This article was initially published in the February issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
Counterfeit alcohol has long had harmful impacts on drinks brands and consumers. However, smart labels and packaging solutions offer companies a way to protect themselves – and others. Joe Bates investigates.
The problem of counterfeit alcohol and illicit consumption is a growing problem, not only for every stakeholder in the drinks business but also governments worldwide.
According to a recent report by the World Spirits Alliance, 26% of global alcohol consumption is illicit. In developing markets such as India, the rate is as high as 46%, but the issue is not confined to developing countries. In 2018, the European Union’s Intellectual Property Office estimated that the UK lost GBP218m (US$270m) due to counterfeit wines and spirits.
The pandemic only exacerbated the problem. In January last year, the Transnational Alliance to Combat Illicit Trade published a report confirming that Covid-related restrictions on the sale of alcohol had boosted illicit markets to satisfy unmet consumer demand.
Counterfeiters upped the ante as Covid drove online sales boom
Counterfeiters, says the alliance, have become more sophisticated, using higher-quality dry goods and fake labels and investing in fake glass and coding machines. As online sales of alcohol soared due to pandemic restrictions and lockdowns, counterfeiters promoted their products on many popular online marketplaces.
The negative consequences of illicit trade are numerous: for brand owners, sales are lost and brand equity is eroded, while governments lose tax revenue and countries become less attractive to legitimate traders and investors. That’s not to mention that illicit alcohol sales often fund other criminal activities.
Counterfeit alcohol products also pose serious health risks to consumers. In May 2020, around 100 people died in Mexico after drinking poisonous illicit alcohol. Then in December 2022, 39 people died and many were hospitalised after consuming fake spirits in India’s eastern state of Bihar, where the sale of alcohol has been banned for six years.
Brand protection and supply chain security solutions
One of the options open to brand owners wanting to protect their sales and brand image is to employ a company such as Texas-based Authentix, a provider of brand protection and supply-chain security solutions.
The company has supplied a range of covert inks, coatings, seals and other marking technologies to help wine and spirits brand owners protect against counterfeit and illicit trade at distribution points across Asia, Europe, the Americas and the Middle East for the past 15 years.
“Brand protection comes in many forms and has advanced over the last decade,” explains Authentix’s chief sales & marketing officer Kent Mansfield. “Several wine and spirit brand owners have become quite sophisticated in their targeting and toolsets used to combat this ever-growing fraud problem.
“In some marketplaces, distribution and supply chains differ greatly and will affect the solution choice and how pervasively it is deployed. With high volume, mid-priced brands, for instance, covert solutions are often used to minimise costs and allow company inspectors to quickly determine evidence of counterfeiting at the retail or wholesale level.”
In other markets, consumers are more concerned about identifying genuine products compared with fake ones, according to Mansfield. “They are more willing to participate and proactively look for specialised features, such as colour shifting and thermochromic inks or encrypted QR codes for secure smartphone interaction.”
Digital tracking via smartphones rising in popularity
Authentix also offers a digital tracking service for its clients which has become increasingly popular. “Our ‘DigiTrax’ system allows smartphones to query and interact with a digital code, including solutions that provide the dual purpose of direct consumer engagement coupled with the ability to track product movement and provenance throughout the supply chain,” says Mansfield.
“In these cases, products become literal and digital touchpoints by adding unique, item-level identifiers to the product’s packaging. Unique identifiers can be delivered in various formats such as overt or covert Datamatrix codes, QR codes, human-readable alphanumeric codes or embedded NFC (near field communication) chips, added to any part of the product or packaging or other carrier vehicle.”
With e-commerce booming during the pandemic, Mansfield says Authentix’s online brand protection service has grown quickly and now offers online monitoring and enforcement services to target counterfeiting and infringement in 500 online marketplaces. “In the last six years, we’ve had over a 96% effective takedown rate against infringers discovered and remediated using these specialised services,” says Mansfield.
Aussie start-up targets wine sector with smart lids and labels
In Australia, Perth-based tech start-up Cellr is giving winemakers the chance to fight back against counterfeiters by using smart lids and labels in their packaging. In addition to brand protection, the smart packaging can also communicate with consumers through marketing, offering experiences, competitions and promotions while collecting useful data on consumer behaviour.
The company’s lids and labels contain NFC and radio frequency identification (RFID) chips, which can be scanned by a mobile app. The application then instantly confirms the product’s source and provenance and provides the option to include brand or promotional messaging.
“We have millions of products tagged in the Cellr platform across a stack of winery customers,” says company founder Chris Braine, who reveals prices start from around US$0.08 per unit depending on volumes, features and technology choices. “We have some famous producers using the platform; our clients can be found in Australia, New Zealand, Mexico, Chile, Brazil and Argentina.”
Braine says it is relatively easy for winemakers to adapt their bottling lines to apply the smart lids or labels. “Simplifying the application process was a critical step for us when it came to designing our technical offerings,” he explains. “We knew bottling lines wouldn’t want to implement big, expensive changes to processes or hardware, so everything we have designed has been done to fit into standard bottling processes.
“Standard label arms that are in use can deliver our NFC tags, unique QRs or multi-layered security tags, while our lids are designed to be used by standard poly laminate capping machines. Simplifying the process just makes sense to us.”
Near Field Communication versus Radio Frequency IDentification
Braine explains the main difference between RFID and NFC technologies: “For RFID, you need a reader that is able to pick up that frequency to engage with the tags. RFID is not readable by a smartphone. NFC, on the other hand, is readable by the majority of all new smartphones (circa iPhone 7-era and newer). So, this is the perfect technology for creating scale.”
“Cellr offers the best of both worlds,” he says, and has “combined the two frequencies into one single tag small enough to embed into a lid or packaging.”
Although Cellr has a pipeline of new clients coming on stream in 2023, Braine admits many wineries are still not taking the issue of counterfeiting seriously enough. “Plenty choose to ignore it and think it doesn’t affect them or call it ‘the greatest form of flattery’,” he notes. “But, that was when ready-made solutions didn’t exist, and the technology route was tricky to navigate.”
With wine and spirits counterfeiters upping their game during the pandemic, the type of laissez-faire attitude towards brand protection and customer safety described by Braine, is hard to defend when smart packaging solutions offer an effective way to push back.
This article was initially published in the February issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
