Counterfeiting is common in India across various sectors, most notably in cosmetics and pharmaceuticals. On 11 January 2017, the Food and Drug Administration (FDA) busted a racket and seized fake cosmetics products worth Rs 2.39 crore from a shop at Crawford Market in Mumbai. According to reports, the FDA team found an elaborate set-up in a dingy room complete with machinery and packaging equipment along with products belonging to brands such as L'Oreal, Lakme, Revlon, Olay, Elle 18, Nivea, Fair & Lovely and several others.
Counterfeiting causes sales losses of 21.7% (USD 11.9 billion) for Indian companies, and it steals around 25% of their market share, according to a whitepaper published by NetNames. Indian counterfeiting has a market size of Rs 55,000 crore (USD 11 billion), and drains around Rs 5,000 crore (USD 1 billion) in exchequer revenue annually.
The counterfeit goods not only hamper sales revenues of a company but also severely affect the brand’s reputation when consumers buy fake products that are ineffective and unsafe. The primary culprit is often the pack, which motivates a consumer to buy a knockoff because simple artworks are easily imitated and body-doubled by the counterfeiters.
“It is a lucrative business. The fake products in market range from high priced drugs like antibiotics to high volume products like Paracetamol, which can be easily put in the market through retail stores,” says Ajay Bapat, head-packaging development, Emcure Pharmaceuticals.
A decade ago, when a majority of items were sold loose, packaging was a sign of originality of the product. Today, packaging alone is no longer sufficient to establish its legitimacy on the shelf.
Over the years, technology barriers in manufacturing a pack have significantly reduced. Packs that lack brand protection features are most susceptible to duplication. In addition to this, there is a lack of sensitisation of retailers and consumers for effectively differentiating between authentic and fake packaging.
According to RK Jain, group president (corporate finance and strategies), Uflex, packaging shall always be the only canvas that can ensure the legitimacy of the product. He adds, “Imagine your favourite coffee brand being sold loose in a polyethylene or paper pack. Would you vouch for the authenticity of such a product? I am sure the answer is a no. It is only through packaging that the brand custodians can include special brand protection features for the consumers to be cautious and mindful.”
Even though packaging has always played a vital role for any brand equity, there is a need for constant innovation not only in packaging but also in the supply chain, where the bug lies.
Bapat says, “The supply chains in India are not secure enough as there is no check or control from any authority. That’s why smaller business partners like printers and converters are vulnerable to easy money, as getting the samples printed by unauthorised personnel can lead to a fake product.”
He adds, “The other reasons are unaware consumers, the practice of self-medication, availability of drugs without a prescription, blind faith on the pharmacist, and high margins to middlemen, among others.”
Lately, everything, including medicines, is available online and there has been a surge in eCommerce, which adds to the menace of counterfeit products as there is no control on what you will receive and how safe it is.
“For instance, some leading shopping portals in India recently come under attack for allegedly selling branded shoes at one-fourth the actual price. There were allegations that these were factory products being passed off as branded shoes. Though it is yet to be established whether this is true or false, the fact is that counterfeiting has multiplied manifold thanks to the ingress of the internet,” says Arun Agrawal, general secretary, Authentication Solution Providers' Association (ASPA).
It is paramount for brand owners to protect their brands.
Usual counterfeits of a brand are either a lookalike or a sound-alike name. Bapat argues that such instances are common among less educated or rural population, where the product identification is primarily by colour or design on strip or carton.
It is imperative for the marketing and legal teams to work closely with the design and package development team to come up with an intelligent solution to this problem.
Bapat says, “There are two ways of looking at this from an organisation’s point of view. First, for the OTC or FMCG kind of products, you need to hammer the consumer through continuous advertisement regarding what feature needs to be seen for the original brand. Secondly, for a typical prescription product, a security feature is built to identify that the counterfeit product is not manufactured by the brand. To prove that this substandard product is not manufactured by the brand is a major concern even above the fact a huge volume is lost in the market.”
Agarwal explains how the State Excise Department has effectively implemented holographic excise adhesive label (HEAL) for liquor.
“In order to eradicate the problems caused by illicit liquor, the State Excise Departments have been deploying several measures. In the early 1980s, the Tamil Nadu government used tax stamps. These were on a thin glassine paper with a strong adhesive. These tax stamps were serial numbered and were given by Tamil Nadu government to companies that filled IMFL against payment of tax. In a similar way, Uttar Pradesh State Excise Department started using security hologram in 2001. Today, more than 25 states and union territories in India are using approximately 22 billion tax stamps. Approximately, 75% of these are in forms of full polyester security hologram and 25% are paper based, with or without a holographic element,” says Agarwal.
Recently, GEF India used a similar but more complex solution, in the form of a 3D holographic stamp, for its Freedom brand of refined sunflower oil. Jain says, “A 3D holographic stamp (unique to Uflex), sandwiched between two transparent isotropic polyester layers, makes the pack counterfeit-proof and assures the end-users of a product that upholds utmost standards of quality.”
The sandwiched holographic stamp is not susceptible to any rupture by scratching or rough handling in the supply chain. The end-result is a product that would be almost impossible for a counterfeiter to recreate.
Big Data and IoT
One of the effective methods of fighting fake products is tracking the product through the supply chain, from printer and manufacturer to retailer and end-user, thus eliminating all possible loopholes.
While track and trace technologies are being developed to aid anti-counterfeiting efforts, big data analytics and Internet-of-Things (IoT) are the enablers. These technologies ensure connectivity at all levels of product value chain.
Jain explains, “Since IoT allows objects through smart sensors to be sensed and controlled remotely across existing network infrastructure, it creates opportunities for more direct integration of the physical world into computer-based systems, thereby resulting in improved efficiency, accuracy and economic benefit in addition to reduced human intervention.”
The technology can incorporate various data forms and product tracking information, as well as link on-pack product identification with supply chain management, market enforcement, and forensic support services, if needed.
"Prominent FMCG brands like Amul, Mother Dairy, Milkfed, Anik are using various authentication solutions. In medicines, more and more brands are adopting solutions, such as high-security hologram with 2D and alphanumeric codes on each individual blister pack, bottle or injectable vial. However, there is a need for more consumer awareness. Usage of authentication technologies like UV protected film, colour-changing film and holographic film for secondary product packaging not only helps companies protect the products from being duplicated but also helps in marketing and sales promotion."
Arun Agrawal, general secretary, Authentication Solution Providers' Association (ASPA)
In June 2016, Bayer launched a new cap seal to protect users against counterfeit crop protection products. The Bayer CapSeal, based on the Trustseal technology of the Leonhard Kurz Stiftung, is a cap seal with visual security features and a QR code.
Scanning the code with the interactive smartphone app from Bayer gives the user important information about the authenticity of the product. The CapSeal is currently being introduced at all of Bayer’s European production sites for crop protection products.
“Bayer is working with farmers, retailers and the authorities to resolutely tackle product counterfeiting,” says Dr Hans-Joachim Henn, global head of anti-counterfeit management at Bayer. “Innovative packaging technologies like the Trustseal visual security element from the Leonhard Kurz Stiftung provide users with important information about the authenticity of Bayer products and thus help prevent the use of counterfeit products.”
Jain feels the impermeable loop of big data and IoT will strengthen the security harness of products by protecting information falling prey to nefarious elements. I see this combination as an augmented reality that will further aid in rendering foolproof and watertight physical anti-counterfeiting and brand protection solutions.
“When you stay connected with something, the chances of it slipping out of your hands can be minimised,” he concludes.