There’s been a lot of excitement about NFTs recently. “Non-fungible Tokens” are essentially digital code that lives on a blockchain and can be used for many purposes that relate to trust – such as proving ownership or authenticity.
We've mostly seen them used to prove ownership of digital goods – most commonly pictures but also video clips, sounds, and even tweets. Similar to what happened with Bitcoin, they evolved from a novel solution to a techy problem into a mainstream news item due to money becoming involved. A piece of art created by the artist Mike Winkelmann (known as Beeple) sold for $69 million at auction this year.
But the technology can, in theory, be used to establish ownership and provenance of just about anything. Distillers William Grant and Son have recently sold 15 bottles of 46-year-old Glenfiddich whisky for $18,000 apiece, each one accompanied by its own NFT revolving image/ artistic impression of the bottle that not only allows them to show off their purchase but also acts as a counterfeit-proof certificate of ownership. Speaking to them -as well as cousins Dov and Sam Fallic, founders of BlockBar, which handled the technical side of the project – I learned that this would be similar to the asking price for the whisky if it had been sold by traditional methods. After all, there aren’t many bottles of 46-year-old whisky available, and the market for rare spirits as an investment vehicle has grown considerably in recent years.
However, launching as an NFT-backed product drew interest from a far larger pool of prospective buyers than is usually attracted to this asset class – with all 15 bottles selling in seconds.
“When we told our fathers about [NFTs], they thought we were crazy initially," Dov Fallic tells me.
“Who cares about something that’s digital? But the younger generation spends more time in the digital world than the physical world. That's where they live, and that's where they interact."
Along with cousin Sam, Dov Fallic spoke to many of the individual buyers personally and learned that rather than keeping it locked away forever, many of them do intend to drink the whisky at some point.
When they do, they will have to redeem it. Under their model of ownership, the bottle remains in the company’s custody until the customer wants to claim it, at which point they have to destroy – known as “burn” – the NFT. Until they do, possession of the NFT means that William Grant and Sons will certify that the buyer owns a genuine, 46-year-old Armagnac-casked Glenfiddich. After all, once it’s left their hands, there’s no way to know with one hundred percent certainty that it still exists or is genuine – NFT or no NFT.
William Grant and Sons’ head of luxury, Will Peacock, told me that the distiller has a long history of innovation and has been interested in the idea of blockchain authentication for some time.
"We are always looking at new ideas; most recently, we've been working on converting our delivery trucks to work on biogas fuel generated from distillery waste. The whisky is unique – using an Armagnac cask was an innovation in 1973 – and has an incredible flavor. This is a marriage of a very rare, unique proposition in whisky with blockchain that felt right for us.”
This excitement about the potential that NFTs have for opening up new lines of business is reflected in other luxury goods manufacturers and retailers that I’ve spoken to. One of the most attractive aspects is undoubtedly the opportunities created for creating new and deeper interactions with customers.
Often selling luxury products involves establishing lasting connections with the relatively small pool of customers who are wealthy enough to make the purchase. These are customers who expect a high quality of service and a level of personalization in their relationship with brands.
“The key thing here is how we can create new communities of collectors who are interested in really rare, great whisky like this Glenfiddich,” Peacock tells me.
“It’s about new avenues to explore, communities … and how we have an ongoing, long-term relationship. I can see it really expanding, and it sits very comfortably alongside the rest of our business, where we do private client sales, auctions, and so on. There are some really passionate collectors and NFT provides us with a really great service for buyers and collectors.”
As for the younger market – people who are maybe just testing the waters of investment, and attracted to whisky as an interesting asset class, the digital tokens themselves are designed to function almost as status symbols – they can be shown off on social media or incorporated into digital art galleries.
Traditionally, rare spirit buyers might purchase a rare whisky somewhere such as Harrods and then store it in their house, where “Maybe 10 or 20 people at most will ever get to see it and talk about it – today I can put it on social media and everyone can see it – I prove that I bought it … and I think that’s one of the things that’s really changing today,” Dov Fallic tells me, “There’s so much more of a story to tell for everyone.”
Luxury brands including Gucci and Louis Vuitton have been quick to jump on board the NFT bandwagon, but we have so far mainly seen it attached to digital products. But in goods and commodities – where there is a strong resale market, and products are often bought as investments – they have the potential to be equally transformational. It will be interesting to see how other makers and manufacturers react to this opportunity to engage their customers in innovative ways.
You can click here to watch the whole webinar, where I am joined by Will Peacock, head of luxury at William Grant and Sons, as well as Dov and Sam Falic, founders of BlockBar, where we further discuss the potential of NFTs and technology in the luxury goods sector.