The need for brand owners to hold off counterfeiters is stronger than ever as the practice makes a dent in global trade. But do you even know where to begin?

By Pauline Hammerbeck

 

Chinese police raided a house in June where fake cigarettes were being produced and sold in packaging bearing the Beijing Olympic Games logo. And while it’s true that China is widely considered ground zero of the counterfeit trade, it certainly doesn’t limit phony products to its own geographic boundaries. The World Customs Organization estimates that counterfeiting accounts for five percent (or more) of global trade.

 

Credit goes to a confluence of forces that has made duplicating and transporting phony goods easier than ever. Advanced technologies are now widely available, making it cheap and efficient for counterfeiters to produce high quality fakes. And globalization-new trade agreements and the emergence of markets like China and India-makes it easy for them to quickly traffic those wares across borders.

 

“It always existed, but it was always of low quality and easily recognizable. Today you have a hard time differentiating a knock off from the real thing,” said Moises Naim, author of Illicit: How Smugglers, Traffickers and Copycats are Hijacking the Global Economy, in an interview with NPR. “It’s a business that generates losses of about $630 billion a year to the legitimate owners of these trademarks.”

 

Yes, there are incredible profits at stake. But for the consumer packaged goods sector, there are also risks to brand equity when a consumer finds that a fake doesn’t perform as well as the legitimate brand or, as is frequently the case within luxury personal care, when a product is diverted into a less-than-savory sales channel.

 

“We deal with a lot of customers whose brand image is built on where you can get the product,” says Bob Neagle, business unit manager of brand protection solutions at Videojet Technologies, based in Wood Dale, Ill. “When members of the supply chain start diverting product, over time, that could clearly erode the image of the brand.”

 

There are also, of course, more serious threats-risks to consumer safety and health-when foods, beverages and, more frequently, pharmaceuticals are faked.

“It’s not in the best interest in the health and well-being of our nation if our products are being counterfeited,” says Johnson & Johnson’s David Howard, director of product protection, global brand integrity.

 

To decide how to protect J&J products, Howard employs a risk assessment tool to analyze the vulnerability of each product and package and to identify the impact of such an occurrence; he then runs it through a scoring system that awards points for protection features.

 

Howard says his team is in the process of integrating the tool into research and development to build counterfeiting deterrents into product and packaging at the earliest stages, which, in effect, would make brand protection a “cost of doing business”.

 

Not every brand owner is as proactive as Johnson & Johnson. Some hold back because they view security packaging as an expense, not an investment. Others say consumers aren’t demanding security features. Many look into it only after they’ve had a problem.

 

KNOW THYSELF

Even those who make a commitment to brand protection can falter because they simply don’t perform proper due diligence.

 

“The first step is to look internally,” says Howard. “You have to learn whether you have gaps in processes or procedures. How you operate. Where you operate. Who’s touching your product.”

 

Consider the issue of returned goods. They make their way from customers back to brand owners (with opportunities for a security breach), only to be shipped off to another retailer without much examination. Disposal of such goods isn’t always a solution, because they can show up on the “grey market”.

Variable pricing is also a concern, says Howard, because product intended for lower-priced markets can be intercepted and diverted into higher-priced sectors.

 

There’s also the consumer complaints department, which is frequently overlooked. Consider, though, that counterfeit Lipitor pills were discovered in U.S. pharmacies in 2003 only after a consumer called Pfizer to report that the cholesterol-lowering pill had a bitter taste. When Pfizer looked into the matter, it discovered a repackager had introduced phony Lipitor into the legitimate supply chain.

 

Reviewing policies and procedures and conducting these types of inward-looking assessments helps guide effective, well-directed brand protection solutions, says Howard.

 

SEEK THE RIGHT PARTNERS

A similar system should also be in place to steer the selection process for security packaging providers, who, like wholesalers and distributors, are also points of vulnerability.

 

Rather than pinpoint specific technologies, however, the goal should be to identify providers with the capabilities and security procedures to provide solutions for the problems you’ve uncovered.

 

“We lock down the relationships first, and then work with that supplier base to integrate security materials into the packaging,” says Howard. “The old model was that I would go to purchasing and packaging and say, ‘I’d like to do this’. Suppliers would compete with solutions, and we would pick and choose. And that’s still true for tamper evidence, but not true for security elements. Product protection is not a commodity.”

 

EMBRACE AND LAYER TECHNOLOGIES

Only with the right partners in place should you move forward, and, then, your objective is to develop security solutions that address the vulnerabilities of a specific package.

 

The range of options can be overwhelming, though critics say that shouldn’t be a deterrent.

 

“Most brand managers and brand-pointing suppliers are asleep with respect to these things,” says Dr. Peter Harrop of IDTechEx, a UK-based consultancy that specializes in RFID, printed electronics and smart packaging. “I think most of them are in the wrong century.”

 

That said, he admits there are no “silver bullet” solutions. In fact, the more widely used a single security feature becomes, the more attractive it is to a counterfeiter to attempt to defeat it.

 

That’s why experts generally advise a layered approach, to create multiple entry barriers for counterfeiters.

 

There are overt (visible) features like holograms and color-shifting inks to consider. In theory, they deter counterfeiters by making it more of an obstacle to replicate a package; they also put authentication in the hands of consumers-though it’s doubtful consumers are educated enough to know whether a hologram or ink on a package is legitimate.

 

There are also covert features like invisible inks and graphics, forensic markers like chemical taggants and other hidden protective technologies. Earlier this year, Kodak began deploying such a technology-its own proprietary system-on packaging and components of its rechargeable digital camera batteries to combat counterfeiters who are inserting fakes into legitimate sales outlets. The company is using forensically undetectable markers that, typical with covert features, can only be viewed with the aid of a special reader.

 

A third category of security packaging includes track and trace/mass serialization elements like 2D barcodes and RFID, which assign unique ID numbers or alphanumeric codes to each package. These features are designed to provide brand owners with the supply chain history of any item (an electronic pedigree, or “e-pedigree”) and allow them to tightly control packages to reduce the possibility for counterfeiting or diversion at any given point without detection.

 

When a brand owner’s field inspectors come across a package where it’s not supposed to be or if the package itself is suspect, the inspectors simply input the unique code or scan the tag to retrieve the item’s history.

 

“If the code doesn’t show up, it’s not an authentic product,” says Videojet’s Bob Neagle. “And if it does show up, it can tell you where it’s been and the last legitimate person who touched it, who very well might be the person who kicked it out of the supply chain.”

 

The downside to these track-and-trace technologies is that they’re expensive to implement and monitor at the item-level. Though there are examples-Viagra for instance-where the threat of counterfeiting and the potential damage to brand equity are so high that the brand owner is willing to take on the costs of tagging individual packages. RFID also comes with privacy concerns from consumers who are put off by the idea of someone “reading” RFID-enabled packages in their cars or homes.

It’s safe to say that the strengths and weaknesses of any one technology are best mitigated by a sophisticated, layered approach, which should include the ability to authenticate product and also trace its history throughout the supply chain. Both elements are important-you can’t authenticate what you can’t find.

 

SPREAD THE WORD

Though never a guarantee, security packaging is a smart way to reduce the supply of counterfeit products. But, increasingly, brand owners are asking what they can do to reduce the demand-to convince consumers to avoid purchasing counterfeit goods altogether.

 

“We’ve tried to carry message why people should be buying authentic product, but we were criticized for trying to protect margins,” says Johnson & Johnson’s Howard. “Some [brands] are protecting revenue, but that’s not true in the healthcare industry, where our motive is protecting people.”

 

Brand owners are finding that it’s less likely they’ll be misinterpreted when they band together. The Washington, DC-based International Anti-Counterfeiting Coalition, which consists of brand owners, law firms, security providers and other groups concerned with counterfeiting, launched a public service campaign this summer with the city of New York to educate shoppers that counterfeiting is not a victimless crime.

 

“Consumers who knowingly purchase counterfeit goods are supporting forced child labor, inferior and sometimes deadly products,” said Bob Barchiesi, the coalition’s president.

 

In the UK, the Anti-Counterfeiting Group (ACG) is taking a similar tack, deploying a campaign that calls out the “top five crimes” associated with counterfeiting (drugs, illegal immigration, theft, weapons offenses and murder) and the links between counterfeiting operations and people trafficking, arms smuggling, identity theft and other dark trades.

 

These groups have their work cut out for them, though. A 2005 Gallup Poll found that 68 percent of Americans justified buying counterfeit merchandise because they believe the “genuine product price was too high”. Another 2005 survey, conducted by the global market research firm Synovate, found that 57 percent of Americans have purchased imitation name brand products, and-corroborating the Gallup findings-that 69 percent of them said they didn’t find anything wrong with doing so.

 

Of course, it’s not every instance that shoppers are knowingly buying fakes. Many times, as in the case of the phony Lipitor pills, consumers are entirely unaware that they’re consuming counterfeit goods at all.

 

There are, however, tools in development that will encourage consumers to take an active role in validating legitimate goods. The Chesapeake Corporation, in Richmond, Va., has a technology that lets consumers verify the authenticity of a package using the text messaging feature on their cell phones: They text the unique alphanumeric code found on the packaging and, if it exists in the brand’s database, they receive confirmation of the product’s authenticity; if the code that’s sent doesn’t find a match in the database, however, a text warning is dispatched to indicate the product might be a fake.

 

“A lot of these technologies will embarrass the counterfeiter,” says IDTechEx’s Harrop, who describes a future where, in the near term, advances like printable RFID will make the system financially viable and anti-counterfeiting programs more powerful. In the long term, Harrop says, rapidly advancing technologies will revolutionize security packaging and the very idea of packaging itself.

 

“Increasingly, it’s not chemical taggants or holograms that have no other purpose other than the fact that they’re difficult to copy,” he says. “We’re moving on to high-tech features that will perform anti-counterfeiting and stock control and have a human interface to provide information and warnings. You’ll have printed electronics and smart labels and laminates on the surface of your package doing all these things and more. There’s a whole new world coming out there, really.”

 

Until then, it’s important to stay vigilant with a brand protection program, to see through your existing security tactics and, according to Johnson & Johnson’s Howard, to make darn sure you haven't overlooked the fundamentals.

 

“If you don’t have tamper evidence or child resistance-these elements that protect people-then adding brand protection means you’re just wasting company money,” he says. “Brand protection is not a substitute for poorly designed packaging.” BP

 

Pauline Hammerbeck is senior editor of BRANDPACKAGING. Reach her at hammerbeckp@bnpmedia.com

 

 

 

Overt security packaging: These features are visible to the naked eye and enable the end user to verify the authenticity of a package.
Most common: Holograms, one of many optically variable devices (OVD)

Other technologies: Color-shifting inks and films, and security graphics

The pluses: User verifiable; newer overt technologies are more secure than in the past; they can be incorporated into brand identity elements; they can deter counterfeiters

The minuses: Consumers don’t know what an authentic hologram might look like; some are easily replicated; doesn’t prevent package from being filled with counterfeit product

TIPS: Best when integrated into primary package like in the foil of a blister pack, so it can’t be removed.

 

Covert security packaging: These features are hidden and are designed to enable brand owners to identify a counterfeit product or package. They require special filters, readers or laboratory analysis to be detected on a package.

Common technologies: Invisible inks, images or data that are printed or encoded on a package; anti-copy technologies, like background patterns that, when copied, blur the original image; chemical, biological or DNA taggants.

The pluses: Inks, images, etc., can be easily added to or modified and can be applied in-house to reduce security threats; chemical and other taggants can be expensive.
The minuses: The invisible inks, images, etc., can be replicated if not implemented under secrecy.

 

Track and trace/mass serialization: Unique identities are assigned to each package to tightly control and trace it throughout the supply chain.

Common technologies: 2 dimensional bar codes and RFID

The pluses: These features are secure against copying; they facilitate recalls; and can help with supply efficiencies

The minuses: Cost is a significant barrier at the item-level; these features could be vulnerable to hackers; and remote reading brings up consumer privacy issues.