THE RANT Blair

CRYPTO CRAZY

Buying and selling a token representing a bottle of whisky that you’ll never have the chance to drink is a very modern madness

Written by Blair Bowman

f you happen to follow me on Twitter (@MrBlairBowman) you’ll have no doubt seen that I’ve been fl agging some major issues I have with NFTs tied to physical bottles of whisky. If you’ve not seen or heard of NFTs (non-fungible tokens), they are, according to their advocates, ‘the future of digital transactions’ in Web 4.0, the supposed next phase of the internet. I don’t have the space to go into the fi ner details of blockchains and NFTs here, so I will start by making the assumption that you have Googled this information.

I am not entirely against the idea of blockchains, NFTs and the like. I actually own a few cryptocurrencies that I have been investing in for a few years. What I do have a problem with is the idea of a digital token representing a physical object. It makes no sense. The non-fungible token is non-fungible, it’s in the name (non-fungible meaning something that is unique and cannot be replaced). But a bottle of whisky, in our example, is inherently very fungible, meaning that it could very well be lost, stolen, damaged, copied or faked. This is why I am so vehemently against the idea of a digital token representing a physical asset. In my opinion it is the Emperor’s New Clothes of Web 4.0 and wide open for corrupt charlatans

Ito take advantage of in the highly unregulated world of blockchain. The unregulated nature of blockchain and cryptocurrency is perhaps its main USP. As I have been repeating ad nauseam on Twitter lately, you can’t open, share and enjoy a digital token, in short you can’t drink an NFT, so what is the point? One of the reasons seems to be that this new way of ‘purchasing’ whisky via an NFT is really aimed at those who have no interest in ever opening or drinking whisky. They can effectively resell the tokenisation of the whisky at a future date for profi t. One of the other major issues around NFTs at the moment is that the amount of energy used to create the transaction on the blockchain is mindboggingly enormous. According to a Fortune Magazine article from 2021: ‘Currently, a single Ethereum transaction consumes as much electricity as an average U.S. household uses in a workweek – and has a carbon footprint equivalent to 140,893 Visa credit card transactions or 10,595 hours of watching YouTube.’ So, if you are to buy an NFT on the Ethereum blockchain, be it a computer You can’t open, share generated image of a cartoon ape or a and enjoy a digital token, token that represents a whisky, this is the amount of energy used to create the the so what is the point? entry on the blockchain. If at a future date you decide you wish to take physical

LEFT: VKILIKOV / SHUTTERSTOCK.COM ownership of the bottle of whisky from the seller (forgetting for a second that it might have been damaged, lost, stolen etc, but let’s assume it’s fi ne) then the NFT will be ‘burned’. This is another separate transaction on the blockchain to delete the entry and again uses the same amount of energy. So, to buy and then take physical ownership of an NFT tied bottle of whisky it uses 10 days of average US household energy use. The same applies for each transaction or trading of the bottle on the blockchain. Energy use varies on different blockchains and hopefully will improve in the future.

Another area that is rife right now in the whisky NFT space is the blatant passing off and breaches of intellectual property. I’ve fl agged this with several whisky brands in the last few weeks and sent them dozens of examples of people selling NFTs that look as if they may come from the whisky brand. Both Nike and Hermès are suing NFT ‘artists’ who have been selling NFT images of their products in NFT marketplaces. So, I suspect whisky brands will be similarly concerned about breaches of IP.

I’m also incredibly wary of people selling ‘fractions’ of a whisky bottle via NFTs. Essentially decanting the whisky into miniatures for selling as an NFT or ‘share’ of the whole bottle. Firstly, if rebottling happens it could be in breach of laws protecting Scotch whisky, not to mention IP issues around labeling. I’ve seen examples of people literally doing this in their kitchen. How does the buyer know that what they are buying is really what they think it is? Same goes for individuals listing whole bottles as NFTs. How can this be verifi ed as authentic? Where is the bottle stored? Is it insured? Is the seller even licensed to sell alcohol? So many red fl ags.

To make it more bizarre they are often trying to sell the NFT for more than the real cost of the actual bottle on a shelf.

Recently, in the space of a week over two hundred and fi fty four tokens valued at $1.7m were ‘stolen’ in an online phishing attack on OpenSea, a major NFT marketplace. So even though an NFT is supposedly a ‘smart contract’ it’s not that smart if you accidentally give your password to a cyber criminal.

At the start of this rant I did mention that I’m not entirely against the idea of blockchain, NFTs or crypto. There are several ways that I think whisky brands could cleverly and effectively engage in this space. However, I do have concerns about anything really tied to a physical asset.

The main area that I could see whisky brands using NFTs would be in a membership concept. Many whisky brands already have their own whisky clubs. However, membership could be offered as an NFT token that could be gifted, bought, sold or traded. There could be bronze, silver, gold tiers with only a limited number of each. All of this could be a really nice proposition if handled well by the brand owner and make a pretty fun ‘exclusive’ club for consumers. Another idea that distilleries could start using would be the use of POAPs (Proof Of Attendance Protocol). Basically, think of this like getting a digital sticker or a badge for visiting an event or place. At Diageo’s twelve distilleries that are open to visitors you used to be able to collect a stamp in a mini passport book. Once you’d collected all twelve stamps you could send it off and receive a quaich as a prize. It’s essentially a digital way of doing this.

Another space that could be interesting in the future for whisky is that of DAOs (Decentralized Autonomous Organisations). It’s basically a way of creating a transparent organisation where voting rights are assigned via NFTs. As mentioned above I do have concerns around NFTs tied to physical assets for all the reasons mentioned. However, if handled directly by an established and legitimate whisky distillery a DAO could work well for a group of friends, or small syndicate, that want to pull together to buy a cask. Knowing that the cask will be held safely in a bonded warehouse by the distillery.

I have however already spotted a few projects looking to build a DAO distillery. But, the information I can fi nd gives no indication of who is behind the project, if they have any experience of running a business, let alone a distillery, and has no mention of where in the world the distillery would actually be. Nice idea, in theory, but as you can see several people are jumping into this space just so that they can be the fi rst to do it.

The same applies to the whisky and spirits brands who have already sold offi cial NFTs tied to bottles. I get the strong feeling that they just wanted to be the fi rst to do it and hadn’t really considered the wider implications of environmental impact and future risks. Many whisky brands have cited that they want to use NFTs to get in front of a new audience. I would question if an audience who only wants to speculate on the future value of your product to profi t from it, never having even taken a sip of your whisky, is really the audience you want to be speaking to?

LUXURY MARQUES ARE SEEN AS THE IDEAL BEDFELLOWS FOR HIGH END I SCOTCH

A

dding a splash of luxury

Whisky brands are teaming up with a wider and wider range of luxury goods and cultural bodies, and coming up with creative ways to promote each other’s products and events

Written by Peter Ranscombe

Left: The Macallan Distillery is visited by a couple of Bentleys. Right: Bottles of The Macallan 18YO and Red Collection 40YO given to Scotch Club members.

Some things were meant to go together – fi sh and chips, neeps and tatties, Aly Bain and Phil Cunningham. But how about whisky and cars? Or whisky and hotels? Or whisky and art? Scotch marketing was once a simple game; pick the tartan to go on the tin and then spin the dice to work out if it was the season for sponsoring a rugby it was the season for sponsoring a rugby match or a fi tba game. If the advertising match or a fi tba game. If the advertising budget stretched then hiring a stand-up budget stretched then hiring a stand-up comedian to do a short television advert comedian to do a short television advert was about as exciting as it got. Nowadays, product launches have become ‘activations’. I’m still not 100% sure what that made-up word means but, having attended dozens of them, I’m pretty sure they’re what we used to call ‘events’ back in the days before social media, plant-based sausages and alcohol-free ‘spirits’. A key part of an ‘activation’ is teaming up with the right partner – and whisky distillers are getting more and more creative when it comes to the luxury goods brands and high-brow artistic troupes with which they form their alliances. Twee bagpipes and shortbread are no longer an option. no longer an option. While drink driving has While drink driving has been consigned mercifully been consigned mercifully to the 1970s – along with to the 1970s – along with the three-day week and Alf the three-day week and Alf Garnett’s rants – several Garnett’s rants – several whisky labels have motored whisky labels have motored ahead with links to the ahead with links to the crème-de-la-crème of crème-de-la-crème of the car industry. Luxury the car industry. Luxury marques are seen as the marques are seen as the ideal bedfellows for highideal bedfellows for highend Scotch. end Scotch. Islay distillery Bowmore has taken a ride Bowmore has taken a ride with sportscar marque with sportscar marque

Aston Martin in recent years. Just 25 bottles of its Black Bowmore DB5 1964 went on sale in 2020 as part of their ongoing partnership.

‘Exceptional experiences’ are on the agenda for the pair, highlighting the opportunities for the brands to tap into each other’s customers. More joint products are also on the cards.

The Black Bowmore DB5 1964 – costing £50,000 a bottle – was designed to mark an important year for both fi rms. In 1964, Bowmore installed a gas boiler to heat its stills, replacing its old coal-burning furnace, with the fi rst spirit to be bottled after the changeover going on to become its legendary ‘Black Bowmore’, a richer whisky that’s only been bottled on six occasions.

Although Aston Martin’s DB5 hit the road in 1963, it

wasn’t until the following year that Sean Connery drove it onto the big screen in Goldfi nger, the seminal James Bond fi lm, cementing its place in popular culture. That heritage was even refl ected in the packaging for the Black Bowmore, which included ‘a genuine Aston Martin DB5 piston’.

In July 2021, The Macallan unveiled a partnership with luxury carmaker Bentley. Initially, their deal will cover the environment, with each brand sharing lessons with the other about reducing their carbon dioxide emissions, sourcing sustainable materials, and fi nding local suppliers.

Eventually, the companies aim to collaborate on products, events, and ‘curated customer experiences’. The Macallan is also taking delivery of two of Bentley’s new hybrid vehicles for use on its Speyside estate, home to its new Hobbit house-like distillery.

The Macallan has also teamed up with The Balmoral hotel in Edinburgh to create a ‘Scotch Club’. Basic membership begins at £710 a year, and includes a bottle of The Macallan double cask 18-year-old single malt, which is stored under lock and key in one of the ‘keeps’ in The Balmoral’s Scotch bar.

Membership also includes a private whisky tasting in the bar, along with advanced invitations to masterclasses, and discounts on hotel suites. Members who pay the top rate of £17,700 a year get upgraded to a bottle of The Macallan red collection 40-year-old whisky.

Partnerships between whisky labels and luxury goods makers can bring benefi ts for both parties, explains branding expert Susie Davidson. ‘These partnerships can give access to new customer groups, as the luxury partner audience can often be distinct from the whisky partner demographic,’ she says.

‘Investment in the partnership for the long term is key. To truly build awareness and relevance in the luxury space, there are no quick fi xes.

‘It takes time, commitment, and investment. Where the consumer cannot see or understand the link or connection between the partners, it will be diffi cult to drive a brand engagement, recognition, or equity building.’ engagement, recognition, or equity building.’

As well as luxury goods, whisky makers are also As well as luxury goods, whisky makers are also building links to the high arts. At the end of 2020, Dalmore building links to the high arts. At the end of 2020, Dalmore signed a four-year deal with the Victoria & Albert (V&A) signed a four-year deal with the Victoria & Albert (V&A) design museum in Dundee, which will include supporting design museum in Dundee, which will include supporting collaborations and commissioning a fi lm about ‘design, collaborations and commissioning a fi lm about ‘design, design education, and the value of design to design education, and the value of design to Scotland’.

The initiative began with Dalmore The initiative began with Dalmore donating the proceeds from a silent auction donating the proceeds from a silent auction of its 60-year-old 180th anniversary whisky at of its 60-year-old 180th anniversary whisky at Harrods. An auction in Hong Kong in October Harrods. An auction in Hong Kong in October 2021 also raised £100,000 for the V&A after six 2021 also raised £100,000 for the V&A after six malts bottled between 1951 and 2000 sold for a malts bottled between 1951 and 2000 sold for a record £830,000.

Diageo, Scotland’s largest distiller, also Diageo, Scotland’s largest distiller, also held a sale with Whisky Auctioneer to raise held a sale with Whisky Auctioneer to raise money for Scottish Ballet: 470 bottles from money for Scottish Ballet: 470 bottles from a Royal Lochnagar cask known as ‘The a Royal Lochnagar cask known as ‘The Sleeping Beauty’ raised just over £230,000 Sleeping Beauty’ raised just over £230,000 for the organisation’s endowment fund to for the organisation’s endowment fund to commission ballets, support dancers, and commission ballets, support dancers, and fi nance engagement programmes. fi nance engagement programmes.

‘The tremendous interest this auction ‘The tremendous interest this auction attracted is a testament to the increasing appeal attracted is a testament to the increasing appeal of top-quality Scotch whisky as a collectable of top-quality Scotch whisky as a collectable object of desire, and we’re delighted with object of desire, and we’re delighted with

the contribution this has made to Scottish Ballet,’ says James Mackay, Diageo’s head of rare and exceptional spirits. ‘With our “Casks of Distinction” programme, Diageo is proud to join Scottish Ballet in showcasing Scotland as a source of globally-admired products, culture, and arts.’

Fiona Wollocombe, chair of Scottish Ballet’s endowment fund, adds: ‘Surpassing all our expectations, the values achieved at auction from the sale of The Sleeping Beauty form both a historic donation and a special moment in Scottish Ballet’s history. I would like to say thank you to everyone involved for turning our dream donation into a fairy-tale ending.’

TWEE BAGPIPES AND SHORTBREAD ARE NO SHORTBREAD ARE NO LONGER AN OPTION LONGER AN OPTION

From left: Bottles of The Macallan stored at the Balmoral Hotel; the Dalmore 60YO; Scottish Ballet dancer Alice Kawalek with The Sleeping Beauty cask of Royal Lochnagar whisky [Credit: Gavin Smart].

info@northstarspirits.com www.northstarspirits.com

Top: The finished tweed jackets designed by Judy R Clark. Left: Creating the tweed.

LUXURY GOODS ARE JUST THE TONIC FOR GIN LABELS

Few brands scream ‘luxury’ like Harris tweed. From jackets and trainers to cushion covers and tea cosies, the Western Isles’ most famous export is still seen by many as the epitome of class and sophistication.

It’s little surprise then that Isle of Harris Distillery teamed up with Scottish designer Judy R Clark in 2020 to launch a made-to-measure Harris tweed jacket. Following the success of the initial partnership, the pair have now unveiled made-to-order jackets at £660 a pop.

Isle of Harris Distillery – along with Harris Tweed Hebrides, the Harris Tweed Authority, and the islands’ education services – ran a competition for children to design a tweed, while learning about the history of the cloth. The winner was 14-year-old Scott Murray from Sir Edward Scott School on Harris, with Judy R Clark turning his design into reality.

Some of the world’s most tightly-controlled partnerships involve big sporting events, including the Olympic Games. Cameron McCann, owner of Stirling Distillery, took advice from the British Olympic Association on how to market his ‘OlympiGIN’.

‘We had an incredible response – lots of sports fans wanting a keepsake and gin fans wanting a limitededition gin,’ he explains. ‘Dame Kelly Holmes was a big fan and reviewed it on her gin Instagram account, and Colin Jackson was a great supporter – he’s also given advice to one of our members of staff taking on a running challenge during August. What a nice guy.

‘We were delighted that Judy Murray did a post about it and encouraged people to shop local. She, of course, used the image of the OlympiGIN in front of Andy’s gold letterbox in her post. And Rebecca Adlington was really supportive of the gin, posting about it and thanking us.’

McCann adds: ‘Many gold medal winners have been sent bottles, including BMX gold medallist Bethany Shriever, triathletes Georgia Taylor Brown and Jess Learmonth, and both pentathlete gold medal winners Joe Choong and Kate French, to name a few. Some asked for extra bottles for family or for parties they were throwing.

‘We also had Stirling local athlete Kathleen Dawson come into the distillery with her gold medal from the swimming relay. We have been blown away with the response.’