The March 2012 edition of Decanter magazine features an article on the fine wine supply chain intiative we announced at the WineFuture conference in November. We are reproducing the article below, with the kind permission of its author, John Stimpfig.

Liv-ex to shake up fine wine supply chain

Liv-ex, the global online trading platform, has proposed a radical shake-up of the fine wine supply chain, designed to remove the need for the constant physical movement of younger fine wines from one storage account to another.

‘Most fine wines traded on Liv-ex are not being purchased for immediate consumption’, says its director James Miles. ‘Nevertheless, they end up constantly moving from place to place simply to transfer the title of ownership. This process is unbelievably expensive, risky and detrimental to the provenance and condition of the wine.’

Liv-ex’s high-tech solution is to create a central electronic depository to store and manage ownership records of wines lying in multiple locations. ‘This would allow for the title to be transferred electronically, thus eliminating the need to move wine between countries or bonded warehouses,’ Miles points out.

As an example, he quotes the 2008 Bordeaux vintage which went up dramatically in price after its en primeur release and consequently saw considerable trading. ‘As a result, a case of wine could easily have gone from the chateau to negociant, then making short stays in Germany, London and New York before ending up in Asia. Under the new system it could simply remain in a certified warehouse in Bordeaux. It would effectively become ex-chateau stock.’

Liv-ex believes the change would not only benefit consumers but also producers, merchants and warehouse operators. Cost would be reduced and not moving young wines would eliminate problems of damage, loss and theft. A move towards electronic records would also improve traceability, provenance and condition.

Alun Griffiths MW, wine director at London merchant Berry Bros & Rudd, says the move ‘would give greater assurances to consumers about the provenance and storage history of the wine.’

Johnny Goedhuis, chairman of London merchant Goedhuis, adds: ‘This is a mammoth task that Liv-ex is taking on and it will be a long-term project. But if they can pull it off, it would make a dramatic difference by speeding up transactions times and cutting costs. My only concerns would be over quality of storage and stock control. Assuming these could be overcome, I am extremely supportive.’

Liv-ex’s Miles acknowledges that the project will require time, financial resources and technical development, as well as the support of colleagues in the distribution chain. ‘I am sure there will be plenty of problems,’ he admits, ‘but that’s inevitable when you try to launch something on this scale.

‘However, we believe we are uniquely placed to do this and are 100% behind it. Already we are putting infrastructure components into our own systems which Liv-ex members will be able to use next year. We don’t expect people to adopt it from day one and others may well take some time to opt in. But we are confident that this is the right way forward because it’s a win-win situation for everyone.’