Aussie Winemaker Pivots From China to Crypto
By W. Blake Gray
Australian wine has been tougher to sell since the country’s largest market, China, slapped tariffs of more than 100 percent on it this year. So vintners are trying to get creative.
Dave Powell racked up four 100-point scores from the Wine Advocate during his time as winemaker at Torbreck Vintners, which he founded in 1994 but lost financial control of a decade later. Powell also got three 98s and a 99 from the Advocate in four vintages at Powell & Son.
Now he has a new project, Neldner Road, specializing in single-vineyard wines from six old-vine vineyards in Barossa Valley. He made 100 barrels of wine in 2021, and he calls it “the best wine I’ve ever made, and probably the best wine I’ll ever make”. (That may be pure marketing, but there are climate reasons behind it.)
But he’s facing a rough market for expensive Barossa Valley wines. Australian wine exports declined by value over the last year in all six of the county’s top export markets: the 78 percent drop to China is the worst, but there were also double-digit drops in export value to the US, Canada and New Zealand. The UK is now Australian wine’s top export market – but while the cash-strapped Brits imported 7 percent more Aussie wine, they paid 2 percent less for it.
So what’s a high-end Barossa Valley winemaker to do? In Powell’s case, he has entered the world of cryptocurrency and NFTs with a very unusual auction.
“When a friend first proposed it to me, a non-fungible token, I thought it was a communicable disease,” Powell said. “The more I found out about it, the more I researched it, I thought, well, you never know. With the problems with the Australian wine industry, with the China situation and needing to sell wines somewhere, where is there an untapped market? The whole thing about cryptocurrency is that there’s a lot of money invested in it.”
In July, Bordeaux’s Château Angélus reached out to this market by offering a single barrel of 2020 wine as an NFT. Powell has gone much further: He is offering the entire vintage in an auction on the NFT auction site Open Sea.
Most of what’s for sale on Open Sea is digital art: computer drawings that look a bit like animation cells you might buy at Disney World – the difference being they don’t look as good and cost quite a bit more.
Powell is selling each barrel of wine individually as an NFT. Each lot will include a piece of unique digital art that is basically a photo of the barrel head. More importantly, each lot will include the contents of that barrel, 225 liters of wine, which can be bottled into the buyer’s choice of bottle size and shipped to the buyer when the time comes.
WETH’s the deal?
In addition to a lot of money, you’ll need a cryptocurrency wallet and a glossary to bid. Bids are only offered in WETH, which is a “wrapped” ETH cryptocurrency. The skyrocketing value of cryptocurrencies is obvious from the exchange rate. Some lots look deceptively cheap, but 6.95 WETH was worth about $33,000 on Monday; thus a winning bid at that price would make the cheapest wines on offer worth about $110 for a 750ml bottle. But for others, the required opening bid is as high as 34.73 WETH, or about $165,000 total – thus making it 300 $50 bottles.
Torbreck’s wines sell for more than $100 a bottle, and these are single-vineyard wines that seem higher-end than most Powell & Son offerings, so for some it’s arguably a chance to get a good deal by buying early, just as Bordeaux buyers have done for decades with the en primeur system.
But the market of buyers is entirely different. Bordeaux en primeur is bought by experienced wine trade buyers who have a whole network of facilities to deal with the storage, shipping and resale of their acquisitions. NFTs, according to an AdWeek survey, are bought mostly by Millennials, most of them wealthy white men.
The selling point for NFTs is that they are unique: think of the Wu Tang Clan making only copy of an album and selling it for $2 million. (After the buyer was convicted of an unrelated crime, the US Department of Justice seized and resold it for $4 million.) In addition to the album, the buyer gets bragging rights, which may represent the greatest value of the purchase.
That brings up a point: the main demographic differences between Bordeaux en primeur buyers and NFT buyers is that the NFT buyers are younger. If you think about it, this is backwards: older people could buy an NFT they can brag about enjoying now while a younger consumer can wait decades to brag about how the Bordeaux he bought en primeur is just reaching its prime now. In sum, NFT buyers are the missing Millennials the wine industry desperately wants to reach.
That’s demographics, but the more important difference for Powell is that Bordeaux knows how to reach its en primeur buyers: it sets a schedule and they arrive in person to taste barrel samples. Powell has no idea how to reach NFT buyers.
“The one piece of the puzzle we’re struggling to get our head around, is, how do you actually get to this community?” Powell told Wine-Searcher. “The stuff’s there and people just don’t even know it’s available. Most of what I can see on the site is digital artwork. Will they be interested in something that has a slight digital component, but it’s something that’s tangible? Maybe not.”
Powell doesn’t know the NFT market, but he does know Barossa Valley, and he says the conditions were perfect in 2021 for a great vintage that he also fears might be Barossa’s best for a long time.
“The ’19 and ’20 were low vintages. With the heat, the vines couldn’t produce as much fruit,” Powell said. “In 2021, the preceding winter was pretty good. It was more rain than we’ve seen in a couple of years. The growing season was really cool and mild. Perfect growing conditions. Normally you have to wait a couple of years to see how good the quality is but in this case I’ve been working in the Barossa for 41 years and I can tell this one right away. I’d be surprised with global warming if we get that confluence of conditions again.”
A really ambitious bidder could buy Lot 101 and own Powell’s entire vintage, all 100 barrels. Right now that would cost 2373.28 WETH: more than $11 million.
“Somebody like Elon Musk could buy it and give it away as corporate gifts, with the Tesla logo,” Powell said.
The last time I checked before filing this story, there were no bids yet on that or any of the lots. But it’s early: the auction continues through November 17 on Open Sea. Powell says that if the vintage doesn’t sell as an NFT, he can simply bottle it up and sell it the traditional way.
“We’ve had a lot of interest from the wine community,” Powell said. “Especially in Australia but everywhere in the world, everybody’s looking for new ways to sell wine. Will it be successful? I don’t know. I’d rather try something new and see what happens.”