By utilizing radio frequency identification (RFID) technology, a wine's provenance, harvest information, flavor profiles and even suggested food pairings can be inscribed on a rice-sized chip that resides inside the cork. This chip supplements information normally found on a label. The technology is similar to the bar code in many ways-useful in warehousing and inventory control-however, because it is far more versatile and powerful than a bar code, RFID is making a rapid entry into retailing and onto sales floors.

Smartcorq™, an RFID application, was created by LabID of Bologna, Italy, and Umbrian winemaker Arnaldo Caprai. Caprai, an early adopter of Smartcorq, is best known for Sagrantino di Montefalco, which retails in the $100 range. Although the varietal has never ranked with Brunello and Barolo among the great grapes of Italy, this Sagrantino is sought after by collectors.

Caprai chose to first make use of the attention-getting device to help launch Contemporare, a limited bottling of 100 percent Sangiovese, which will retail at about $40, and will join a Nero Outsider and a Merlot/Cabernet blend called "Rosso Outsider" (in Caprai's non-indigenous wine category). Contemporare and the Smartcorq will be shown to the trade and consumers for the first time at Vinitaly in Verona April 6-10.

The Smartcorq is most likely to find a home on retail store shelves, where customers are able to use a small hand-held reader to enjoy the additional information. Eventually, Smartcorq and other related devices will play a role in maintaining inventory at all levels of the industry: production, importing, distribution, retail, restaurants and well-furnished personal cellars, where it would be utilized for personal record keeping. Smartcorq will also become a weapon against fraudulent wine at auctions and other high-end retail points. At $140 for the hand-held reader alone, it is, however, not something for everyone.

The intelligent Smartcorq itself is surprisingly inexpensive. Marco Astorri, CEO of LabID, says it will cost between $0.50 and $1 more than a normal cork, but that this would hardly affect sales of the more expensive wines, Smartcorq's prime market.

Who's using Smartcorq?

Giant retailers such as Albertson's, Target, Wal-Mart, Rite Aid, CVS, Tesco (in the UK) and the giant German retailer Metro Group have asked suppliers to begin installing RFID transponders on pallets and case goods as soon as possible.

Metro Group was so eager to hasten supply line use of the new system that it created an RFID Innovation Center in a warehouse near its headquarters in Dusseldorf. At the center, suppliers explore existing technology and test how their RFID systems can be integrated with Metro's programs. The facility also enables Metro sales divisions and technology partners to familiarize themselves with the new equipment.

Spread over four rooms, Metro's test areas include a demonstration supermarket, with food products and a simulated sales floor for clothing. The warehouse docking doors, forklifts and conveyor belts are equipped with RFID readers and intelligent scales, and smart shelves make tracking of inventory a matter of pushing a button. Metro executive Zygmunt Mierdorf, addressing the National Retail Federation in New York last year, said his firm envisions using RFID within its supply chain from point of manufacture to retail sales floor, but stressed that his vision would take years to become a reality. "We are at the very beginning of the journey," he said.

At Wal-Mart headquarters in Bentonville, Arkansas, Linda Dillman, executive vice president and chief information officer for Wal-Mart, is the leader in pushing RFID in the United States. In April 2004, the chain's top 100 suppliers were mandated to install RFID tags on cases and pallet loads, and that quota has already been surpassed, with some 140 resources now using RFID. A similar mandate has been issued to a second wave of suppliers, and that group includes E&J Gallo and Constellation, the nation's two largest wine producers. Both companies are now studying ways of working with the new technology.

By the end of last year, Wal-Mart had handled more than 200,000 tagged pallets and upwards of 8.5 million tagged cases. Dillman anticipates that the second wave of 300 suppliers will be live by January 2007, bringing the total of participating firms to more than 600.

In the March 2005 issue of Wine Business Monthly, Ernie Chachere, supply chain vice president for E&J Gallo, echoed Mierdorf of the Metro Group, saying, "There's a lot of discovery left to do (on RFID)." Kent Kushar, chief information technology officer of Gallo, stated recently, "The E&J Gallo Winery has been researching and testing RFID since 2004. Gallo is a Wal-Mart second one hundred company and is compliant with their RFID initiative. The winery and 29 other sponsoring companies are working to find solutions to real world supply chain issues through the RFID research center at the Sam W. Walton College of Business at the University of Arkansas."

Bart DiPaolo, senior vice president for information technology at Constellation, praises the technology, observing that it will "present paybacks for producers as well as benefits for major retailers."

DiPaolo told Wine Business Monthly that the alcohol beverage industry is addressing RFID and its allied technology in association with its e-commerce group and EPC Global, a group that sets global standards for electronic product coding. He is a past chairman of the study group working on RFID for the alcoholic beverage industry. DiPaolo says Constellation looks forward to great improvements in the supply chain, production environment, warehouse management and barrel tracking, from the new technology.

Most members of the wine industry are holding back on RFID, waiting to see how it works for the big boys. A production exec at Foster's Wine Estates Americas said, "The prospects are tantalizing, but we'll wait for a while."

In a recent industry journal, consultant John Burnell explored the reservations suppliers may have about adopting RFID. Many people, he observed, hesitate to adopt RFID because of the expense. Burrell pointed out that RFID technology applied to logistics enables workers to become more productive because they no longer need to handle items and physically scan bar codes. Unattended scanning, he stressed, eliminates manual labor altogether.

The cost of RFID has fallen in recent years, but it will never be less expensive than paper bar codes. However, while the initial cost is higher, the technology yields a lower cost of ownership over the long-term since a tag costing $1, for example, can be used many times, eventually costing less than $0.01. Tags with read and write capabilities can also be programmed with new information as they move through the supply chain, eliminating the need to create new bar codes

On the retail front, RFID currently powers the smart cards used by Exxon and Mobil customers at the gas pumps. Many of the fast food chains, such as McDonald's, Taco Bell and KFC, have also tested cashless payment systems, and low-cost versions of the chip are now used by libraries, video stores and other purveyors. Wal-Mart, for instance, projects that more than 1,000 stores, Sam's Clubs and distribution centers will be RFID-equipped by the end of this year.

The tags and corollary gear will become much less expensive as the systems are adopted more widely, but they will never replace the bar code. RFID works best when integrated into a total system of related computer gear, wireless networks and bar codes.

RFID Prevents Wine Theft

Faced with shrinkage in a multi-million dollar wine cellar, one Mexico City hotel called on RFID technology to cut losses on missing bottles of wine. Technicians from RSI ID Technologies, a California- and Mexico-based company that leverages RFID and bar-coding technology to improve business processes, installed electronic readers on wine racks and put pressure-sensitive labels with a transponder on the most expensive bottles. The transponder's serial number is entered into a software program that records the location of each bottle. The reader tracks each bottle and confirms that it is in the proper slot in the rack.

If a guest orders one of the labeled wines, staffers log onto a website to find its location, removing the need to search for bottles. Once it is removed from the rack, the reader no longer senses the tag and sends a message to the computer to remove that bottle from the records, thus updating inventory automatically.

When the bottle is opened, the pressure-sensitive RFID label is removed, destroying the transponder and preventing a thief from switching labels and putting a lesser-priced bottle in the ultra-premium wine's slot. The program calls for smart card access control to the cellar, and a camera records anyone who removes a bottle from its assigned position.

The hotel also uses the RFID system to manage inventory in each of its five restaurants, automatically updating stock in real time and also generating replacement orders when supplies fall below set levels.

Based on reduced theft and improved inventory management, RSI CEO Wolf Bielas calculates the system has saved the hotel about $80 per rack location. The tags cost about $1 a bottle and the reader about $50, but Bielas says prices will drop for both units as more businesses adopt the system. wbm

wbm

Mort Hochstein is a wine journalist who has written for many of the nation's consumer and wine trade publications.

Also see in Wine Business Monthly: "Beyond the Bar Code," March 2005. Or search
www.winebusiness.com, keyword: RFID.