Serve and protect: anti-counterfeiting packaging technology

27 June 2017

The market for anti-counterfeiting packaging technology is growing and expected to reach $3.6 billion by 2022, according to reports. Industry experts explain the scale of the threats facing the packaging industry and discuss what can be done to protect consumers and companies from counterfeiters.

It does not require much analysis to appreciate the sheer breadth and scope of the problems caused by counterfeit goods. A threat to consumer safety, health and international security, the problem has been compounded by the extension of trade zones that make it easier for counterfeit goods to cross international borders.

As losses from counterfeit and stolen goods continue to rise, technology suppliers are responding with more cost-effective, sophisticated solutions that address the needs of retailers and brand-owners when it comes to supply chain security, product authentication, and loss prevention. Consumers, brands and enforcement authorities are also increasingly using mobile digital channels such as smartphones to authenticate genuine items.

Regulatory developments will impact positively on this market in developed economies over the next five years. These include new obligations for labelling, and the use of tamperevidence fixtures in the US and the EU. Other countries, including China, India, South Korea, Brazil and Turkey, have introduced measures designed to tighten supply chain security.

Combing through the variety of research and insight available today, it appears that the problem of counterfeiting seems to stem from a number of key areas.

Online growth

The rise of auction or retailer sites has enabled counterfeit products to easily enter the market and reach a large audience. The discreet nature of online shopping means that the scale of counterfeiting has risen because producers can safely sell their illegitimate goods to global consumers with few or no repercussions.

It is difficult for officials to stop counterfeit products sold online as it is harder to intercept single packages rather than locate and raid large warehouses or factories full of fake products.

The use of cutting-edge technology, specifically printing technology, means that counterfeiters are able to replicate logos, labels and images easily and cheaply. This makes it difficult for retailers, officials and consumers to catch fake products. Imitation packaging is a problem in the food and alcohol categories with regard to on-pack logos proving origin of product.

For example, the EU’s protected designation of origin (PDO) logo authenticates products such as champagne, chorizo and olive oil to their traditional area of production. However, fraudulent PDO logos trick consumers and simultaneously hinder the ability of authentic products to compete with cheaper imitations.

Limited bipartisanship

The growth of eretailing and globalisation in recent years has enabled counterfeiters to produce and sell fake products to consumers cheaply, easily and with a high degree of anonymity. The large scale and international reach of counterfeiting means that individual organisations, such as customs, police or brandowners, cannot effectively tackle the problem on their own. Limited cooperation between government and the private sector causes problems for consumers who unwittingly buy counterfeit goods because they are easily available.

Protecting consumers and preserving the reputation of brands is of paramount importance, so every counterfeit is taken very seriously.

Supply chains with a lack of oversight, tracking technology or greater inefficiencies enable intellectual property crimes to grow. Authentic products could be stolen or fake products integrated into poorly monitored supply chains easily. Many producers or retailers that use third-party distributors must ensure that their supply chain is fast, efficient and safe from such problems. Consumers and retailers will suffer the most from unsecured supply chains as their products may not be authentic at the point of purchase.

Protection problems

In a speech to the UK’s Anti-Counterfeiting Group, the Conservative peer Baroness Neville-Rolfe had this summary of the issue: ”According to estimates from the EU Intellectual Property Office (EUIPO), as much as 5% of goods in European markets are copies. The scale and scope of IP [intellectual property] crime means partnerships between industry, law enforcement and government are essential.”

Her sentiments are echoed by Andrew Barber, managing director of the International Federation of Spirits Producers (IFSP).

“The vast majority of the branded international spirits sold in reputable shops, bars and restaurants are genuine,” he says. “However, for IFSP member companies, the scale of counterfeiting of their brands is not the primary issue. Protecting consumers and preserving the reputation of brands is of paramount importance, so every counterfeit is taken very seriously, which is why IFSP was created and continues to operate, funded entirely by its members.”

Enforcement data

For more specifics on the size of the problem in 2017, we can turn to recentlyreleased data by the EU from its Operation OPSON programme, which targets grey marketing. The programme is in its sixth year, targeting counterfeit and substandard products as well as the organised crime networks behind this illicit trade. It has resulted in the seizure of 9,800t, 26.4 million litres, and 13 million items worth an estimated €230 million ($257 million).

“OPSON confirmed the threat that fraud represents, as it affects all types of products and all regions of the world,” says Chris Vansteenkiste, head of Europol’s Intellectual Property Crime Coordinated Coalition. “In addition, we saw some new trends such as counterfeit mineral water. Once again, good cooperation on a European and global level was paramount to disrupt the criminal gangs behind the illicit trade in counterfeit and unregulated goods.”

Brands must educate consumers and organisations more on how to spot fakes. The scale of counterfeiting is huge, with some estimates putting the global counterfeiting consumer goods market at $1.8 trillion a year.

The Operation OPSON cases showed an increase in fraudulent activity in the beverage industry. Beverage fakes were found across the globe, from South America through Asia and Europe. Highlights included Italian carabinieri dismantled an organised crime network involved in the production and distribution of fake wine. Three people were arrested by Florence’s anti-mafia police unit. Investigators discovered counterfeit packaging materials, 9,000L of fake wine and 30L of pure alcohol that was being used to adulterate the wine.

New measures

Fortunately, there are actions available to limit or curb counterfeiting. New product packaging technology continues to be essential for brands to better protect their products and profits. Counterfeiters have been using sophisticated packaging techniques to better imitate or tamper with authentic products to avoid detection from officials, and to trick consumers; for example with copying product logos, labels and icons. But packaging and design companies are adopting increasingly modern anti-counterfeiting techniques to stop them. Some of the tools available to companies include on-pack holograms, UV printing, taggant fingerprinting and tamperevident seals or stickers. These indicate that a company’s products are authentic, while simultaneously hindering counterfeiters’ ability to replicate them.

To combat global counterfeiting, brands must educate consumers and organisations on how to spot fakes. The scale of counterfeiting is huge – some estimates put the global counterfeit consumer goods market at $1.8 trillion a year. Brands and retailers will have to use education and cooperation to catch fake products throughout the supply chain. Educating law enforcement and customs officials about products, specifically unique logos and anti-counterfeiting packaging, will be essential for manufacturers.

Targeting consumer needs by offering value will also combat the appeal of fakes. One of the main reasons that counterfeits succeed in the FMCG market is price. Fraudsters tend to use low-cost ingredients and labour to reduce production costs. They can then offer a cheap imitation that appeals to value-seeking consumers who want a high-quality product without a high price.

Manufacturers must target this consumer need more effectively to limit counterfeiting and gain market share. Loyalty programmes such as a points system and special offers such as ‘buy one get one free’ will be essential methods for encouraging consumers to pick legitimate products over low-cost, fake alternatives.

Offering value-for-money options is particularly important in the nonalcoholic drinks categories because price is an influential issue for consumers. Encouraging repeat custom is a simple yet valuable way for brands to compete with imitations that cannot offer the same long-term incentives and customer loyalty programmes. This should be done in conjunction with lowering production costs and limiting inefficiencies, before passing savings on to consumers. This will further help manufacturers compete with cheaper, fake offerings.

Manufacturers use logos and tags to help combat counterfeiting.
The beverage sector is working with authorities to combat counterfeiting.

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