A long term Challenge in the Wine Industry

The Regulation aims to enable consumers to have greater confidence in the food safety approvals process by improving the transparency of EU risk assessments in the food chain and strengthening the reliability, objectivity and independence of studies used by the European Food Safety Authority (“EFSA”).

TRACEABILITY Chapter 1 — Part 1 #OIV #EFSA #EU

In this series of articles, I try to understand the implications of topics related to traceability (chapter 1), transparency (chapter 2), and decentralization (chapter 3). These themes may be considered as antonymous with the wine industry.
Chapter 1 Traceability — In the first chapter, I analyze the relationship between wine producers and consumers through traceability. It has been divided in six articles. This article is the first of the series Traceability. In the second chapter, I examine the effects that transparency could have on the wine supply chain. In the last chapter, I wonder if decentralization could be the future of the wine business industry.

I had the pleasure of interviewing 40 leading players in the wine and the tech industries. For this article, I have been discussing with (sorted by alphabetical order):

REPRESENTATIVES
• Paul Bounaud, Director Community Engagement France / Project Manager Europe Alcoholic Beverages at GS1
• Gilles Brianceau, Director at Inno’Vin
• Pierre Gernelle, Managing Director at Federation of the Négociants-Producers of Great Burgundy
• Eric Lamaille, Head of Business Unit at Champagne Growers Union (Syndicat des Vignerons de Champagne)
• Ignacio Sánchez Recarte, Secretary General at Comité Vins, CEEV (European Committee of Wine Enterprises)

TECH EXPERTS
• Franck Bourrières Sales & Marketing Director at Prooftag
• Sylvie Busca Associate Founder at Wine in Block
• Stefan Gendreau, Associate Founder at Augmented Reality Wine labels
• Gavin Ger, Joint-CEO and Commercial Director at Laava
• Damien Guille, Global Business Development Director at Scribos
• Maxime Le Coutaller Sales Manager at NutriLabel by ATT
• Alexandre Mongrenier, President & CEO at WID Group
• Nicolas Moulin, Founder & CEO at La Vie Du Vin
• Jémérie Pappo Innovation Manager at Hub One
• Jérôme Pichot, CEO at Advanced Track & Trace (ATT)
• Niko Polvinen, Co-Founder & CEO at Logmore
• Sebastian Schier Managing Director at VinID

“At present, digital tools and data science are driving the most innovative evolution of our society, in our lives and the economy. Vitiviniculture may be adapting at a different rhythm and at different stages, in some cases the sector may be subject to profound disruption. In a changing environment, the reactions of the sector may be fearful and hence even conservative.”

— Paul Roca, Managing Director at OIV — excerpt from the Digital trends applied to the vine and wine sector study, November 2021, p.5–6

The OIV launched its new website last week: October 13, 2022. Unfortunately, the redirections of the pages have not been done. The links I put in my article to their reports are not working. Hopefully, OIV will take care of this little problem soon.

1. OIV’s objectives — the International Organization of Vine and Wine: to inform, to assist, to contribute

The OiV’s activities are:

• to draw up and frame recommendations and monitor implementation of such recommendations in liaison with its members […],
• to submit to its members all proposals relating to guaranteeing the authenticity of vine products […] protecting geographical indications […], improving scientific and technical criteria for recognising and protecting new vitivinicultural plant varieties,
• to contribute to the harmonisation and adaptation of regulations by its members […]
• to help protect the health of consumers and to contribute to food safety […],
• to promote and guide scientific and technical research and experimentation.

“Is digital transformation an end in itself? Do we really need it?”

— Gilles Brianceau, Director at Inno’Vin

1.1 OIV’s Strategic Plan — “Facilitation of the digital transition”

The International Organisation of Vine and Wine (OIV) has launched a new digital observatory hub in 2021. The initiative aims to provide updates on the digital and technological trends taking place in the vine and wine sector. This is aligned with the OIV’s strategic plan for the period 2020–2024, which is built around six main axes, of which Axis V is “facilitating the digital transition of the sector”.

However, there are a number of challenges to overcome before reaching a higher maturity level (i.e. lack of public initiatives support, high implementation costs for small producers and low end-user commitment).

I have transcribed the excerpt of the conclusion of a presentation made Giorgio Delgrosso, Head of Statistics Department & Chief Digital Transformation Officer at OIV. This comes from the video where Giorgio has presented the report on digital trends — Nov 2021 (13’20).

“This report offers a good overview of the what is the status quo and the main trends of digitalisation in our sector. Although many see the vine and wine sector as very conservative and linked to tradition, it is clear that we live in a world that is becoming more and more data-driven. At OIV, we think that the vine and wine world is no exception.

Digitalisation offers great opportunities in terms of efficiency, productivity, transparency, sustainability. However in the same time, we have seen how the degree of adoption of digital technologies is still quite low for a number of reasons such as the high implementation costs, the lack of support from the public, low commitment and unawareness especially for what concerns small producers of the lack of international standards.” — Giorgio Delgrosso, Head of Statistics Department & Chief Digital Transformation Officer at OIV.

“We have a problem of adoption by the wine industry because we lack intermediaries, integrators.”

— Gilles Brianceau, Director at Inno’Vin

The OIV report (Nov. 2021) analyses different technologies used across the stages of the value chain: vineyard, winery and distribution. Artificial intelligence, robotics, satellite imagery, Internet of Things (IoT) and blockchain are some of the technologies included.

Digital transformation offers an opportunity for the sector to gain efficiency, transparency, productivity, open itself to new business models/value propositions and improve in sustainability. However, it requires large investments in terms of skills, capital and time hence the slow transition.

“These technologies are tools that we don’t know much about.”

— Pierre Gernelle, Managing Director at Federation of the Négociants-Producers of Great Burgundy

The OIV’s Digital tends applied to the vine and the wine study (Nov. 2021) states (p.16) that “End consumers are also able to interact directly with organisations and have direct information about production stages (for e.g. through blockchain), which is a clear benefit for end consumers.
One example of increased transparency for consumers in the vine and wine sector is the e-label, which thanks to a QR code allows a greater inclusion of information that traditional labels allow.”

“Consumers are asking for more and more information. We [producers] cannot oppose this demand, it is also a matter of transparency and reputation and, if we do not provide it, otherwise others [retailers, NGOs] may do so, with the risk of providing incorrect information.”

— Ignacio Sánchez Recarte, Secretary General at Comité Vins CEEV

1.2 Traceability — “The capacity to track and trace by means of recorded information” — OIV

In 2007, the OIV has defined that the objective of traceability is to ensure that key information to the competent authorities, sector operators, distributors, retailers and consumers, regarding:

• The origin and characteristics of the raw materials used in the vitivinicultural process of the product in question;

• The origin and technical specifications of all materials and chemical, biochemical and biological materials and products used;

• The production, processing, packaging, storage and distribution conditions of any product (finished or in production);

• The relevant composition or analytical parameters of each batch of production;

• The identity of the person(s) responsible in a vitivinicultural production, processing or distribution process to enable, when necessary, rapid product recall and determine responsibility in the event of a risk for consumers.

“We have to deal with climate change, sustainable development, new eco-agricultural approaches, as well as new viticultural and oenological strategies with a low environmental impact, and a transparent protection of both producers and consumers.[…] The plants, the professionals and consequently the consumers can no longer be put off.”

— Luigi Moio, President at OIV — excerpt from the OIV Activity Report 2021

OIV — “Considering Information systems assist transparency in the production process and confidence in the market, from producer to consumer” I am going to focus, in this article, about the winemaker-consumer relationship: information to consumers (eg. nutritional and authentification) and information to producers (e.g. sensing and authentification).

I am analyzing the impacts and methods to achieve three objectives: “the origin and characteristics of raw materials”, “the origin and technical characteristics of all materials and chemical, biochemical and biological products used”, and “the production, processing, packaging, storage and distribution conditions”. The other objectives and the way to achieve them will be analyzed in the next article.

If you wish to read more, here are other articles I wrote: the perception of the taste of wine using AI, how nudge marketing can explain review and rating wine, how to bring the winemaker closer to the consumer using AI.

The OIV adopted basic guidelines for the development of a consistent and standardised approach to traceability in the vitivinicultural sector applicable between countries. The OIV’s ad hoc group on “Traceability and Labeling” has considered that “traceability is one of a number of tools which may be used as appropriate to contribute to food safety and to consumer protection, and to facilitate trade”.

TRACEABILITY = the capacity to track and trace vitivinicultural products through all necessary stages of production, making and distribution, by means of recorded information - OIV 2007.

“We don’t have the means to control the distribution except to have local subsidiaries.”

— Pierre Gernelle, Managing Director at Federation of the Négociants-Producers of Great Burgundy

Traceability systems consist of records and/or documentation and are complemented, if necessary, by samples analysed at critical stages during the production process, supply chain and the commercial life cycle of the product, which have food safety and commercial or economic implications.

Conservation and dissemination of information must be done so as to protect the right to confidentiality relating to subjects arising through the various stages so as to protect elements of competitive producer advantage when this does not conflict with other legal obligations.

Traceability systems should respect and be compatible with all appropriate elements of official national systems controlling the storage, management, and movement of vitivinicultural products. Traceability systems can be supported by business documentation, labels or other related means.

“The most common concern I hear from winemakers is that when they go elsewhere, their wines don’t taste the way they do when they’re in their own vineyard, when they’re in their own location.”

— Robin Grumman-Vogt, CEO of eProvenance

2. Regulations Drive the Wine Industry Forward

Over the past few years, countries, regulatory bodies and local authorities have tended to require manufacturers to display an increasing amount of information on the labels of products. Such information can range from warnings and cautions on the types of materials used and even clinical data, which then also needs to be translated into other languages. Stickers are becoming thicker, text is becoming smaller, and more and more labels are being added. With the introduction of e-labels, the distribution of information within labels has become quicker and more practical.

Sweeping technological advancements are creating a sea change in today’s regulatory environment, posing significant challenges for regulators who strive to maintain a balance between fostering innovation, protecting consumers, and addressing the potential unintended consequences of disruption.

Emerging technologies such as artificial intelligence (AI), machine learning, big data analytics, distributed ledger technology (blockchain), and the Internet of Things (IoT) are creating new ways for consumers to interact — and disrupting traditional business models. It’s an era in which smart devices respond to and anticipate consumer needs.

In the wake of these developments, regulatory leaders are faced with a key challenge: how to best protect citizens, ensure fair markets, and enforce regulations, while allowing these new technologies and businesses to flourish? The assumption that regulations can be crafted slowly and deliberately, and then remain in place, unchanged, for long periods of time, has been upended in today’s environment.

“Regulation is the powerful lever to make things happen, and there is a need for interoperability to enable an effective implementation by all the companies.”

— Paul Bounaud, Project Manager Europe Alcoholic Beverages at GS1

I consider that there are only two blocks allowing the emergence of traceability for the wine industry: the United States and the European Union. Let’s remember that the United States is not a member of the OIV, only the State of Texas is an observer.This is also the case of China, which is an observer, but wishes to become a member State of the OIV. Traceability is an important issue for China. I know this for a fact: my research institute was working with other experts in the vineyards to fight against counterfeiting. Nevertheless, I do not forget what happened to Australian wine. China uses wine as a lever to influence Western governments. China could use traceability as a barrier to entry to the projects I have outlined below, imposing greater demands for information. Indeed, China likes the power relationship, so it does not hesitate to compel states.

2.1. Traceability by the Food Safety Modernization Act — the proposed rules for importing wine to the US

The Food and Drug Administration (FDA) considers wineries to be in the category of food manufacturing plants and they therefore must be registered with the FDA and comply with Food Safety Modernization Act (FSMA).

The Food Safety Modernization Act became law in 2011. This food-safety legislation expanded existing FDA powers in an effort to shore up safety for the entire U.S. food supply — including wines and wine-derived products. This latest round of FDA updates creates new responsibilities for operators of wineries, vineyards, and supply chains. The legislative environment hasn’t changed for wine producers as much as it has for, say, a meat-packing plant. The good news is that food-safety specialists consider wine a low-risk product.

FSMA Proposed Rule for Food Traceability

Section 204 of the FDA Food Safety Modernization Act (FSMA) requires the FDA to designate foods for which additional recordkeeping requirements are appropriate and necessary to protect public health, and to establish those recordkeeping requirements. The additional recordkeeping requirements that the FDA proposes to establish are outlined in the Requirements for Additional Traceability Records for Certain Foods (Food Traceability) proposed rule and are intended to make it easier to rapidly and effectively track the movement of a food to prevent or mitigate a foodborne illness outbreak.

The winery must also keep track of each ingredient used in each wine that is produced, bottled, and shipped by the winery. The FDA has not prescribed specific penalties, but simply reminds food facility operators and importers that non-compliance with registration, prior notice, or recordkeeping requirements (once they are mandatory) are prohibited acts, and violators are subject to civil or criminal court action.

The alarm probably won’t go off until 2026, but the clock is ticking. At a public meeting last December, FDA deputy commissioner Frank Yiannas warned the audience that it would be hearing “a lot of talk about data and standards.” But, he emphasized, “this is ultimately all about protecting consumers from contaminated foods.”

Although the FDA will not require electronic records, it does “strongly encourage” them. Digitization may be the only way to produce an “electronic, sortable spreadsheet” in 24 hours without serious headaches.

The FDA’s proposed system follows critical tracking events (CTEs) in the supply chain and stipulates capture of key data elements (KDEs) along the way. It will also require creation of a “lot” identified by a specific code, such as a “batch,” “production run” or, in the case of growers, what’s harvested in a 24-hour period.

“Wine producers do not use traceability products because they are not forced. There is no legislation like for the pharmaceutical or tobacco industries.”

— Jérôme Pichot, CEO at Advanced Track & Trace

If producers are using an ingredient on the Food Traceability List (e.g. eggs), but the product is transformed through a kill step, the producer must adhere to these traceability requirements, but those downstream on the supply chain do not. Transformation events that do not involve a kill step will still require recordkeeping required by this proposed rule.The public comment period for this proposed rule closes Monday, Feb. 22. The rule must be finalized by November 2022, after which, companies across the supply chain will have two years to comply. Producers and others across the supply chain must prepare to implement the final rule by the end of 2024.
The transparency rules of the Food Safety Modernization Act for importing into the US are not yet fully finalized. It will be necessary to follow and monitor the impacts for the wine industry (which rules, applicable, from when). I advise you to question your representation (trade association, union, federation, commission) in order to be ready, as other industries are preparing (seafood, bakery…).

2.2. EU — Transparency Regulation of risk assessment in the food chain

The Regulation aims to enable consumers to have greater confidence in the food safety approvals process by improving the transparency of EU risk assessments in the food chain and strengthening the reliability, objectivity and independence of studies used by the European Food Safety Authority (“EFSA”). The Regulation has four key objectives:

• Ensure greater transparency of the EU’s risk assessment process in the food chain enabling consumers to access the scientific studies and information,
• Increase the independence of scientific studies, obliging businesses applying for authorisation to submit all relevant information including unfavourable studies,
• Develop comprehensive and effective risk communication,
• Strengthen the governance of scientific cooperation.

The Regulation brings with it greater transparency and scientific rigor. Companies will need to be mindful of the new transparency requirements and confidentiality provisions, as well as the impact that mandatory publication of scientific studies may have on innovation and new product development in the sector.

“How can we increase the level of interest and be more supportive? By enabling the #collaboration# of all the stakeholders involved in the business issue: associations, solution providers, brands, merchants, etc because there is an atomicity. This remains a interdependency issue.”

— Paul Bounaud, Project Manager Europe Alcoholic Beverages at GS1

This was the first article of Chapter 1 — Traceability. In the next post, I remind you to mark the date if you want to continue selling wine in the EU.