collectID AG (INVE) Earnings Call Transcript & Summary

Okay. Hello, everyone. Good morning, afternoon, evening to some wherever you may be in the world. We're delighted to have you on our webinar today, highlighting The Future of Wine Authentication and how the IoT and AI are redefining luxury brand protection. We have a great lineup of presenters for you today. We have Dr. Markus Ehrat, CEO of Genuine Analytics; Dr. Maria Bikaki, Project Leader of winePROOF at Genuine Analytics; David Geisser, Co-Founder and CEO of ZATAP; Klaus Simonmeyer, the Vice President of Strategic Accounts for EMEA here at Identiv. We will start with a quick overview of our partnership and dive into how our unique alliance can solve big challenges within the industry through our innovative technologies to lock out counterfeits, verify authenticity and keep high-end wine brands thriving. You'll even get to see it in action with a live demo and learn a little bit more about the technologies behind it. We'll then finish up with a Q&A session. And then in preparation for that, I'd like to invite you to please feel free to ask your questions as they arise throughout the presentation by simply typing in your question into the Q&A panel, and we will address each of those questions at the end. And with that, Klaus, I will hand it over to you to get us started.

Thank you, Ryane. Yes. Welcome, everybody. In the use case that we're going to be talking about today, 3 partners bring in their individual core competencies in order to form a real state-of-the-art solution. And actually, I'm particularly looking forward to it because what makes this use case a bit special is that it's not just one out of many use cases where everyday items become part of the IoT. Here, one of the oldest and most traditional cultural assets of mankind, wine, gets a unique digital identity, which secures its authenticity and history and also protects it from being tampered with. The 3 components of this solution are, apart from the wine itself, obviously, a scientific approach to verify the authenticity of wine, which is the part that Genuine Analytics is doing. The next component is an NFC tag from Identiv, which has a variety of both digital and mechanical security features. And third, we have the digital backbone of the whole thing, which is the setup application interface with a blockchain-based security infrastructure. And this shared mission brought up a solution with a whole variety of benefits. It provides evidence to the buyers of expensive wines that their product is genuine. The NFC interface and the cloud back end provide additional user experience, the tamper-proof features make it harder for criminals to come up with fake wines and a couple of others. And yes, wine is the key word today. So now is the time to talk more about wine and this is why I'm handing it over to the Genuine Analytics team now.

Thank you very much, Klaus. Welcome, everyone. First, I would like to tell you quickly how Genuine Analytics was started. In 2018, we initiated the development of a no-authentication methodology that will be presented now to you in the webinar together with the university of Applied Sciences in Northwestern Switzerland. And after a year, based on the promising initial results, we founded the company Genuine Analytics. So we are a start-up company, a pretty young one in 2022. We transferred the technology to Genuine Analytics and we started our own lab here in Switzerland. We also initiated the development of our ARAM system. That means artificial intelligence recognition and authentication machine. And so it's a combination of mass spectrometry and artificial intelligence data handling. In 2024, we conducted the first line authentication for an auction. And finally, now today, we have about 1,400 prestigious wine in our data banks, which is growing. So next slide, please. Okay. Alcoholic beverages, pulp food flow target. If we think of what was the driving force in 2019 for us to start the development of a completely new authentication methodology, you may get the answer from this OPSON actions. And if you look at 2021 activity of OPSON, they confiscated about 15 million liters of counterfeit alcoholic beverages, most of it wine and beer. And 3 years later, this effort that Europol made in Europe and in about 27 countries. The number was a little bit small, but still at a very high level of about 850,000 liter of beverages, again, mostly alcohol, totaling EUR 91 million of value were removed from the market. So that was the motivation. But it's not only that there are expensive wines that are counterfeit. There are also wines that are in the secondary market in collectors market. And there is an enormous economic effect of this counterfeit wines. Next slide, please. Well, with the $350 billion wine industry, one assumes that about 20% of this total revenues, that means about $70 billion are fake and are annual losses for the global wine industry. And I assume you all agree that the consumer should have confidence that the wine they purchase is genuine. This is not only true for new wines, but it's particularly true for collector's item for which you may have to pay tens to hundreds of thousands of dollars per bottle. So there is a need for to measure and to have a solution to put in place to prevent those trying to substitute high-value wines in the global market. Now next slide, please. Is the wine authentic? If you look at companies that are working on the authenticity proof of wines, for example, WineFraud, they say on the website to date there are no scientific tests that are accurate enough to tell that liquid inside the bottle is definitely from the particular block of land. That means from a vineyard or that is from a specific vintage. So that was the situation before we started to develop it and now have it. And what -- this company out here, they look at capsule, at cork and label, at vintage tags, at the paper aging, of course, at the glass composition, at the [indiscernible] and so on. But we now have developed a disruptive analysis methodology for the authentication of wines at vineyard and vintage level. Next slide, please. And Maria, the Project Manager of our winePROOF method will now introduce you to this new world of mass spectrometry.

Thank you, Markus. Yes, we can move to the next slide, please. Thanks a lot. So usually, when we use mass spectrometry, what we usually do is that we inject the desired compound, and we measure them, as you can see here in the ion chamber. And we use the mass detector at the end and we generate compounds or peaks with specific intensity so a specific profile. So now you can imagine, the moment we have the same compound in the presence of the wine, the final profile that is being generated totally changes because we have the ion suppression effect that means that the wine matrix might enhance or suppress the final signal that we get. And this is the advantage of our methodology because we can generate unique profiles of each wine that we want to measure. If you move to the next slide, we will see the entire workflow that we follow here in Genuine Analytics. So when a wine bottle arrives in our facilities, we use a laser beam, as you can see in the first -- in the Picture #1, and we open a tiny hole on the bottle shoulder and then we can take the desired wine sample, and we transfer it in our labs and in Picture #3, we mix it with the master mix solution, which consists of around 30 chemical compounds that are not present in the wine. And then we inject it into the mass spectrometer and we generate the final results that we next then compared to the wine reference library that we have. And by analyzing, of course, the data, we generate an authenticity score that is included in the final wine certificate that the customer can access through the ZATAP application that we would demonstrate later on, and he can see the profile and the wine authenticity score. So now what's the advantage of this method? How are we able to discriminate all these wines? As I said before, we mix the wine with this chemical solution, master mix solution, which consists of 30 compounds. This 30 compounds allows us to generate multidimensional results and this, of course, increases the complexity of the whole story. But exactly, this is the benefit of our method. So as you can see, you can imagine that if we have a 2D plot, 2 dimensions, and we want to discriminate to separate all these compounds that you see on the left side of the slide, this might be a bit complicated because you can see that some points are getting crowded, some wines cannot be very well separated. The moment we have a 3D plot, immediately things get much better. So we have 3 dimensions, we have a bigger space, and we can rotate our plot as you can see in this red circle, in some cases, in one angle, the wines or the compounds might get crowded. But when we -- the moment we rotate this 3D plot, immediately, we can separate this crowded area. So you can imagine what is going to happen when we have this 132 dimensions that happens in our case with our methodology, you can try to imagine that we have 132 dimensions, and we can rotate it in different angles, different ways and this increases the efficiency of our method and we can discriminate millions of wines as I will demonstrate in the next slide, please. So as Markus said before, the main challenge, analytical challenge in wine authenticity is that we cannot tell with high accuracy where the wine comes from in terms of vintage and origin. With our method, and please follow me here with the calculations. If we assume, for example, today, all over the world, we have roughly, let's say, 15,000 wine producers. And each of them produces 10 to 15 different wines, and we want to calculate in the range of 70 years, this gives us about 30 million different wines exist today all over the world. The question is, can we discriminate these wines? Is it possible? The answer is yes, with our method, as I said before, by using this 132 multi-dimensions, we are able to discriminate all of them. And of course, practically, the data analysis is quite complicated. You can imagine this. But therefore, we use, of course, machine learning algorithms and AI as a tool to facilitate the data analysis. In the next slide, you will see the wine reference library that we have at the moment. If you are interested and curious to see which wines are included in this database, you can scan the QR code and you will access all the list of the wines that we have. I can tell you that this has already exceeded the 1,400 reference wines, with the oldest one being from 1874. Around 80%, 87%, I'm sorry, are red wines and around 60% of them come from France, which is a country with tradition in wine making. And if we move to the next slide, I can tell you that we have already participated in some auctions. So we have used this methodology in auctions. And this is -- here, I picked up 4 bottles as an example, to demonstrate which ones we have already authenticated. The first bottle is rotated, the other -- from the back side -- we took the picture from the bad side so that you can see the NFC tag that is applied on the bottle shoulder. And as I described before, we followed the same workflow and we generated the wine certificate with the authenticity score as you can see that the customer can access by using the application on his mobile phone. And of course, if we move into the next slide, please, thank you. Our application, our solution is not applicable. It's not only for vintage fine wines, we can use it for any wine. We can use the safety NFC tag applied on the bottle, and this provides a unique wine profile even at the bottling of its new wine. We can detect any opening of -- any cork piercing or bottle opening. And of course, the user, the owner of the bottle or the customer can use his mobile phone, scan the NFC tag and then he can have access to the score or any information about the bottle. So we can trace and track exactly the final results. And of course, as I said before, our customers are not only auction houses, the customers can be wine makers that want to protect their brand and achieve an increased value in the secondary market, any wine lover that want to use this as a tool to compare the wines with the original ones and of course, collectors or investors that they want to authenticate their wines can use this application. Thank you because we were curious to see if our method is applicable in other alcoholic beverages cases, the answer is yes. As you can see in this PCA plot, we are able to discriminate whiskeys with different plastics with different alcohol content. And in the next slide, you can see that our methods can be used also for nonalcoholic beverages like water. We can discriminate waters that derived from tap like tap water or mineral water and even lab water. And with this, I come to the end of this presentation, and I think we can move on to the demo to show you how we can use the application and scan a real bottle in real time. So I will use my mobile phone, but I think you can also see it soon on the screen. So now I have -- I'm using the ZATAP application and with having my mobile phone, and Markus will help me with this, I'm going to scan, like to touch the NFC tag and immediately, you see the phone vibrate. And you see that this is the result that has been generated. And Markus, can we repeat it, please? Because I want to show that we can also -- exactly. This is what I wanted to show you. But here you see the wine proof, the producer in this case is [indiscernible]. And of course, you can -- by clicking on this option here, you can scroll down and we see the wine certificate with authenticity score and all the details when -- with the dates and everything, all information. So now with Markus, we will try something more complicated. In real time, we will show you how Markus will destroy the NFC tag. So you can show it like that with the knife, he took it out. He literally destroyed it. And now I am going to -- I will try to scan -- I think I pressed something, sorry for this. Okay. Yes. I need to scan it again. So you see I will try -- I think that we over destroyed it.

Probably. I am really sorry. I think we can set it to 0 and then...

I can try to repeat the whole process because the phone cannot even take it. We can destroy the second bottle maybe? No, I think it's totally destroyed. Okay. We can either try to destroy the second bottle that we have. Yes. But I think we will get the same result. So this is how the app works. It's quite convenient and extremely fast. The user can scan it and then he can see the results. So yes, sorry for this. Maybe I need to stop sharing my screen. And then I think we will move on to David, if I'm not mistaken.

Yes. Just one second, getting that back up here. Maria, are you able to make me the host again. Somehow it's not showing me.

I will try to.

Okay. Let me see why that happened. Okay. Let's see. Here we go. I found it.

Did you find it. Okay.

Yes, I got it.

Yes, I'm sorry, I couldn't find it.

No. No worries. Okay. And we are back. Here we go. Okay.

Okay. Then I think it's my part again. So Maria, you've been talking of the NFC label. So let's have a bit of a closer look at it. I mean from NFC, most of you probably know, it's a wireless technology, which connects digital text to the Internet. Usually, this is done by means of an NFC with mobile phone? Or in other words, if you use your phone to tap an NFC tag, which is attached to an everyday item like a wine bottle, then this wine bottle becomes connected to the Internet of Things. And the tag that we use in this particular application has been specially designed for wine bottles. It has a special layout and comes with 4 tamper loops and optimized antenna structure. It has very, very fine antenna lines and gaps in between the lines, which prevents even fraud by, for instance, using a syringe to replace the original wine with an inferior product. It comes with a special adhesive that makes it almost impossible to remove the label without leaving physical or digital evidence. And once 1 of the 4 tamper loops is broken, the chip will reliably flag it and tell you that the bottle has been tampered with. The same happens, by the way, if you destroy it completely. The round form factor antenna of the tag provides good connectivity regardless of the brand of the phone. Different phone brands have different antenna shapes inside and because there is no standardization and the round form factor ensures good connectivity with all mobile brands. And this is simply important because it's essential for a good user experience. If users tap the phone -- tap the tag with their phone, they need a reliable and immediate feedback without having to move the phone around in search of the antenna sweet spot. The chip that we're using here is the NTAG 424 DNA from NXP, which comes with a strong cryptography of 128 bit. It has the so-called SUN message authentication. SUN means Secure Unique NFC message, which means that the content of the NFC message transmitted by the tag is not static, but each time the tag is being tapped, it is freshly generated. And similar is the UID. Conventional NFC tags have a static UID. UID means unique identifiers by the way, and the static UID could be cloned. The NTAG 424 DNA's UID is freshly generated and verified by a server upon every tap and this makes it impossible to be cloned. And furthermore, we have 528 bit keys, which are used to make sure that only genuine chips work with the application. These keys are only known to the tech manufacturer and the customer. And as long as these keys are not being disclosed, it is impossible for criminals to clone or tamper with the tags. Yes. And this brings us to the digital back end of the whole solution. David, I'll hand it over to you.

Thank you very much, Klaus. And also thank you, Markus and Maria for showing how the solution works. I just want to quickly wrap things up. So it's a pleasure to work with Genuine Analytics and NXP and also obviously, with Identiv on the solution. And so as you could see in the demonstration of Maria, people can simply use the ZATAP app to access the digital wine profile through a simple tap with their smartphone. So the only thing it needs is to touch the NFC tag with the smartphone in the same way you use your smartphone to pay. The chip gets then read out, and ZATAP application confirms the authenticity of the product and the sealing of the NFC tag. So there is 3 types of outcome, that tag is scanned, it works and it's sealed. So that means the bottle is not tampered with. This was what we saw in the first part of the demonstration. The second option is that the tag is still working, which means the bottle is authentic, but the sealing is broken. This is actually what Maria wanted to show. But for some reason, the tag got destroyed completely. So in this case, the application cannot read it out, which means it's not sealed anymore, but it's also not proven authenticity anymore because the chip does not work. If there is a checkmark on both sides, the bottle is authentic and if the NFC tag is still sealed, then the digital wine profile is displayed in the ZATAP application. The digital wine profile additionally stored as a non-fungible token on the blockchain. This can happen on the Ethereum blockchain or on the Polygon blockchain. Both are public blockchains, which offer a high level of immutability. In other words, this information can, again, not be tampered with, and this information can also not be changed post. So that means even if Genuine Analytics or ZATAP would want to change this information that is originally stored on chain, we are not able to do it, and that gives a very, very high level of security for the entire solution. And then last but not least, the application provides a secure and immutable connection between the encrypted NFC tag that is dynamically encrypted, as Klaus explained, and to the secure and immutable stored NFT on chain. So long story short, it's a very simple system where everybody with a smartphone can find out if the wine bottle is authentic or not, or in this case, if it's proven by Genuine Analytics or not. And also, everybody can proof if the bottle is sealed or not. And then with just a few more clicks, the history of the wine, all the certificates, the digital wine profile can be accessed on the smartphone, very simple, but very secure, and that's the goal of the solution.

Great. Thanks, David. Okay. So we will get into Q&A momentarily. I see a lot of questions in here, loving all the engagement. So if you have not already, please add your questions, and I'll give you a quick overview of how we can support you in next steps, while you're getting rest of the questions then. So I have Markus, Maria, David and Klaus' contact information here up on the screen, but we will also provide this in our post-webinar e-mail along with the recording. So don't hesitate to reach out to them. They can assist you with the consultation to discuss your distinct project needs. Product samples to help you find the right products for your project, design customization, system or encoding support and even helping you tap into our vast network of partners within the industry.

Okay, with that, we will jump right into Q&A. Okay. First question here. It looks like the tag has been designed specifically for these wine bottles. Would other form factors be available as well?

Yes, I think this one is for me. Actually, it has been designed especially for wine bottles, but other form factors are available. Actually, even though all wine bottles might look pretty much the same, they are different. They have different diameters of the necks of the bottles and stuff. So actually, each wine bottle is its own design and it is not restricted to wine bottles, we can do the design to fit to almost any object.

Okay. Great. Next question. How long did the NFC tags last? Fine wine could be stored for 30-plus years.

Yes. This is also for me. I think, I mean, the data retention period is defined by the chip manufacturer, by NXP. And I think in this particular case, even though I have to look it up to be sure, but I think they are guaranteeing 30 years of data retention. I will look that up, and Ryane provide me with the contact if you have it, then we can answer it offline after the webinar.

Yes, absolutely. Okay. It looks like, David, this one's for you. Is it difficult to set up ZATAP for my products? What is needed to get started?

No, that's not the case. It's actually very simple. So what's important to mention is that we automated a lot of the back-end work. So you can create your brand, first of all. In this particular case, Genuine Analytics was the brand because they were also the ones who prove and check the authenticity, and then you can add your products digitally so you can add images and any other content that you want to associate with the product. And then basically with a simple click, you can connect this information to a specific NFC tag. So it's pretty simple to test. And for those of you who want to try out themselves, you can simply go on [ figital.zatap.io ] and give it a try. Because until you actually connect the physical item to the digital content, it's for free. And only once you want to publish it there is some cost involved.

Okay. And next question, how much does winePROOF cost the customer?

It's for me. That depends on the value of the bottle. Of course, you can have a look at our wine database. If the wine that you would like to check is in the database, you can ask us for a quote and we will send your quote. And you may ask that, "Well, it doesn't make sense that analysis is always the same." Yes, the analysis is always pretty much the same. However, if we have a bottle here that has a value of CHF 50,000, obviously, the insurance and all the precautions have to be taken that it gets back intact and in case if something happens that appropriate insurance is in place. And that's why we have a model that is dependent on the value of the bottle.

Okay. Is the business model that the customer deliver the wine to your facility for IDing the bottles and then ship back to the customer? And do you have only 1 facility?

That's the current business model, yes.

Okay. See how long -- yes, we already got that one. Okay, good. And then what measures have you taken to ensure that the profile of your method cannot be faked?

Well, the thing is that our profile does not rely or does not reflect the composition of the wine. So we add, as Maria said, certain compounds to the wine. No one knows exactly which compounds and no one knows exactly at what concentration. And the wine matrix has an impact on the compounds we are measuring. And from this point of view, it's an indirect measurement. So even if you would analyze your wine that you would like to fake in detail for the whole composition, all the thousands or whatever chemical compounds are in the wine and would exactly match the signal, you will not get the profile that we are getting.

Okay. And how about sustainability and eco-friendliness of the tags?

I think this one is for me. The tags can be provided in an ecofriendly version, which means that the carrier material of the antenna lines is no longer made of PET, which is simply the standard in the industry. It can as well be made from paper, which is, of course, much more sustainable. We can produce these tags without an etching process involved. So yes, sustainability is on our radar, and we can make the tags with sustainable materials upon request.

Great, thanks, Klaus. Let's see. Does ZATAP only work for wine or also for other products? David, over to you.

Thanks for this one. No, it's actually a variety of products. So we originally started the service for fashion products. We have also authenticated and connected other physical products in sports and entertainment with this technology. So as you can see today, for example, there is some game-worn jerseys behind me where we prove not just the authenticity of the product, but also that history. So for example, those have been worn at a certain game from a certain player. And generally, it always comes down to the physical side, where Klaus already mentioned that there is different shapes and different sizes and types of NFC tags. So if we can apply one of the securely encrypted NFC tags on the product, then we have a check on the physical side. And then from the digital side, there is no limits in terms of products that can be added. And as I mentioned, we have worked with several industries. And so it's definitely not exclusive for wine and also works for other luxury or lifestyle products.

Yes. And I will note, we have done some other webinars where we have covered some other use cases. So on the Identiv website, under webinars, we have some on-demand webinars there, too, if you're interested in checking those out. Okay. Next question. How did you manage to not only distinguish the vineyard, but also identify the vintage and even the specific wine with such precision with one single method?

Okay. I think that's for me. And so as I showed in the slide, [indiscernible] or the benefit of this method is exactly with 132 dimensions that we generate. So this profile makes the data analysis complicated, of course, but at the same time, gives us a better insight on the wine and the wine profile. Of course, for analyzing this data, yes, we need to use machine learning algorithms with AI, otherwise, manually we wouldn't have been able to achieve this. But that's the reason why this -- how this works.

Okay. And what is the typical turnaround time for getting the authentication certificate after a bottle is received in your lab?

So the analysis time is extremely short, preparation as well. So just adding that process time, you could probably get it back in half a day. However, as we are working batch-wise, so I would say it takes about a work week till we get the results back.

Okay. Great. How do you collaborate with wine producers looking to generate profiles for their new wines?

Well, there, we will take the samples, of course, not through a hole in the bottle, we have to go there, take the sample there, make the profile and then proceed as indicated with the laser process. But taking the sample directly from the château where the bottles are filled in the filing process.

Okay. It looks like we've got one last question. So if you have any other questions, now is the time to send them along. Can other parameters important to wine consumers, such as cork taint be measured and the results added to the NFC tag?

Yes, the answer is yes. We are able to measure also the cork taint and then we can insert these results in the NFC tag and the customer can follow the profile, the wine profile or the wine information that he needs. So yes, that's possible.

Awesome. Okay, I'll give it another couple of seconds here, see if anything comes in. Okay. We've got 2 more here. Are end consumers accustomed to using the digital touch point?

I'm happy to handle this one. And then please, Klaus, and also Markus and Maria add your 2 cents if you want. But what we can say is that customers get more and more used to tap and read out NFC tags. The obvious answer is that this is primarily driven by the payment industry. So a few years ago, you had to launch an app before you could tap a product. And this is also what Maria showed us in the demo. But in fact, you can even read the tag without opening the app and then it will redirect you into the app or it will redirect you to the specific landing page. And so that means people don't need to install anything on the phone. And since they get more used to tap to pay, it's also more and more adoption for NFC tapping. Additionally, we see a slight difference between the different age groups. So for Generation Z and Generation Alpha, it's almost a native, like they are quite native with this technology while older generations eventually need a little bit more education. But even there, we see more and more adoption. So I would say similar to QR codes that also had a little bit of time until they got standard in the industry, this is the same that we currently see with NFC tags.

Okay. We have one more. What are the predictive capabilities for this testing method when applied to a sample that is not specifically in the 1,400 wine database?

Yes, I think then we will struggle a bit, right? So I think we need to have the reference, the wine in our reference library. Otherwise, we cannot compare the profile so we cannot compare the results. So that's why, as Markus said before, you can visit our website, have a look on the reference in wine database that we have and then check if we can perform the analysis or not.

Okay. I've got another one. Have you already analyzed biodynamic wines? Are all the 132 parameters showing any results that make the analysis as safe as a conventional wine?

Yes. So can you repeat the question?

Yes. Have you already analyzed biodynamic wines? Are all the 132 parameters showing any results that make the analysis as safe as a conventional wine?

Yes. So the analysis that we have performed show that we have a 98% accuracy. So we know that our method works for 98% of the cases. And of course, the times that we usually struggle is when we have very similar wines from very similar vintages. So I think, but this is still a better percent than having a fake wine, but you don't know what's inside.

Okay. It looks like that is it for questions, and that brings us right to our finish time. So thank you, everybody so much for joining us. Thank you for our speakers and our panelists. I hope everyone has a wonderful rest of their day, evening and week. Thank you, everyone.

Thank you.

Thank you. Bye.

Thank you. Bye.