How brands are serving up digital dining

The total value of NFT transactions was $17.6 billion last year and the food and drink sector is looking to earn a bigger piece of the pie. But is it the right move for every business?
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When restaurant chain Taco Bell announced the return of potatoes to its menu last year, it made headlines around the world. But it wasn't the potatoes that caught everyone's attention. The menu change went viral because Taco Bell also released a crypto art collection to mark the occasion. In doing so, it became the first fast-food chain to ever sell non-fungible tokens (NFTs) – unique digital objects with their own traceable history on the blockchain that can be traded at any time. 

Prices for its 25-strong collection of crypto GIFs, including a fluorescent Newton's Cradle made of tacos, began at $1 and sold out in 30 minutes. Days later, resellers were charging more than $3,000 for them. Since then, other food and beverage brands have followed in Taco Bell's footsteps by selling NFTs and experimenting with other products in the metaverse. 

Beer brand Budweiser, for example, launched Budverse Cans Heritage Edition, an NFT sale featuring 1,936 stylized images of its cans on various backgrounds. And then there's McDonald's, bakery-cafe chain Panera Bread and supermarket brand Walmart, which have all filed trademark requests to establish virtual locations and sell virtual food and drink in the metaverse. 

Encompassing all things built on the blockchain, from original cocktail recipes as NFTs to bitcoin-enabled pizza parties in the real world, Web3 has been heralded by developers, investors and early adopters as the next iteration of the internet. The term ‘Web3’ means different things to different people, but it's commonly used to reference a more decentralized kind of internet; it represents a virtual utopia free from big tech ownership, and a place where creators and artists are fairly remunerated for their work. 

‘It's the internet we know, but decentralized,’ says Dr Merav Ozair, a blockchain expert and fintech professor at Rutgers Business School in the US. ‘Web3 is governed by the blockchain concept of peer-to-peer and is transparent for everyone. The control – in theory – goes back to the user, rather than the company.’ 

So long as such principles are upheld, Web3's core features could redefine ownership, identity and community in digital environments, creating huge opportunities for brands that want to drive growth and deepen relationships with their customers. The other big positive? Products no longer need to be tangible – or ingestible – to hold value, opening up new revenue streams for food and beverage brands, which have been hit hard by global supply-chain slowdowns. In the grocery industry, around 5% to 10% of typical categories are out of stock, according to the Consumer Packaged Goods Supply Index from data analytics and market research brand IRI, with a 13% dearth in beverages thought to be caused by a global shortage of cans and bottles.

An innovative way to scale?

But it's not only the fast-food giants that have been looking to take advantage of the popularity of NFTs. Lots of smaller brands, which tend to be digital-only and independent, are using the blockchain to raise buy-in for their initial product. 

Bored Breakfast Club, an NFT community of coffee enthusiasts, partnered with craft coffee company Yes Plz to establish the first NFT coffee subscription, enabling shipments of ground bags of coffee worldwide for members. Yerb, a yerba mate tea drink co-founded by LA-based Brett Fink, started sales through NFTs in February 2021. Each token enabled the holder to get six 12-ounce cans of Yerb's first release in April this year, plus a six-pack of cans for every year they hold the NFT. Yerb will also be available for purchase to non-NFT holders, too. 

Similarly to Yerb, the co-founders of Leisure Project, brothers Alex and Steve Michaelsen, are clear about being a functional hydration beverage company that uses NFTs as a digital manifestation of the brand, rather than an NFT brand with a drink in the pipeline. By creating a community before the product's inception, Leisure Project is able to raise funds from a large pool of investors before shipping a single can. 

‘[NFT owners will] be treated as co-creators, with lifetime discounts and grants to support the community's endeavors,’ says Alex. ‘Unless [crowdfunding platform] Kickstarter leans into this, it'll be a new form of Kickstarter – but more long term, and less transactional.’ Set to launch with three flavors, Leisure Project's future product lines will be nominated, voted on and signed off by the community. 

Dave Goldman, whose custom craft beverage company Eliqs made an IPA, a lager and an ale in collaboration with NFT collection Degenerate Ape Academy, believes this approach doesn't just nudge people and brands into co-ownership, but it cuts out the middleman, too. 

‘Web3 reduces friction to innovation and participation,’ he explains. ‘There's no need to go through paid social media like Facebook – instead, it's a Discord owned wholly by [the brand], for example. It represents a push to the democratization of everything.’

Still, Dave remains cool about the difficulties of launching comestibles to NFT communities. ‘The value proposition is different from beauty or fashion, where it's high-margin products [that] are cheap to get to customers and work well with subscriptions,’ he says. ‘Drinks, however, are indicative of who we are and our values – from rappers favoring certain types of champagne to [canned water brand] Liquid Death's anti-authoritarian appeal, so building a brand tied to certain identities is easier in this space – plus, the community element of Web3 supercharges those grassroots beginnings.’ 

For Degenerate Apes, it's beer, while Louisville-born NFT project Party Horses has chosen fellow Kentucky brand Maker's Mark as its official bourbon partner, giving early adopters limited-edition branded bottles.

A new kind of reward scheme 

Dr Merav Ozair predicts a new era of rewarding customers with Web3. ‘Instead of loyalty cards, brands will use DAOs [member-owned communities] and NFTs to get the community voting and rewarding them,’ she says. ‘If Web3 takes off and becomes what I envisage, you'll be able to use reward tokens not just with the brand that rewarded you, but for other brands, too.’ 

There's a long way to go, but plenty of fun is being facilitated to attract new audiences. UK hard seltzer brand Fountain held a sweepstake that gave 15 NFT holders a digital fridge and a year's supply of drinks. When people entered their email, cyber security platform Magic generated a blockchain wallet. If they won, the Fountain Fridge NFT was sent to the wallet. 

Emily Miller, founder of cereal company OffLimits, launched her brand's first NFT at the Art Basel art fair in September 2021. Buyers had a 10% chance of receiving an exploding version of the cereal box NFT, winning cereal and merch. 

‘I tried to build in some functionality in the early phases,’ says Emily. ‘People were super excited; for many, it was their first NFT. We wanted to show we cared from a crypto native perspective, not just a check-mark project because it's trendy.’ 

Next up for the brand is collaborative cereal box design. People will receive a unique character NFT and access to a private Discord channel, where they can post their NFTs. OffLimits will then make a collage featuring all submitted images. ‘Everyone votes on which they prefer, and then we'll make them into physical cereal boxes, and get four boxes to [each] community [member],’ Emily explains. ‘It's a visual snapshot of what they own and what was relevant at the time, like a time capsule.’ 

The year of the DAO

If 2021 saw brands realize the potential of Web3 for community building, 2022 could be the year of decentralized autonomous organizations (DAOs). Put simply, a DAO is a digital cooperative that uses crypto tokens to manage access, payments and decision-making as a group. According to DeepDAO, a data analytics site, the total treasury value for the use of DAOs increased forty-fold between January and September 2021. 

‘Expect many more in food and beverage, enabling more thoughtful building, with the invested people deciding how a treasury is used in a way that they all define as the brand's mission,’ says Dave Goldman. 

The more niche and invested the community, the more effective the DAO stands to be. A snack company catering to people with type 2 diabetes, for example, may decide to form a DAO and issue tokens to members to contribute to startup capital, help with product formulation or market the product within their communities. It could tick a lot of boxes. 

While Eliqs, OffLimits and Leisure Project are all looking to tokenize, they're cautious of running before they can walk. Emily of OffLimits credits Club CPG for giving her the confidence for her NFT plan. Founded by venture capitalists Jaime Schmidt and Chris Cantino, the community, which began on social app Clubhouse, has more than 45,000 members and organizes regular chatrooms and mentor pairings. 

‘Being a woman in this was isolating, but [Club CPG] gave me a place to ask questions and connect with people in the Web3 space,’ Emily explains. She finds Club CPG's women-only spin-off channel, No Boys Allowed, a doubly safe space, as is BFF, a group focused on getting women in on the crypto boom. 

But even with the best support systems, should everyone be rolling up their sleeves and cutting off a slice of the Web3 pie? ‘Brands can't disregard it if they want to survive in future. The sooner they start experimenting, the better,’ says Dr Merav. ‘It's going to be costly though, just as the internet was at its start. As tech gets more advanced and mainstream, every new brand or company will get involved.’ 

If the metaverse develops in the way that its devotees predict, we could be dining in virtual restaurants, sipping on digital drinks that we helped to develop and fund, before getting them delivered to enjoy in the comfort of our own homes. 

Don't hold your breath, though. ‘You're still doing this for crypto-native people and they're critical of brand projects – functionality has to be the touchstone,’ says Emily. Brands need to carve out their own space in this scrappy arena and take responsibility for educating people on Web3 and staying safe.

‘It's not a good fit for every brand right now. If you don't want to be a leader here, don't worry about it – it's early,’ she says. Either way, you'll want to stay tuned, tangible snack in hand.

A version of this article was first published in Courier issue 47, June/July 2022. To purchase the issue or become a subscriber, head to our webshop.

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