How Penfolds Bottled ‘Phygital’ Wine in the Metaverse
- By Lachlan Colquhoun
- September 19, 2022
Penfolds is an Australian wine company founded in 1844, best known for its Grange Hermitage Shiraz which has sold at auction for more than AUD150,000 a bottle for older vintages.
While the company will keep producing its signature shiraz and other wines as part of Australian company Treasury Estates, a parallel strategy is taking Penfolds into the metaverse by creating non-fungible tokens, or NFTs.
“The Penfolds vision is to become a global luxury icon,” said Amanda Green, the global digital director for Penfolds.
“And we’re looking at now NFTs can help us achieve that vision.”
At the recent CDOTrends Chief Digital and Data Officer Summit in Sydney, Green described how Penfolds had been using the issuance of NFTs to drive that luxury strategy and engage investors around the world.
Green said Penfolds had looked at its sales and understood that eCommerce had become the dominant channel, responsible for around 70% of all sales.
Looking at what was next, the company began to look at the metaverse and how it could deliver a “really immersive brand experience” and engage younger people up to the age of 35 on a global scale.
Let’s get ‘phygital’
Green said Penfolds saw opportunities in tying an NFT to a physical object, such as a bottle or barrel of wine, to create a “phygital” asset that could be sold and traded multiple times, with the company taking a percentage each time there was a transaction.
Key to the opportunity is the fact that Grange Hermitage is rarely actually drunk. Instead, the bottles are considered investments that significantly appreciate over time.
“The Penfolds vision is to become a global luxury icon, and we’re looking at how NFTs can help us achieve that vision”
“If we take the normal example of a volume of Grange wine, for example, someone will go online, and they will purchase a bottle say for around AUD1,000, and it will be delivered to their home,” said Green.
“They will store it, and hopefully, it will appreciate in value and be worth AUD5,000 or so in ten years.”
Using this example, Penfolds could create a digital NFT tied to a particular bottle of wine which would stay cellared with the company in South Australia. Then, after holding the NFT for some time, they could sell it and make a profit on their investment, and this could continue for thirty years until someone decided to redeem the NFT.
“The flip side to this is that this is also great for our business,” said Green.
“In the traditional situation, we would only have got AUD1,000 when that first person bought the bottle of Grange, but with a phygital NFT, every time it is sold, we would get a royalty from what is built into the smart contract, and this is essentially money for doing nothing besides making a great product. This is where a phygital NFT becomes really interesting for our business as a way forward.”
Global reach
Penfolds has already used this model for its barrels of wine, selling through a partnership with the digital online marketplace Be Bop.
A buyer purchased the barrel at auction for AUD130,000. The wine will mature in late 2023 and will be put into 300 bottles, at which point the owner can sell some of the wine as phygital NFTs while holding the rest for some future time.
The strategy, says Green, is attractive to young people who present as new Penfolds customers. The phygital nature means that the company can reach more people worldwide because they will own an NFT and won’t physically possess the wine.
“The NFT really speaks to a younger demographic that we want to tap into, and it does position Penfolds as a forward-thinking luxury brand,” she said.
“NFTs can reach people globally, whereas, at the moment when we look at things physically, we’re limited by location and geography.”
The use of blockchain can also deliver more information on the wine and make it more of an exclusive product.
“If we get the data systems in place, we could tell you what block the grapes came from, where it was bottled, who first purchased it and how many times it has been sold and for how much,” said Green.
She said Penfolds would focus on “establishing our community and building a Web 3 brand” over the next 12 months.
“We are not there yet,” she said.
Going forward, Penfolds will look at “building a Penfolds brand in the metaverse and understanding what that will look like.”
“It's really important to have that place for our community to come together and get to know us as a band,” said Green.
“And then, when we’ve got that in place, it’s about building scale and getting out overseas and into the mainstream NFT community where we’ve built scale, and that is when it actually starts to go mainstream.”
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their entire business models. You can reach him at [email protected].
Image credit: iStockphoto/MillefloreImages