← Liftoff with Keith: Conversations with Super Founders and Growth Experts sharing useful insights
Liftoff with Keith: Conversations with Super Founders and Growth Experts sharing useful insights
How CruTrade Is Fixing the Broken Fine Wine Market with Blockchain & Provenance
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The sponsor of Liftoff with Keith is the one and Only Compass Strategic Advisors.com an experienced partner to help you navigate everything from cap tables to stock option and compensation plans and all types of backroom and marketing services. There is no better friend to the startup CEO than Compass. Check them out at Compass Strategic Advisors. Oh, nothing wrong with having a little chuckle as we wind on into another great episode of Liftoff with Keith and our special guest today, Devin Ferreira, where this is really going to be fun. Devin, it's still kind of morning time for us here in California. You in the southern variety of the region, and I'm in the northern variety of the region, but we're talking grapes and fermented ones at that. And the business that you run called crude trade, which has taken the wine industry and kind of taken it into the, the technology layer and also focusing on the collector layer. So it's really kind of amazing. I love wine. I'm not that astute. I have no, no potential as a sommelier. But I do love going up to the wine regions and doing wine tastings and having some of the great stuff and hearing the great stories about how wine is built and, and made. And you're in the process of really kind of, of adding a new layer to it. Why don't you share with our audience what you're, what you're working on at Crew Trade?
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Yeah, thanks, Keith. I appreciate that. And yeah, good morning to you. It is morning here. A little bit early for wine, but not too early for coffee. So we'll talk about wine while we, while we drink coffee. There you go. You know, it's really, it's not so much about the technology per se, although wine is such an interesting business because it is arguably the world's oldest industry. We've been making wine for 8,000 years, but still the industry runs on technology that, you know, was built in 1985. So it's kind of old fashioned. Yes, it begins with grapes and farmers, but it's a, it's a shame just how overly complex the way we manage the business has become and how outdated the systems are. So this is less about just trying to bring technology to the wine industry, but it's more about trying to serve the needs and the interests of people that really care about the craft and really care about the wine. And yeah, we're using technology to solve some very real problems for them. And, and we're pretty excited about, about where we're heading.
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Well, you're being modest now, so share with us a bit. Little Little bit more detail on what you're doing to accomplish just that.
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Sure. So, you know, when you think about the wine business and, and the wines we'll talk about today, primarily are the best wines in the world. So if you look at the wines on crude trade, it really represents wines that originate from the top, say, 300 producers in the world, primarily Old world Bordeaux, Burgundy, Champagne, parts of Italy. And we've started to add some wines recently from places like Spain and Portugal, but highly selective. Highly selective. And, and, you know, when. When you're into serious wines like that or when you really care about wines, you have a few problems. The first one is, as a collector, it's really difficult to get access to the best wines in the world. You know? Yes. On. On the, on, on the whole, wine consumption is deteriorating slightly over time, but for the very best wines in the world, at the top of that pyramid, there's still a tremendous amount of demand and interest in getting, Getting. Getting hands on the best products out there. And so as a collector, you've got a few key problems. The first one is access. You know, you're in California. We don't have any California wines. But just to make it relevant to our region, it's really takes a long time to get on mailing lists for the best wineries. You know, and certainly when you expand that to. To the regions we spoke about, it can take seven to 10 years in some cases to actually get an allocation. If you're just a guy who's interested in wine and has resources. So that's. That's a big problem. You know, the other problem is curation. You know, how can you be sure that what you're buying is great? Yes, you can get all the typical names, but if you're somebody that really wants to hunt and peck on the fringes of finding what's hot and the new rising star in Burgundy, say, you know, curation becomes super important. So selection is a big problem. What do I buy and how do I get my hands on it? So that. That's a big problem. Another problem that, that you have is, let's assume you could solve those. How can you be comfortable that what you're getting is not just authentic? Sure, fraud is, is. Is. Is a challenge in the industry, but it's not the biggest issue. A much bigger problem is provenance. How can you make sure that the wine that you've. You've. You've been able to secure has been treated right? You know, wine is really unique in the sense that it's. It's the world's only living luxury product, if you think about it. And every time you move a bottle, the wine dies a little bit. You know, wine doesn't like movement, it doesn't like vibration, it doesn't like heat. It just likes to sit still and get better. Right. Kind of like me, as my wife likes to say. But do you like.
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You like what, 60 degree temperature yourself, are you. Yeah, I see you.
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It's a little cool. I grew up in South Africa, so, you know, I'm more of a Sevent kind of guy. But. But we digress. So selection's a challenge. But if you can get your hands on it, how can you be sure that. That the provenance is there and that the wines have been treated properly from inception? I mean, I'll give you a really visceral example. 1982 Chateau Lafite is a famous Bordeaux. That was a while ago now. I can remember 82. I'm not sure if you can, but. But most people. Most people, you know, it's a long time ago. And if you think of a bottle of wine from 1982, that that particular bottle will fetch something in the order of about 4,000 US on. On the open markets. Now, if that bottle has changed hands and been moved from seller to seller four times during the course of its life, which is not a crazy number, if you think of. Of the age of the wine, then there is a. There's a chance that. That it suffered some form of degradation. Whether it's cork taint or heat damage or oxidative stress or something, you know, that there's a. There's a chance that. That it's gone through some of that approaching 50%. Now, if you're spending $4,000 on a bottle of wine and on the day you pull the cork finally, and it's not at its peak, that's a tragedy. For somebody that really cares about that wine, it's a very disappointing day. Right. So when you do the math, that's really how damaging it can be, because every time you move, the risk compounds. So we actually. I studied engineering earlier in my life, and so I love numbers. And when I started to get my arms around this problem, we said, all right, let's do some modeling, let's do some math and figure out, like, how does the risk of spoilage actually stack up? And it's as stark as that. If it trades four times, I think it's 48% is the likelihood that some kind of degradation has happened in the bottle. And so, you know, We've, we really want to tackle that problem. So it's access and it's provenance. Those are really the big challenges that we're. We're bringing technology to bear to solve for people that really care about wine. And then the third thing is, you know, trying to shrink that gap between the producer and the. And the drinker. So thinking about how we can connect the wine lover with the wine maker in a way that really gives them both much more of a through line to one another. If you are a top producer in the world, you spend years making this wine and you watch it roll off your driveway, and you really have no idea if anybody's even consumed it or where it's gone, you know, and, and in the secondary market, some of these wines, if they catch heat, can go on to trade for four and five figures even, although you sold it for three figures, sometimes two, in some cases two figures. And, and if there's a problem with the wine, the producer gets all the blame. They take the reputational hit, even although they had no control of what happened to it once it rolled off their driveway. And they don't enjoy any of the, of the, of the upside. So it's a really bad equation. I mean, the industry is broken. You know, fine wine is broken in that way, and we're really trying to fix it using technology.
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So how, if I'm sitting on that bottle of Bordeaux, can I be sure that, you know, I just bought it, that I could be sure that it's been treated well? How do we validate that?
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Yeah, let me show you an example. I'm going to reach over here to my wine fridge, and I do actually have a wine fridge next to my, next to my, next to my desk. Yeah. So this is a. This is a beautiful. This is a beautiful bottle from Domain de Montiel in Burgundy. It's an excellent white wine. And if you can see on the side of the bottle, everything that we get from our producers gets a tag. Over here, this is actually a radio frequency tag, and it's the same technology that you use for Apple Pay, so it's secure. And if I, if you were in my, if you were in my office with me right now, I would ask you to hold your phone up to the bottle, and that'll actually bring up a link where you can see the details about this particular bottle. So not a bottle like this, but this very bottle. And again, it's maybe not really conducive to the best experience on a, on a podcast here, but, you know, on My phone. It'll bring up the history of this bottle and it'll show you exactly where it's been. Yeah. So this one shows me that it was in the producer seller since 2016. That's the vintage it moved into our warehouse in Bone in France in November of 2023. And then I had it shipped out here in November of 25. So that's the history of this bottle. You can think of it like Carfax for wine. It's probably not the best analogy, but it brings it to life. Yeah. So not only can I learn a bit more about the wine, but I've got a perfect understanding of where it's been and for how long and how it got to me. Right. So that's where we get the provenance record that can give people a high degree of certainty about the. The, you know, where this has been and how it's been treated.
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I kind of. I kind of agree with you and I like it. But how much does that represent then, that. That error that occurs in. In the storage of the wine? Like, it's still possible that even though you have the record that we left it out in the sun for two days while we were waiting to move it to location Z or something. I don't know.
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Yeah, that's fair enough. Now, what you find with the best producers and the best wines in the world, there is infrastructure to support safe and professional storage of these products. Right. So we operate a warehouse in Bon in Burgundy, so very close to most of our producers, which is a facility built specifically for wine storage. It's professional storage. And we have in the order of 200,000 bottles in storage right now. So, you know, the first step on this journey was making sure that we could show it through line and fully trace any given bottle from source to wine lover. And that's what we've done now. Yeah. As we, as we continue to evolve the quality of the labeling and what have you, you know, we're exploring the use of tags and. And labels that not only are uniquely identify the bottle, but that also maybe have some other sensors baked into them. So what we're moving towards is a world where, you know, every bottle could have a temperature sensor as well, where you can see if it went out of range and what have you during transportation. So. But that's, I think, you know, a next step on this journey.
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I was going to ask you to explore the business a little bit. Like, what is crew trade? I mean, where do you make your revenue? How many customers do you have? So give Me give us all a sense of what that looks like today and where you, where you want to take the business, because it seems like there are lots of vines that, that could take you many different directions.
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Yeah. So, I mean, look, the wine business is, is, is pretty messy. It's a, it's a, it's a business that is characterized by many, many intermediaries. There's a lot of middlemen and distributors and what have you. So the primary innovation in our overall business model is shrinking that gap between wine lover and wine maker. So there's, there's actually two steps to the business. The first one is the primary side of the business where we will secure wines directly from producers and sell them directly to collectors that, you know, know what they're looking for. That's more of like a curated club. And, and in fact, you know, our parent company is called Crew Rated and exists primarily to serve the needs of these top collectors. Right. So bringing them the best allocations and bringing them closer to producers and taking the risk out of selection, quality and provenance. And then the second step in that journey is, you know, imagine now you are a serious collector. You have many, many wines. You know, let's assume you're one of the top collectors in the world. So you've got a collection that measures well into the seven figures and that, that collection consists of bottles that you acquired at first release or sometimes on Premiere. On Premiere means in the spring you might buy wines that are going to be bottled later in the year. So before they're even bottled, you just, you know, you know, the producer, you know, it's a good year for wine. And so you'll commit.
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Do they call that futures?
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No, they call it on Premiere, which is, which is slightly different. So, so on Premiere is I'm, I'm just going to pre purchase essentially, you know, part of the harvest. And we do that on the Crew Rated side. In fact, we've got a really novel offering where people can buy fraction of a barrel and then decide how they want to bottle it later. Because the way you bottle the wine affects the drinking experience down the road. You know, bigger bottles are better. A three liter will be more valuable than say four 750s. But I digress. So that's the primary side of the business.
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Yeah.
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With crude trade really trying to solve the secondary markets. Okay, so imagine a collector that gets a particular allocation. Typically you take whatever you can get. Right. And so let's say you have 16 bottles of, you know, let's say a great one, a Kei, which is a, you know, a premier Burgundy. But maybe you don't need to keep all the 16 bottles. And now, sadly, they're just sitting in the warehouse collecting dust. The producer wants people to drink those wines at their peak, right? So when wines come into their drinking windows, it's a shame when they're just sitting in some collector's warehouse and they may never be consumed or they might be consumed at a time which is outside of their drinking window. So what we're trying to address with crude trade is how do we take that wine collection and make it liquid again, if you don't mind the pun. Right. So how do we make it possible for a collector to say, all right, well, I'm going to keep 10 of these bottles, and I'm going to sell six of these bottles to somebody that maybe is ready to buy them, maybe missed them at first release. And in that way, I can take some of those profits and rotate them back into, you know, primary purchases or maybe buying other wines on the secondary. So crude trade was really invented to solve the secondary market issue. Okay, so you asked about the mechanics of the business. Let's just think about scale for a minute. Every year, there's roughly 500 billion, half a trillion dollars worth of wine consumed across the world. A fraction of that, let's just call it 9 to 11%. So I don't know, roughly 50 billion of that is what you would think of as fine wine. These are wines that are selling for low to mid three figures at first release, but can go on to fetch crazy numbers in the secondary market. So that's kind of the scale of the business there. But there is in the order of 15 to 20 billion dollars worth of wine currently in professional bonded storage in the world. And those wines are just gathering dust in the dark. Now, we like to say that wines were meant to be poured, not stored. And so with crude trade being able to very easily make those wines available for sale. And here's the true innovation in the business is we enable the easy trading of those wines between collectors without actually having to move the bottle at all. So just going back to the problem I mentioned earlier in the call, where, you know, every time you move the bottle, you risk damaging it. On crude trade, you can trade the bottle as many times as you like, and it just stays perfectly still in professional storage. And the way that we enable that is by tokenizing that wine and allowing for the fast and, you know, low friction trading on the blockchain. So that gives you a permanent history of the ownership and the provenance on the bottle.
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How is that business going for you then? How is, is there, is there real demand for people that are in that collector's area to see it and happy with the blockchain implementation?
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Yeah. So I mean, this is a phase business we launched in October of last year, so we're pretty fresh. You know, Crew Trade launched on October 7th of 25 and I'd say we had a strong Q4. You know, we were able to pressure test this with real collectors. So in the first phase of the business, which we're still in, the service is offered specifically to all of our crew rated members. So over the last four years, on the crew tray crew rated side of the house, we built up a member base of 15,000 plus now. And so the crew trade was primarily a venue for those collectors to begin to get some liquidity on their collection and to easily trade among one another in the next phase of the business, we're looking for ways to actually bring this to a broader market. So thinking about how we can tap into that 15 to 20 billion dollars worth of wine sitting in bonded storage, and that's going to take a little more development. On the tech side, we need to think about how we're going to go and commission those, those wines and bring some of these other storage providers on board. Right. So I would say currently we certainly have the best tokenized supply of fine wine. You know, I encourage you to go and look at crude trade. Anybody who knows anything about wine, I think will be suitably impressed with the selection there. And since launch, we've seen pretty good listings activity and we've had a sell through in the order of 25% of the bottles that are listed there. So, you know, in the grand scheme of things, I think the volumes are still quite small, but we're early in this game and, and you know, we, we think that it's going to get, going to get traction. And do you want to keep it,
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do you want to keep it pretty exclusive to the top wines in the world in, in the regions of the world, or do you see a scenario where Napa wines will have a, a module on your, on your marketplace?
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Yeah, look, California makes some incredible wines and there's a healthy secondary market for some of those as well for the top producers? You know, we, we decided to, to start in Europe just based on the heritage of our business. And also we wanted to start with the most prestigious vineyards. I think the California wine market also has some, you know, unique sort of structural challenges. At the moment. We could talk a little bit about what's happening in California, but, you know, that's. The new world is something that I think we will grow into once we've saturated all the best producers. And if you look at what drives the secondary markets and true kind of top collector behavior, you know, it's always been about France first and then some of the old world market second and then, you know, further down the chain. But yeah, so it's not that we're, we're, we're not interested in some of these regions. It's just that we'll get to them. You know, it's. It's additional complexity and there's not a huge economic incentive for us to do that, especially given some of the, you know, volatility and structural challenges that are facing the, the California wine market.
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Yeah, no, I know a little bit about it. I come from a restaurant family and I'm a, a wine fan for, for many years. So I've had a lot of friends in the wine industry and I know of the challenges. It is a very difficult market now. But look, you know, with a, with a born South African running the business, you know, South Africans and leading executives in a lot of industries here, they're quite the shine. So I have to tap into your, your entrepreneur and business savvy now to, to share some insights into a little business advice. What, what have you learned over the course of not just starting fruit trade, but in your history and business of some lessons that you can share with my, my entrepreneurial audience, my founder audience. Maybe it applies to wine or crude trader. Maybe it applies to things you've done in the past as well.
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Yeah, I mean, my book of notes is I'm on to, I think, a third or fourth at this point in my career. So lots of, lots of mistakes. And I think that's probably where most of the advice lives is how to avoid them. I think, you know, I started my career as an engineer, so on the technical side of things, but I've always had a very active right brain. And as I get deeper into my career, I realize that, you know, the, the answers are sometimes the easiest part of the whole process. You know, we live in a world where answers really are free. I mean, there's not a problem that you have that you can't find an answer to if you just spend a little bit of time looking. I'm sure there's a YouTube video out there somewhere that can explain it. And I've learned that there's a lot more value in figuring out the right question to ask. Right. And spending your time on the right problems, as it were. So I'd say, you know, identifying the right problems is, is where people should spend most of their time. There's a lot of great ideas out there. There's a lot of aspiring entrepreneurs like, hey, I've got an idea for X, Y and Z. But I think that as I get older and more experienced, I realize that the value idea of ideas is, is pretty low. Right. It's, it's, it's really about understanding the problem you're trying to solve and making sure that you're solving the right one. I think it was Charles G. Said, we're moving from a well stated is a problem I have solved. Right.
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So, yeah, we're moving from that world where, you know, we knew everything and now we're searching for everything and now we're prompting for everything. Right. So, yeah, our way is we have to ask better questions. We have to be more in tune with, you know, what we're trying to, to get at and commute how we communicate those things.
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Yeah, no, exactly. I think the other thing that I've learned is although crew trade is a business founded on technology and enabled by new technologies, and I think that will be true for, you know, every business from here on out. In fact, that has been true for a while. But I think the thing that I've really come to appreciate is that the technology is important, but at the end of the day, the best tech doesn't win. And having spent a lot of my career in very technical industries, I think that the area of biggest opportunity for entrepreneurs is really to think about how to communicate the value of what you're doing to the people that you're serving. And, and so I. On that note, I think storytelling is dramatically underappreciated as a core part of success. You know, best tech doesn't win, Best story wins every time. And, and you know, I do a lot of coaching. Crew trade is a business that I, I hopped into full time middle of last year just to make sure we get it off the ground. But I do a lot of advising and business coaching with early stage companies and I spend a lot of time with founders in this area helping them think about how to communicate what they're doing in a way that's going to resonate with the people that they're solving these problems for. And so to that extent, I think that brand narrative and marketing is really something that is poorly understood in the most and often just relegated to like, oh, figure out what you want to do and then, you know, the marketing people will go off and figure out how to let people know. But I think that the closer you can bring some of that thinking into the, the founder's mentality, the entrepreneur's mentality, and recognize that it's the responsibility of the person that's driving all of this to get the communication right and to figure out how to deliver the story in a way that's actually going to land with the people you're building for. That's critical. That's critical. And the best companies and the best entrepreneurs do that. Well, sometimes just, you know, unconsciously and sometimes more deliberately, but there's no doubt that the ones that were not the ones that are able to, to figure that out.
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B
Yeah, Devin, I really want to double click in on that. Let me ask you, is there a person or a company that you look at as your sort of North Star or, or example of who's doing it really well, combining that engineering mentality with, with that storytelling brain as well? Because I think it's not, and I'm not arguing with you as much as just pointing out, I think something is obvious. The best tech doesn't win and the best story doesn't win. It's both. If you have, I mean, to really win in such a crazy and competitive market and world, you need both. I think ultimately.
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Well, yeah, certainly. I think my point was more that the, the technology is a necessary but not sufficient condition.
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B
Right.
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I was agree for success, you know, and I'd say, I mean, it's the most obvious example and, and maybe I'll just, you know, plug a fellow South African. But obviously somebody that I, I really admire and look up to is Elon. I think the way that he tells his stories and kind of gives people something to believe in. So if you think about what he's doing with his various businesses, or let's just take SpaceX.
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B
Yeah.
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Of course, without the technology being there, without all the tremendous innovations, none of it is possible. But at the same time, you know, the people that buy into what he's doing with SpaceX, starting with the employees, are people that are committed to the vision. And the vision is for multi planetary life. Right. And so starting with some first principles, thinking and some basic problems that need to be solved, like Earth, isn't going to last forever. Do we want the species to persist beyond the existence of this planet? And if we do, we need a way to solve that problem. That's something that anybody can resonate with, regardless of whether you're you know, a, a rocket scientist or not, it's a very simple message and if you buy into that story, well then the technology becomes relevant. And so I think without that overlay, it's just a bunch of guys, you know, trying to shoot some, shoot some things into the sky. But of course there's a much bigger story attached to that. So I think that's the obvious example.
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B
Well, Devin, I agree with you. I think, I think continuing to build on a story that has compelling value to it gives people a reason. Excited also breaks through all the noise out there, right where it's never been more access to information and content. And how do we get our story through all of that? It's a challenge, right? It's really tricky. But I think you're onto a good path with pre trade. I think you're on to telling a really cool story. Thanks for sharing it with our audience, with our listeners today.
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A
No, you're very welcome, Keith. It's a pleasure to be here. And like, we're early in the journey, we got a lot more work to do but you know, appreciate people like you giving us an opportunity to share what we're trying to do with the rest of the world.
- [28:33]
B
No, I'm going to share this with my audience in, in various forums online, but I'll also make sure we grab the appropriate URL, people can check it out and who knows, make an offer. Join the Try to get in on some of this good tasting stuff.
- [28:48]
A
Absolutely. Yeah. I mean it's open to the public at Crude Trade IO and we've tried to make it easy to navigate. There's a lot of cool features and yeah, thanks. Thanks again for your support.
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B
My pleasure. Good talking with you.