consume a lot of energy. It seems there is a movement away from the proof-of-work model to a proof-of-stake concept where layer 1 blockchain protocols like Ethereum will offer a clean and energy-efficient verification process.

To me, this is a full-circle micro-economy that is created with blockchain technology. There are many different permutations of how something like this could work and I’ve only scratched the surface. I often think about ways this could be extended into the mainstream market. Execution is always hard and the biggest challenge for the wine industry is that most are not technically sophisticated. And, for it to work, the on/off-ramps of tokenization would need to be extremely simple, the UI would have to be super intuitive and the ecosystem well managed. Perhaps, most importantly, building the bridge between the physical good and the digital experience will be most important (and an industry itself). I’ll talk more about that next week.

P.S:

While many wineries haven’t taken blockchain to the next level, I wanted to highlight some wineries that have become interested in either NFTs or Crypto as they are likely doing so to attract a non-traditional market (genius!):

• Yao Family Wines: a winery owned by Yao Ming (former NBA player) who auctioned a bottle of “The Chop” Cabernet Sauvignon in April ’21 alongside an NFT.

• Chateau Darius, St. Emilion: they started to sell four NFTs per vintage for $150. For each NFT, the holder gets a piece of artwork, the opportunity to store wine, and two physical bottles.

• Andrews Family Vineyard: started producing Trothe (my personal favorite) accepts cryptocurrency as payment.

If I had to bet, with even the limited options out there, the crypto community is buying more wine than wine people now because they understand the usability of it.

Tech Innovation in the Wine Industry, Pt 2

As I discussed last week, winemakers used to rely on instinct and tradition. Here’s another quick look at how those in the wine industry are turning to tech (like data analysis) and innovation in winemaking.

Wine Blockchain Technology – We live in an increasingly-digital world, so it was only a matter of time before the old-school art of collecting entered the realm of pixels and binary code. Non-fungible tokens (NFTs) are grabbing a lot of headlines now, and they’ve arrived in the wine business, too. An NFT is a unit of data that is stored on a blockchain, representing a ‘digital asset’ that is unique and is therefore not interchangeable. We’ve seen a lot of NFTs in recent times, from Twitter founder Jack Dorsey’s first-ever tweet (which sold for $2.9 million) to artist Kevin Abosch’s virtual artwork ‘Forever Rose’ (which sold for $1 million). Now wineries are doing the same. French winemaker Chateau Darius, for example, has recently begin selling ‘digital bottles’ of its Bordeaux for more than £300 apiece. But more on this next week.

Robotics in the Vineyard and Winery – With shortages of manual labor, tightening restrictions on migrants and herbicides, and increasing awareness of the disadvantages of using heavy tractors in vineyards (compaction and emissions), there will be an interest in agricultural robots. The first robot was developed three years ago and, is equipped with a central platform that spans the vine rows with modular arches allowing it to adapt to a variety of vines (narrow, high, etc). Weeding tools, blades, disks, and ploughs can be attached to the new central toolholder, which has a parallelogram lift. Two tools can be combined at the same time. The power of the lightweight machine has been increased so it can reach speeds of 5 km/h and tackle slopes. There are other uses like fertilizing and harvesting but I envision, in the next 3-5 years, robotic systems will have a far greater impact on the vine and wine sector. Vineyard workers are often tied up with repetitive and physically demanding tasks in the vineyard when their skills could be put to better use elsewhere.

• Ted, The Robot:  Chateau Clerc Milon is where a robot named ‘Ted’ has been brought in to help with soil cultivation and vine weeding. According to the chateau, “As well as helping to make our vineyard work less arduous and respecting the soil, it will reduce our dependency on fossil energies and the harm caused by traditional agricultural machinery.”

• Vitirover: Saint-Emilion, France is world famous and steeped in tradition. Vitirover was developed as a fully autonomous lawnmower powered by solar energy. About twenty of these robotic mowers are in use in the vineyards. This year, Vitirover will deliver 200 more robots, for use along railway tracks or in a solar farm. The main benefit of the robot is that it is environmentally friendly and helps to make organic wine. The use of the robot in the vineyards makes pesticides like glyphosate unnecessary. In addition, the robot protects the soil by avoiding the compaction that may be caused by tractors or horses.

• Slopehelper: an autonomous electric vehicle that goes a few steps forward by performing a range of vineyard operations like mulching, mowing, spray and side-trimming. It can integrate with software to communicate with the vehicle remotely, stream video from the camera and monitor weather conditions through an onboard weather station.

• R2T2 is partnering with a winery to develop a pruning robot that can tackle vine-training systems only workable by humans like bush vines.

Understanding Aging: The aging of wines is a process used to preserve wine but also to enhance its properties. It is a process of great interest, mainly because of the additional properties it adds to wines and because of its economic implications. Historically, barrels have been employed for centuries for preserving and aging wine due to their resistance and relative impermeability. In general terms, the wine aging process can be divided into two phases: oxidative and reductive aging. Oxidative aging traditionally takes place in barrels while reductive phase occurs in the bottle. During both processes, oxygen plays a fundamental role as well as other factors, for instance: temperature, light, bottle position, microbial growth, or storage time. Likewise, during the aging process, a series of chemical reactions take place influencing the composition and organoleptic profile of wine. Given that it is a central tenet in the creation of fine wine, winemakers need to better understand the process.

• Space Wine : after a year in space aging, a dozen cylinders of Bordeaux’s Petrus and 320 vine canes returned home. Researchers say the jaunt into orbit energized the vines, helping them to grow faster while the wine experts said the wine tasted more developed. Researchers are especially interested to learn how being in orbit affects the sedimentation and bubbles of the aging process. Findings from the experiment could eventually be used to understand taste enhancement and flavor conservation here on Earth. Climate change will require plants like grapes to adapt to harsh conditions. By understanding how grapes respond to weightlessness, scientists could help develop technology to grow more resilient, sturdier plants on Earth. 

• Underwater Wine: I first heard of underwater wine on a recent trip to Portugal. We went to Ervideira, where the tasting room associate poured us a side by side tasting of their wines – one aged underwater and the other aged in a cellar. My partner, Dave, loved the wine aged under water. I couldn’t detect a difference, but I had 5 of each shipped home anyway! In theory, aging under water offers a consistent low temperature, additional pressure and slight rocking from the current to create a different aging experience. Regardless of the science, this technique also offers a marketing opportunity. Some experts have assessed the wine compared to test batches of the same vintages aged in cellars and the notes of the underwater wine are distinct and exciting. Some of the enhanced attributes of underwater aged wine include greater intensity of color, a milder change in the wine’s hue over time, a greater intensity of aromatics with accentuated fruit and floral notes- essentially a young but loud wine – which is clearly enough for a surcharge on the wine

Some producers have embraced broad-scale mechanization in the vineyard and winery, others have gone to more extreme lengths. As mentioned last week, the world’s highest- tech producers are turning to capital-B Big data and computer science; they’re harnessing sorting tables that analyze grapes on a three-dimensional level; and they’re designing every aspect of their vineyards and winemaking facilities so that their wines will arrive in bottle with a predetermined style.

One producer stands above all on this stage: Napa Valley’s Palmaz Vineyards. Palmaz’s end goal and most significant achievement is not revolutionizing what wine is, but utilizing forward-thinking technology to craft a product that is almost imperceptibly different from other big, bold Napa wines. In an industry that glorifies ancient methods and craftsmanship, why go to such technological lengths to eliminate much of what the winemaking world considers integral to wine?

Is a winery’s pursuit of perfection — its quest to stamp out every flaw that may arise on a grape’s journey from vineyard to bottle — ultimately worth it if it risks losing the intangible romanticism of traditional winemaking? Or is that very argument just a cleverly calculated concept, conceived to excuse the industry’s inertia?

Beyond the pursuit of perfection, there are any number of reasons why a winery might adopt technology — even if they don’t have the means to dig out an 18-story building from the side of a mountain or design a custom AI program. Most notable among them: well documented labor shortages, to which the ever-improving accuracy and quality of machine harvesting seems like a no-brainer. There’s also the climate crisis to consider, which will require its own large-scale shake-up in how the greater industry thinks and acts — with or without the aid of technology.

Tech Innovation in the Wine Industry, Pt. 1

Amid the pandemic, the wine industry suffered tremendously – from catastrophic weather events in California, Italy and Germany and, global supply chain disruption to growing threat of price inflation. Despite the chaos, the global market for wine grew from US$326.8B to US$340.23 billion in sales in 2021. Restaurants are rebounding, off-prem sales are booming and the industry is proving its capacity for creativity, adaptability, and resilience. In 2022 and beyond, I anticipate the market to be more responsive to innovation. What does that mean though?

When you think about wine, technology doesn’t tend to come up. Wine ignites the senses and most often, you’re thinking about the flavor, smell, body and how the wine makes you feel at the moment. Moreover, science and innovation have been the foundation of grape growing and winemaking – from monks observing grapevine cycles and adjusting their practices accordingly to smart developments in fining and storage. In short, the wine industry has been generally slow to adopt new technology. It’s a “who you know” sort of business that still relies primarily on excel, poorly created websites… the list goes on. The pandemic proved to be a bright spot for wine industry though; those operating in it were forced to innovate as sales moved online. There are other pressing concerns like fraud and climate change that require a heavy investment in technology and will ultimately change how the industry operates in the future. . I’ll talk through some contemporary innovations that are pushing the business of winemaking ever forward.

IoT & Sensor Technology: Challenges in the vineyard have always been a concern for winemakers – the devastating blight of phylloxera in the 19th century is one example. Managers use different tools to improve crops, manage costs and track environmental impacts. Precision viticulture is a term that comes up, often associated with how to increase efficiency, reduce disease, and maintain quality. Predicting a vineyard’s yield is of paramount importance for winemakers. When you have an accurate yield idea, you can allocate your resources better for the season. This includes everything from water, to fertilizer, to barrels, to staff. New technologies enable producers to take historical data of the vineyard and apply it to the current wine season's early activity. Now, with climate change an increasing risk, winemakers have a myriad of other issues to consider too, and technology is stepping in to help mitigate these threats. IOT & sensor technologies are increasingly deployed in the vineyard, winery, distribution and on the bottle itself.

In the vineyard, sensors are deployed collect data on weather patterns, sun exposure, rainfall, pH, nitrogen levels, soil conditions, humidity, wind direction and speed. Drones have allowed growers to take overhead shots of their crops with thermal infrared cameras to give detailed information on the plant’s health that a regular camera could not provide. This allows the farmers to assess which vines need nourishment and spread irrigation and fertilization more efficiently. Drones with infrared light are used to determine optimal harvest time and picking order. particularly in farming and production management. IoT examples include using intelligent tracking devices to check up on the health of grapevines and the presence of invasive species. Automation is even driving the handling of soil temperatures and hydration.

Some new applications:

• A winery in Oregon built UV Robot to battle the blight of potentially destructive powdery mildew

• Winemakers in Burgundy are tackling extreme storms with high-tech systems that deploy particles of silver iodine into the atmosphere to form a shield against hail.

• LIDAR, a remote imaging technology, allows for the structure of the vineyard to be mapped in 3D. Crop 3D modeling allows for site specific management. This promotes greater control over the processes of growing grapes and assists grape growers in meeting the demands of winemakers. It’s also used to extract biophysical parameters to monitor dynamics of vegetation, the water cycle, energy budget and other variables for decision making programs. It can also be easily incorporated into current machinery or tractors to scan the field while doing other tasks such as tillage of fertilization. The resulting information is easy and fast to process which can be incorporated into decision support systems or used for automatic pruning systems or site-specific fertilization.

• Satellite Imagery: Satellite images can also be used during a period of the growing season known as véraison, a critical point in the vine’s growth when grapes turn from green to red or white. Monitoring crop vigor at this stage gives the winemaker time to modify management of individual vines with a goal of optimizing the harvest. It also allows winegrowers to optimize the decision-making process by showing the yield variability allowing them to take advantage of this variability for applying selective harvesting to increase the quality of the wine.

• Cisco has an industrial IoT solution that can track temperature, light, humidity, and water availability, block by block of an estate. It offers insight into tannin development by measuring the amount of light hitting individual grapevines. This allows a winemaker to not only figure out when grapes are ready for harvest but reduces a vineyards dependence on water. This, coupled with neutron probes, can provide substantial real time data that reduces

Artificial Intelligence (AI) & Machine Learning (ML)  for Wine – this can be used anywhere up or downstream in the chain.

In my opinion, here are some practical applications for both:

• Applying AI to different wine critic reviews to create a database that synthesizes all the different reviews to provide more clarity on taste markers and what makes a 90+ plus wine for a specific region. The goal is not to replace wine critics but to provide a more comprehensive analysis of wine for consumers.

• Machine Learning & Sensory Science: analyzing tens of thousands of wines combining analytical chemistry, consumer flavor preferences, and ML to predict market performance for sensory-based products. This could help winemakers produce or enhance a style of wine (decision assistance in the winemaking process) or target their customers more efficiently.

Current Applications:

• AI & Robotic Cameras: Researchers have used AI and a robotic camera to cut the time spent examining grape leaves in the lab from six months down to a single day. Until now, labs were slowed by the need to manually check thousands of grape leaves for evidence of infection. Blackbird was developed by the USDA_ARS program. It’s a robot that uses a camera to gather information from the leaves with the detail of an optical microscope. Given the detail of the information, a sophisticated analysis using deep neural networks is required to help predict the plant variety, plant stress, and mitigation techniques for many other factors in the vineyard.

• AI & Blending: California winemakers are using AI to help salvage grapes damaged by smoke from the state’s massive wildfires. Ahead of harvest, dozens of vintners used AI-powered models to identify viable blending options that mask unwanted smoky flavors. Narrowing the blending options can reduce production delays and get wines onto store shelves faster, compared with the time and expertise needed to taste-test as many variations as possible. Blending in smoke-tainted grapes adds an extra layer of complexity  to the winemaking process and is much more sustainable (i.e., less waste).

• AI & Smoke Taint Detection: bushfires are climatic anomalies related to climate change that is severely affecting the grape  growing industry. Smoke contamination and taint in wines is difficult to assess. Current assessment methods require berry or wine sample collections and specialized lab analysis that is time-consuming, cost prohibitive and more importantly, not representative of the real level of contamination within a vineyard. AI based on short and proximal remote sensing combined with ML modelling can be used to assess and monitor smoke contamination and smoke taint in wines and implemented with unmanned aerial vehicles (UAV) and infrared thermal imagery (IRTI) to map regions of vineyards according to smoke contamination levels. Near-Infrared Spectroscopy (NIRS) could offer a quick assessment for amelioration techniques to reduce smoke compounds in berries and taint in wines. E-noses have been developed to assess smoke-related gases in wines to predict smoke taint or be applied to the vineyard to monitor ambient gases and levels of smoke contamination in bushfire events.

• Customer Experience (CX) and Personal Experience: Vivino  has rolled out Match for You, a new app feature that provides wine drinkers with a percentage likelihood that they will enjoy a specific wine. Vivino recently raised a $150M round and announced their funding would be used to improve AI, focusing on increasing personalization. Vivino users primarily relied on the Vivino Rating, a five-star wine rating system that leverages the wisdom of the crowd to show the average score of a wine.  Match for You uses ML and the insights Vivino has on each user to give each one of them a unique match score for every single wine scored in Vivino. There are match brackets that apply a % chance that you’d like the wine. I’ve found this tech hasn’t worked well and operationally, it’s a nightmare (from personal experience).

Drones & Last Mile: Last-mile delivery is not a new trend, but wine tracking apps and shipment notifications are. Getting wine to the consumer can be challenging, especially when shipping networks are at capacity and the contents are fragile. Sellers must deal with expensive packing materials while they meet unique state legalities on how and where to deliver. The addition of specialized last-mile services specific to the wine industry is becoming a real possibility for more producers. Just like Amazon has its own last-mile delivery drivers, we could see more wine-branded vans and trucks pulling up to hand-deliver those precious bottles directly to the consumer, guided by the efficient uses of tech-equipped GPS, wine inventory apps, driver guides, and optimized routing. When vans or trucks can't make the drive, there's still an option for drones. While the drone business is fraught with FAA regulation, local zoning ordinances, and the limitations on drones themselves, we're seeing it done well in some industries already. In areas where drones are embraced and normalized, the prospect of delivering a $100 bottle of bubbly in a drone-delivered basket is not farfetched and something I’d welcome on a hot summer day. In fact, it could be cheaper and safer than driving across town in rush-hour traffic for that single bottle.

Now this is only part of the technology being used and innovation in the wine industry. Join me next week while I breakdown technology in aging, robotics and my honest assessment of the software that exists in industry today.

Wine Investing 101

Why Invest in Wine?

Classic cars. Watches. Fine art. Fine Wine. All investments of passion. I recently started investing in fine wine and found it’s more fun, lucrative, and… liquid. Here’s why:

The last two years have been all about timing in the capital markets, and if you got that wrong, you likely made an expensive mistake. But, not so for wine. In 2021 alone, fine wine prices rose 15% outpacing other real-asset investments like Hermes Birkin Bags and rare bottles of scotch. While the Omicron variant continues to spread, leading new countries to be added to the red list, fine wine sales are booming. Demand soared in 2021– luxury fine wine merchant and global trader, Bordeaux Index, saw overall trading volumes up by 40% with newer entrants like Champagne and Italy driving up volumes – and the trend for increased consumption and investment is showing no sign of slowing. Overall the market is up lsd% and fueled by a surge in spending in part by high net worth individuals who have more cash to splash amid lockdowns.

However, the investment grade wine market has more to offer than just impressive returns.

• Tangible Ownership: You have direct ownership of the object. Even if your wine investment company disappears tomorrow, you still retain ownership of every bottle in your portfolio. This also means that you can drink your wine and enjoy it (at any point of the ownership lifecycle). You can’t really enjoy your declining GME investment.

• High Capital Growth: the market has delivered 13.6% annualized returns over the past 15 years, outperforming most global equities even in the decade long bull run and exchange-traded funds (ETFs).

• Low Volatility: Fine wine has seen 16 months of consecutive gains and increased 119% in that time - merchants held firm on pricing, showing signs of a stable market and is less volatile than real estate or gold.

• Portfolio Diversifier: they say “don’t put all your eggs in one basket”. A well-diversified portfolio can protect your bottom line from a variety of risks. Fine wine is unique as it has a low correlation with traditional assets and the stock market.

There are other benefits like potential inflation and currency hedges.

Liv-ex is where I get most of my data - it is the "the global marketplace for the wine trade” and has a number of indices, but focuses on the Liv-ex 100. This index tracks the price of 100 of "the most sought-after fine wines" on the secondary market (think Burgundy, Bordeaux) as "the industry leading benchmark." Over the past year, the Liv-ex 100 grew nearly 21 percent. Comparatively, the Dow Jones Industrial Average only gained 14.43 percent over the same period while gold actually declined nearly 4 percent. (S&P500 did edge out wine for the year at 23.2 percent growth so don't dump all your stocks quite yet.)

So – what actually is investment grade wine? It’s tangible asset whose value is expected to appreciate over time and is dependent on two factors – quality and scarcity. Your top wine pick? Top end Italian and Californian wines with a slight resurgence in Bordeaux first growths.

How to ID investment grade wine?

The technical definition of investment grade wine is: fine wine that has a chance of increasing in value after 5 years.

Identifying fine wine can be tricky so I’ve outlined some ways to identify great investment opportunities. There are a few terms that are must-knows. Let’s explore:

• Critics Ratings - the wine generally must have a score of at least 95 points by one or more of the principal worldwide wine critics.

• Price Appreciation - the wine must have a consistent history of substantial price appreciation over a 10-year period.

• Liquidity - the wine must be made in sufficient quantities so it can be bought and sold on the secondary market.

• Longevity - the wine must be able to age for at least 25 years with maturity occurring after the 10th year.

  • Here’s a quick reality check - most wines are not meant to be aged. Red wine have an average shelf life of 5 years and whites 2-3 years. To be investment-grade, wine must have a balance of acidity and tannin (the higher the better), alcohol, and flavor.

• Pedigree - the wine must be produced by a chateaux, domaine or producer whose name is synonymous with quality and prestige. Wines made in the Bordeaux region, Burgundy, Rhone Valley, Tuscany or Piedmont in Italy tend to be more valuable over time.

Other things to know about and consider when investing wine?

Historically, there’s been a supply and demand imbalance in the fine wine market. The supply of wine is usually constrained because it is 1) produced in limited quantities

• The effect of scarcity on price can be seen with well known brands. As an example, 2012 Domaine de la Romanée Conti (DRC) in Burgundy produced less than 4,500 bottles, which now sell for upwards of $13,000 per bottle. In comparison, first growth Lafite from Bordeaux produces 15,000 to 20,000 bottles per year, which sell for closer to $500 per bottle. For wines produced in limited capacities, the inverse relationship between price and quantity is accentuated as supply dwindles.

And 2) most top fine wine producing regions have restrictive classification system and zoning laws. There’s also a huge demand for these wines – traditional buyers and the emergence of wealth in China, Russia and other emerging markets; following an interesting pattern driven by these emerging markets but also by its behavior as a Veblen good (demand for certain wines increasing as price increases). The prestige-seeking behavior of wine investors helps explain the outsized price tags on wines. Additionally, because the quality of wine cannot be ascertained before consumption, buyers often rely on critic’s ratings, such as Robert Parker, giving certain individuals vast influence over prices.

Provenance is also probably the single most important concept in the fine wine market. It’s a catch all referring to whether the wine is genuine and how well it has been stored and if it’s fraudulent. It tells you the ownership history, source, authenticity, life cycle and storage of the wine. This can help you get a gauge for the price of wine and sell it with the right valuation. Aim to get a certificate of authenticity and try to learn generally about its storage and transit conditions.  

Earlier, I mentioned that the fine wine market is typically less volatile. This is not to say that there are no risks associated – you must consider a few risks: wines can get mishandled or damaged in storage, in transit or due to a natural disaster. The value of wine doesn’t increase indefinitely. At certain ages, wine can become undrinkable (~50 years – depending on the type of wine) and it may be difficult to identify the right time to sell it. And, as mentioned, fraud in the wine industry has become a thing.

 You absolutely must consider costs. Base price, costs that go into storage, insurance and shipping. Capital gains tax are a doozy – places like France, the UK, Germany and Hong Kong deem wine a wasting asset since it eventually declines in value and are usually free of capital gains tax. You must incorporate fees and commissions if you’re not doing the buying yourself. I also like to think of opportunity cost of the investment.

How to invest in wine?

Investing in wine is not as straightforward as executing an equities trade. Traditionally, you need lots of capital and the right connections. Investment grade wines come from the top-level Bordeaux (Lafite Rothschild, Latour, Haut-Brion, Mouton Rothschild) and gaining access challenges even the savviest investors.

Today there are more ways to invest in fine wine and more knowledgeable buyers around the world. People are more sophisticated and tech savvy than ever.

There are a ton of ways to invest in fine wine, all with varying risks and results. Let’s explore some:

• You can invest in blue chip wine stocks and other funds like:

  • Investment Houses/Wine Funds – investors can buy shares in a wine fund that pools investors' capital. Fees vary.

    • Sommelier Capital Advisors Investment Fund - merges high-end wine with active professional investment. Only for Accredited (high-net-worth) Investors. Requires long-term commitment (minimum five years.)

    • Wine stock exchanges like Cavex (3% commission), Liv-Ex, and Berrys’ Broking Exchange have a good collection of fine wines that can be shipped internationally. 

    • Blockchain-Based Wine Investment Platforms – Alti Wine Exchange sells tokens through IBOs – initial bottle offerings. Tokens are backed by wines stored in Bordeaux. Available to non-accredited investors.

• Other Investment platforms –

  • Vinovest – Invest a minimum of $1,000 plus fees based on risk tolerance. The company offers algorithm-based portfolio balancing, storage, and insurance. You own the wine, so you can drink it if you want. An insurance policy guarantees provenance.

  • Cult Wines – For $15,000, you access a global portfolio. A $45,000 investment includes management services, valuation, advice, and access to en primeur allocations. Wine experts verify provenance.

  • Rally – Rally accumulates funds from many participants, then buys collectibles (wine/art/cars/watches). Investors buy “shares” in these asset classes with a low-cost point of entry. A partnership with Cult Wines verifies provenance. You can sell shares after 90 days.

• En Primeur – essentially wine futures, granting an investor the opportunity to invest in wine while it is still in the barrel (i.e., before it is bottled), but more on this next week!

• You can buy bottles of wine and store them yourself or at a specialized facility with the goal to sell at a higher price in the future. Specialized facilities are basically temperature and humidity-controlled storage rooms. This can get spicy, but I’ve provided some tips:  

Deep Dive into Buying Wine Directly

Like I said earlier, do thorough research. You should research which vintages and wine makers have done well in the past and look at trends by wine experts and analysts. Understand what’s happening at the auctions, track market data on online wine exchanges like (Liv-Ex). Read reviews by wine critics, tasting notes, manufacturer’s details on websites like Wine Searcher, Wine Spectator, or Decanter.

Determine how much you can invest. I often see that you need at least 10,000 USD to start and like all dividend paying stocks and bonds, invest in a diverse range from different regions and vintages.

Decide where to buy wines from. I’ve listed a few channels here:

• Direct from Producer – Buying directly from a producer is effective, efficient, and it guarantees provenance. But it can be challenging or impossible to get on allocation lists.

• Wineries –Buy wines directly from a prestigious chateau or local vineyard, and get them shipped to your address. Often, there are several regulations with international wineries that may not allow you to buy wines directly. They also charge a huge buyers premium.

• Brokers – Working through a broker, importer, or distributor offers more access and expertise. Costs will be higher, could be up to 10% more - Wine brokers offer personalized advisory services, and transact and trade on your behalf

• Auction Houses – they can offer expertise and access hard-to-find wines that come on the market from private sellers. They’ll add a 10-25% charge. Newer online auction platforms may be less expensive. like Sotheby’s Wine and Christie’s.

• Traditional or Online Retailers – You can buy investment-grade wine from your local retailer. Selection may be limited. Retail pricing is higher, so shop around for the best prices..

Where to sell your wine?

There are several ways to sell your wine:

• Auctions - In-person and online auctions are popular. Commission charges for online houses are lower than in-person like Sotheby’s.

• Wine Stock Exchanges - Cavex and Liv-Ex can facilitate P2P selling. They charge a selling commission of usually less than 10%.

• Other Private Collectors - sell your wine to private wine collectors or enthusiasts.

• Speak to a Financial Advisor

 Fine wine is so unique as an asset class – its defensive in times of economic crisis and can benefit from economic upside when wealth is created and spending on luxury assets is high. More importantly, technology advances in the industry have brought new levels of efficiency and transparency to the wine market and now, more consumers than ever can invest in wine as an asset class.

Note: I am not a financial advisor and this is not financial advice. I’ve recently started investing in fine wine and this is simply an outline of my research.