Using taggant technology to reduce counterfeit products entering the alcohol market

Up to a quarter of licensed premises in the UK have been found to have counterfeit alcohol for sale. In October 2010, Her Majesty's Revenue and Customs (HMRC) officers seized 25,000 litres of counterfeit vodka, along with bottling and labelling equipment in Cheetham Hill, Manchester. Trade Standard officials warn the problem is growing, with fake alcohol being produced by organised gangs on an industrial scale around Europe. Alcohol fraud costs the UK alone around £1bn a year in lost revenue, in addition to posing a serious threat to public health.

Richard Burhouse, business development manager for Payne Security, explores how taggant authentication solutions can be used to reliably identify and distinguish genuine drink products and brands from counterfeit products.

The threat of counterfeit alcohol
Under regulated manufacture conditions, legal alcohol is still widely recognized as a dangerous and toxic substance.  Counterfeit or ‘fake alcohol’, produced illegally and without regard for health and safety conditions therefore poses a serious threat to consumer health, with potentially fatal ramifications. Recent cases have shown that some illegal alcohol contains high levels of methanol, a substance used in anti-freeze solutions and in some. Drinking high doses of methanol can cause dizziness, breathing difficulties and even blindness.

In response to this growing threat, the UK Trading Standards have compiled a database of small mistakes and discrepancies in counterfeit products, that provides a resource of key signals to look for, when distinguishing legitimate products with counterfeit goods. The Trading Standards warns customers to look out for spelling mistakes on the label, to check whether all bottles are filled to the same level and whether the label is straight. It also recommends checking to see if the packaging of the same products are identical and even recommends smelling the alcohol, as counterfeit vodka often has a strong acetone smell, similar to nail varnish.
However, these recommended measures are not enough. The growing problem of counterfeit alcohol emphasises the importance of accurate, reliable and secure means of authentication. Unless this threat is challenged and thwarted, public safety, brand integrity and tax and company revenue are all at risk. Advances in technology have provided criminals with the ability to produce realistic replicas that successfully convince the untrained eye of the legitimacy and safety of a product. As a result it is essential for both the government and brand owners to stay one step ahead of the counterfeit community by investing in new technologies to ensure the consistent differentiation between what’s genuine and fake.

Highly visual and overt techniques such as holograms, special inks that change colour according to the viewing angle and security printing techniques offer consumers some reassurance regarding a product’s authenticity. These overt technologies provide a preliminary level of security, offering instant verification. However, to ensure absolute security a multi-layered approach, combing both covert and overt technologies is required.  Covert methods are methods that can only be detected by ‘those in the know’. As a result, they not only provide a secure means of authentication but present even the most sophisticated counterfeiter with a serious challenge.

Taggant authentication
Taggant authentication solutions provide companies with a highly secure, covert security system for on-site or in-field applications, such as with drink products. Taggants are chemical markers, typically manufactured using complex rare-earth phosphor compounds that are extremely difficult to source or replicate. When engineered at molecular level, these compounds emit a unique signature under certain conditions. For many taggants, the trigger is excitation by infra-red radiation. Others may only be visible under a micro-scope – a type of ‘nano-barcode’.

The technology can be used to reliably identify and distinguish genuine drink products and brands from counterfeit materials. Due to their size, taggants can easily be included in inks, lacquers, or plastics. They can also be embedded in packaging materials, such as cartons, overwrap, labels and tapes, which is particularly relevant for the protection of drink products.

The absence of a generic model for taggants significantly enhances their effectiveness as a security device. The specific and unique composition and structure of each taggant makes it almost impossible to replicate (without having prior knowledge of the molecular structure).The success of a taggant hinges on the manufacture’s control over supply. In order to ensure a high level of security, taggant manufacturers must maintain a tight control of their chemical combinations, preventing third parties from acquiring the taggant.

Proprietary taggant readers
An important element that distinguishes different taggant technologies is the type of reader used and the technology it deploys to identify and authenticate the taggant. Invariably, the more exclusive and proprietary the reader device, the harder it is for counterfeiters to source and copy.

Sophisticated counterfeiters are aware of the extent to which taggants can thwart the creation of convincing and ultimately, profitable, counterfeit products and are working constantly to overcome these challenges. In response, technology companies are now developing patented taggant authentication systems that use proprietary reading technology to detect taggants and verify the authenticity of products. Without access to the appropriate taggant authentication system, potential counterfeits are left ignorant as to the presence, position or appearance of the taggant, ensuring replication is impossible.
Unlike previously available versions of taggants, the most secure solutions do not rely on the visible florescence of taggant particles so they cannot be detected easily and as result are unaffected by background colour or ambient lighting conditions. This provides operational versatility, allowing the system to be used for different applications in different environments. As a result speed and efficiency of authentication is ensured. These reader systems also have user-friendly, lightweight, hand-held devices, ideally suited by use ‘in-the-field’ by company personnel, customs officials or authorised agents.

Taggants are a vital security solution in the fight against protecting high-end consumer goods, such as alcoholic drink products, from the growing threat of counterfeiters. The covert inclusion of taggants on drink product labels is easy to implement and the ability to detect their presence is efficiently facilitated by new hand held reader technology. As a result, taggant technology effectively hinders attempts at counterfeiting, ensuring the protection of brand revenue and public consumer health.

Hidden Dangers. . .

Tackling the Challenges of Tax Stamp Security

Excise duty on spirits and wine is an important source of tax revenue for governments, which is continually under threat from the practice of illicit trade around the world. To counteract both counterfeit and grey market activity, some governments have implemented tax stamps to maintain the security of taxes levied.  In response to the increasingly sophisticated tools and tactics of counterfeiters, governments have had to work harder to ensure appropriate levels of security, not least because consumers have come to rely on tax stamps as a seal of approval.

Richard Burhouse, business development manager for FractureCode Corporation, provides an overview of the effectiveness of paper tax stamps in excise collection programs and the market trend towards digital technologies

Government’s ability to claim legitimate tax revenue on alcoholic drink products is threatened as a result of both product diversion and counterfeit fraud. In the case of product diversion, genuine products are sold to one market and then shipped illegally to another for resale. This generally occurs where there are significant price differences between markets, usually due to different tax regimes between countries, making it financially attractive to undertake this fraudulent activity.

Diversion poses two very significant challenges for Governments, firstly consumers are usually complicit in the transaction as they knowingly purchase alcoholic products well below known market prices and secondly it also introduces weaknesses in the supply chain allowing counterfeit products to be introduced into the legitimate supply chain  and sold unwittingly.

In the case of counterfeit products, there are obvious significant health risks as fake wine and spirits often contain ingredients that are dangerous and occasionally lethal. In both cases, access to excessively cheap alcohol, as a result of low-priced diverted or counterfeit products, potentially threatens consumer health in the long term.

Traditional paper stamps use old fashioned technology and have actually been shown to make little difference in the long term fight against counterfeiting and diversion. As a tool in the war against the illicit trade of alcoholic products, it is necessary for excise tax collection systems to evolve in response to the many modern day challenges they face. A key problem thwarting the efficacy of paper tax stamps is that counterfeiters have been able to create fake tax stamps which have fooled consumers into believing that the products they are consuming are safe and legitimate.  Compounding this problem is that many brand owners choose to rely on paper tax stamps as their only form of product security.  As a result counterfeiters can easily use a fake tax stamp to ‘legitimise’ a counterfeit product.

As technology marches ever onwards there is a need to provide more secure and effective means to protect excise revenues and minimise the prevalence of illicit products in the market. However, recent developments show that even the most sophisticated paper tax stamps have been successfully counterfeited shortly after their introduction. There is also a need to separate core security features from the packaging itself, to eliminate the need for a secure supply chain for physical paper markers, thereby dramatically limiting diversion and exposure to sophisticated counterfeiters.  It is now time to adopt a digital approach to authentication and tax verification which uses secure, IT infrastructures in-line with effective e-government initiatives.

One technology that ensures fiscal marking and authentication makes a leap into the digital age is Codentify®, a patented database-free encryption and on-line coding system that significantly increases security and integrity compared to other solutions.  It combines and securely digitises all features of a governmental fiscal collection scheme in a fully on-line “all-in-one” licensing, transaction, and auditing system. It also enables government authorities, as well as trade and consumers themselves, to easily verify the legal status of excisable products such as alcohol without the need for any special training. 

In summary
Product diversion and counterfeit fraud pose a significant threat to governments and their ability to claim legitimate tax revenue. Considerable amounts of money which could be used to benefit the government services of a country are being diverted to the pockets of criminals participating in illegal trading. In addition, legitimate traders who do pay tax are left at a disadvantage, with their product sales reduced as they compete with the excessively cheap counterfeit or diverted products entering their market.

As counterfeiters and smugglers use ever more sophisticated practices to sell fake & grey market products, it’s important that governments “fight fire with fire” by employing the very latest in technologies available to combat this illicit trade.  The technology leading the way is Codentify®, a digital tax verification technology that uses advanced coding technology to provide to Governments and brand owners a highly secure all-in-one licensing, transaction, secure authentication and auditing mechanism.

By implementing digital tax stamps as part of an e-government solution, tax collection is aligned with the global trend towards digitising and modernising government processes, leading to greater efficiency and substantial cost savings by brand owners compared to using and applying other fiscal marking technologies, whilst protecting the consumer from counterfeits and the false sense of security that paper tax stamps can give

December/January 2011

In today’s expanding global market, the issue of product diversion is a growing threat to brand owners and the integrity and profitability of their products. This was illustrated recently when the manufacturers of Red Bull, the leader in the energy drink category, opened a multi-million dollar lawsuit against a New York based company accused of diverting the sale of Red Bull products intended for an international market back into the US.

Richard Burhouse, business development manager for Payne Security, provides an overview of cutting-edge overt and covert technologies that can prevent the illegal practice of product diversion.

Product Diversion involves "products sold by the manufacturer, which are then distributed into markets other than originally intended in violation of a contract, law or regulation". * Unlike other issues of brand protection, such as counterfeiting, which refers to the sale and fraudulent imitation of a product, product diversion refers to genuine products produced by the manufacturer that are being sold in a market for which it was not intended.  This is most commonly done to take advantage of differences in tax/tariff rates, currency exchange fluctuations, or simply purchasing agreements that can lead to cost discounts to different countries/markets.

Product diversion can cause a range of significant problems for both the brand owner and the government. Third parties can undercut market pricing, directly impacting a company’s profitability and price/tax related health initiatives can be undermined. The effect of product diversion on distributors is also significant. Local distributors can be forced to compete with artificially low prices, causing conflict and supply chain demand issues within the authorised sales channels. In many cases, retail stores may acquire diverted or ‘grey-market’ products through unauthorised channels, sidestepping the brand owner’s distribution network altogether.

Price differentiation strategies can also be seriously undermined by product diversion. Price differentiation is often implemented by brand owners to control the brand positioning of a product. For example, to position a cappuccino as a premium product compared to a regular coffee, there is a price differential which plays on the perceived uniqueness and high customer satisfaction related to a higher expense. Product diversion can undermine this brand positioning and disrupt the distribution network, by allowing ‘premium’ products to be sold at a lower price than intended for that market. As a result, not only do brand owners lose revenue, but brand control and integrity is compromised. This problem can also occur in the case of short-term price promotions, for example when new products are being launched in specific areas and distributors sell products based on volume discounts.

Solutions and technologies:
Brand owners have dedicated many resources into looking for solutions to prevent the occurrence of product diversion. With the need for supply chain security and visibility ever present, a range of cutting-edge technologies, including both covert and overt methods, are available. However, key to the success of these initiatives is enforcement and specifically how brand owners put in place and follow up on legally enforceable agreements/contracts to stop products getting into certain parts of the supply chain. This means brand owners have to monitor supply chains, be able to prove without doubt who/where a product has been sold and ultimately be willing to stop supplying certain customers.

Covert Technologies
Through the use of custom-designed software, unique identifiers such as serialised codes can be applied in an overt manner with their primary purpose being covert in nature.  This is achieved through the design and release of specific codes to specific locations, providing information regarding production dates, times, etc. To be fully effective, it is essential that any codes or markings can be traced back to the customer and/or region in question so that it is possible to identify where a product should/shouldn’t be.

Other covert technologies that can help identify goods that have been diverted include complex markers, such as taggants. Taggants are typically chemical, biological or physical markers that use rare materials or properties under specific conditions. Taggants are usually only detectable using special readers and critical to their success is that they are hard to locate for the untrained, difficult to copy and are unique for enforcement purposes.

UV (ultra-violet) and IR (infrared) inks are another form of covert technology that provide an anti-diversion tool as they can be used to print invisible marks, symbols or indicia that can in turn can be associated with the country/customer in question in order to prove association/source. However, specifying the right ink and source is important as their security is determined by limited access to the inks in question and their component pigments. Genuinely secure inks are only available under restricted-use measures and can involve the use of bespoke colours or wavelengths.

Finally, Microtext print is a semi-covert technology that can also be used in the fight against product diversion, through the creation and inclusion on packaging of text characters that cannot be seen with the naked eye. These complex designs are difficult to reproduce and can only be validated using a magnifying lens or microscope to examine detailed features, however the fact that such lenses are readily available can limit their effectiveness. Microtext is popular because of its cost effectiveness and ease of use, as well as the fact that it is extremely difficult to replicate.

Overt Technologies
Overt technologies have the added benefit of not only being able to reinforce a brand’s image but also that they can act as an additional anti-counterfeiting tool for consumers to verify. However, during the specification process it is important that Brand Owners are aware that simplistic overt features can be copied and passed-off, given that they can come to be relied on by consumers. One example of this is on the implementation of government tax stamps on drink products, where consumers have been able to use the stamps as an indication of the products legitimacy and safety. However counterfeiters have since adopted superficial replications of tax stamps, fooling consumers into thinking a counterfeit product is legitimate.

There are a range of overt technologies that can be employed to reassure consumers that the product they are purchasing is legitimate for that market. Holography is one example that is extensively used. Various forms can be integrated into drinks packaging, including fully metallised, de-metallised and High Refractive Index (HRI) methods. Clearly identifiable holograms are primarily used as first level identification devices for consumers and are designed to facilitate easy authentication. They can also include covert features such as nanotext and hidden images as additional levels of authentication for brand owner’s investigation teams.

Other overt technologies, such as special inks can also be used to enable customers and industry professionals to easily determine the legitimacy of a product. For example, colour shift inks display two or more distinct colours when viewed from different angles and printers of these inks conform to strict codes of conduct including end use agreements, with their supply restricted by the ink supplier. In all cases, the removal or omission of overt technologies also indicates wrong doing and warrants further investigation by the brand owner.

Conclusion
Product diversion poses a significant threat to the commercial revenue and market positioning of beverage brands. Not only does product diversion affect profitability in primary markets based on pricing, but it also erodes brand identity and value.  

It also introduces a potential weakness in the supply chain, through which counterfeit goods can enter. Other industries have seen counterfeiters copying foreign language labels, etc to make the consumer think they are buying a smuggled product at a bargain price, rather than a dangerous fake.

With the use of both covert and overt forms of security technology, the security of a supply chain can be increased. Overt technologies such as holography and colour shift inks enable both consumers and security professionals to instantly verify the legitimacy of a product. To provide an additional level of security, covert technologies that can only be detected ‘by those in the know’, provide specialists with key authentication information that can not be replicated or imitated by smugglers or counterfeiters.

*Reginald Montgomery, The Legal Advisor, November 1995 (no. 12).

Oct/Nov 2010

Empowering your consumers to identify authentic drink brands

Counterfeit wine and spirits pose a serious threat to consumers' health. In 2006, the consumption of counterfeit vodka laced with toxic household agents led to the death of hundreds of Russians from hepatitis and liver failure. In 2009, two German youths died of methanol poisoning in Turkey after drinking adulterated vodka. Such incidents make it clear that providing consumers with the ability to recognise counterfeit wine and spirits is of vital importance. Richard Burhouse, business development manager for Payne Security, provides an overview of overt technologies that can be applied on packaging to enable immediate product authentication by consumers

Combining the latest computer systems and software, sophisticated optically variable features can be incorporated within a packaging design.

These features are difficult for forgers to replicate and allow products to be validated both quickly and easily through visual inspection by the consumer. Overt technologies offer well-designed text and images that are in agreement with the brand’s image and can be used within the packaging without changing the brand’s style.

Using overt technologies means implementing a proactive brand protection strategy. The effectiveness of a brand protection strategy enabled by overt technologies is defined by the extent to which consumer involvement is promoted. Consumers must be thoroughly informed in order to recognise the specific features that authenticate a brand and identify counterfeit products. Certain simplistic overt features can be copied and passed-off as genuine. Consumers need to be aware of this threat.

There are various technologies that can all be employed to provide consumers with the security to recognise that the drink they are consuming is legitimate. Holography, for example, is extensively used by the brand protection industry. There are many different holographic technologies that can be integrated into drink packaging, including fully metallised, de-metallised and High Refractive Index (HRI) methods. Easily identifiable holograms are primarily used as first level identification devices for consumers and are designed to enable successful authentication at point of inspection or purchase. Additional features incorporated into the holographic design, such as nanotext and hidden images, can be used as second and third level techniques for trained and equipped specialists.

The level of security offered when using holographic technologies is influenced by a number of factors, including the origination technique, image type and enhanced features. Simple holograms can be easily copied and are produced by many drink manufacturers around the world and are therefore broadly available to counterfeiters at a relatively low cost. Counterfeit holograms can be of a high enough quality to pass-off as genuine and provide consumers with a false sense of security. However, by using the latest, most advanced holographic techniques, a holographic device can be produced that is difficult to copy and pass-off as genuine.

Other features easily identifiable by both the consumer and industry professionals are different types of inks. Colour shift inks appear as two or more distinct colours when viewed from differing viewing angles. Through advertising and promotion, consumers can be empowered with the knowledge of what to look for on a legitimate product. For example the consumer can tilt a bottle to see the different colours and easily verify its legitimacy. Different colour combinations are available and both strong opaque and subtle transparent effects can be created to compliment the existing design of the bottle or packaging.

Only a limited number of security inks suppliers produce colour shift inks. This is because the process to create a colour shift pigment is highly specialised requiring particular technical knowledge and bespoke equipment. The supply of colour shift inks is controlled by the inks and pigment supplier in order to ensure that they are used only in genuine circumstances and under strict codes of conduct including end use agreements.

An alternative security print technology is based around the concept of using highly defined print lines to create complex designs that are difficult to originate and print. Sophisticated overt security design features, created using the latest software, can be built into each design helping to protect alcohol brands from counterfeit.

A wide variety of fine design techniques can be combined to build bespoke security solutions to banknote standards into each manufacturer’s brand protection strategy. Overt fine line design techniques include engraved images, relief images, warp grids, variable line width, guilloche designs, crystal patterns and special rasters.

Conclusion
Overt technologies enable alcohol brand owners to take a proactive approach in the fight against counterfeiting, actively engaging consumers in their brand protection strategy. This is achieved through the ability of overt techniques to allow for instant authentication of products through visual inspection at the point of purchase. Overt technical approaches include different types of holography, colour shift inks, colour coding and fine line design.

For further information on Payne Security anti-counterfeiting solutions, email payne@scottpr.com, call +44 (0) 115 975-9000 or visit www.payne-security.com

Aug/Sept 2010

Securing the supply chain – the brand owner’s perspective

Counterfeiting is a growing problem, which can seriously affect a brand’s reputation, endanger business sustainability and increase the likelihood of private litigation and legislative penalties. With increasingly sophisticated forgery techniques becoming available to counterfeiters, how can brand owners secure the supply chain? Richard Burhouse, business development manager for Payne Security, discusses the efficiency of high-tech anti-counterfeit covert technologies applied to drinks packaging

Counterfeiting is a serious problem that is putting pressure on wine and spirits manufacturers. Despite its global nature, counterfeiting typically takes place on a local or regional level. In that way, counterfeiters avoid the high shipping costs and limit the danger of getting identified at border points. The problem is particularly prevalent in Russia, South America and the Far East.

Wine and spirits manufacturers need to be proactive and invest in the protection of their brands. The importance of brand protection is three-fold: protecting the brand owner’s revenue, protecting the consumer’s health and protecting the brand’s reputation. Brand protection solutions help prevent counterfeit products from being sold, thereby securing the brand owner’s revenue. Counterfeit drinks can be toxic alcoholic liquids, posing serious health risks and even leading to death. Brand protection safeguards the health of consumers while also allowing manufacturers to protect themselves from private litigation and legislative penalties.

Equally important, brand protection ensures that the value of the brand is not decreased and the reputation is maintained. With large-scale mergers and acquisitions taking place in the global drinks industry over the past few years, the ownership of some of the world’s biggest wine and spirits brands have been consolidated among a few large companies. Brand reputation is crucial offering a powerful competitive advantage in this constantly changing marketplace.

Packaging plays a key role in a brand protection strategy. Covert printing technologies provide a high level of protection allowing for confident product authentication and subsequent brand protection. In general, the more premium the brand, the more likely it is for brand owners to use sophisticated covert technologies to prevent counterfeiting. The robustness of the chosen covert technique is very important as it defines the level of security. It is vital to use technologies that are difficult to counterfeit and obtain.

Brand Protection Solutions
A commonly used solution is taggants which provide a highly secure covert system for on-site or in-field applications. Brand owners can integrate taggants into packaging to quickly protect and authenticate products in the market, through using standard printing, spray coating and inkjet printing techniques.

There are a number of different types of taggant systems, including varying levels of physical, chemical and forensic markers. Physical markers can be anything from very small holographic markers to colour-coded “barcodes” that are only visible through a microscope. Chemical markers typically exhibit a physical response to light or some other initiator and require some form of device to make them visible, with forensic markers only able to be able authenticated in a laboratory setting.

The most sophisticated taggants cannot be verified without a proprietary handheld reader, thus ensuring any potential counterfeiter is not aware of the presence of an authentication technology. The best handheld readers are lightweight tools that enable quick and easy authentication in different environments. Company personnel, customs officials or authorised agents can then use them to simply and accurately determine whether brands and products are authentic on site.

The use of Ultra Violet (UV) inks provide an effective brand protection method since the images and text printed with such an ink are only visible under a UV light source. The technique is straightforward and enables immediate authentication. Sophisticated printing capabilities allow for fine line designs to also be printed using UV inks. Images and text can be printed in a variety of UV colours, in full colour or black and white, with greyscale or 'flesh tones'.

UV inks are also available at different frequencies, so depending on the formulation of the ink, either a long wave or short wave UV light needs to be used to see the print. Certain long wave UV inks are widely available in the market, potentially reducing their effectiveness as security inks. However, careful selection of the right inks and colour combinations mean they can be powerful anti-counterfeit tools. The use of short wave UV inks is rarer, offering a higher level of security. However, it must be used in a controlled manner since there are health risks to be considered due to the light source required. More complex ink designs can be further validated using a magnifying lens or microscope to examine the detailed features and sophisticated print.

The level of security offered when using UV  inks is defined by the limited access to the chosen inks and their component pigments. A range of inks providing fluorescence across the spectrum of colours are usually only available from security ink companies under restricted use measures. By combining different colours to create photographic images, the level of security is further increased due to the highly specialised origination and printing techniques required. Compared to UV inks, the number of sources of Infra Red (IR) inks is less. As a result, they offer an increased level of security but they are more expensive on a kg vs. kg basis, however selective deployment and the right security print design can negate this.

Alternative covert solutions include the use of microtext print which creates text characters that cannot be seen with the naked eye and can therefore be hidden within larger overt images such as text and pictures without the knowledge of counterfeiters. Products can be authenticated using magnification eye glasses. Such equipment is simple to use, inexpensive, readily available and pocket sized, making a very user friendly technology.

Due to the need for specialist equipment, materials and technical knowledge, the very best microtext print is extremely difficult to copy. The technology cannot be reproduced accurately using digital printing processes. As a result, counterfeiters usually do not attempt replication and create the overt image without the microtext print.

Microtext print can also be printed using UV inks. The invisibility offered with this technique enables it to be used without affecting other design elements and it adds another level for any would-be counterfeiter to overcome. Multi-colour responses to UV light are also available for even greater brand protection.

Conclusion
Counterfeiting damages brand reputation. A weakened brand can take years and millions of pounds to recover, leading to long-term negative impact on financial performance, investment, product development and growth.By introducing state-of-the-art covert printing features on packaging, brand owners can be confident that a high level of brand protection can be ensured. Covert features such as taggants, UV and IR inks and microtext print are invisible, difficult to detect and hard to replicate without specialist equipment, thus offering complete confidence to the brand owner in product authentication. Combining both covert solutions and overt solutions together ensures a more effective brand protection strategy.

June/July 2010

Hitting Back at Counterfeiting

A recent report from the International Federation of Spirits Producers, reported that more than 250 million counterfeit alcohol items are being seized annually by EU customs officials at border points and the number continues to grow. Counterfeiting has far-reaching effects, from damage to brand reputation and subsequent loss of revenue to health risks from consumption of adulterated products. In an unsafe marketplace, how can wine and spirits producers hit back at counterfeiting? Richard Burhouse, business development manager for Payne Security, investigates the efficiency of modern anti-counterfeit packaging solutions 

Refilling genuine bottles with low quality wine and spirits or with alcoholic drinks of unknown composition is one of the greatest problems facing the wine and spirits industry today. In Europe and North America, the refilling of genuine bottles is not as common as in Far Eastern and South American countries, where empty genuine bottles are sold to counterfeiters, refilled and passed through the distribution chain to consumers.

In Russia, South America and certain parts of Asia, particularly in China, there have been cases where bottles are refilled with toxic alcoholic liquids which pose serious health hazards, including death. In other countries such as India, bottles have been refilled with low quality alcoholic drinks which, although not harmful, threaten the brand sustainability. Faced with this increasing threat, some brand owners have started buying their own empty bottles back from bar owners to avoid them getting into the counterfeit supply chain. The counterfeiting threat is set to become even more intense as these markets continue to grow.

The Chinese and Indian economies, in particular, have experienced remarkable growth over recent years enabling an increasing number of people to buy premium Western brands. In China, for example, sales of expensive Scotch whisky brands are booming owing to the country’s growing middle class. Drinking whisky in China is seen as a sign of sophistication and sales have rocketed from $2 million in 2001 to $1.1 billion in 2006. In 2008, South Korea, Singapore and China accounted for around 20 percent of the now $5 billion a year industry. According to figures released by the Scotch Whisky Association, $1 billion has been invested across the Scotch whisky industry for 2008-2009. However, the sales boom is inevitably providing grounds for more extensive counterfeiting.  

Brand owners have dedicated many resources to looking for solutions to prevent the refilling of genuine bottles. Analysing the actual bottle content is an authentication method that is usually implemented in a laboratory. As a result, security packaging components offer the most efficient solution to help prevent the spread of counterfeit products, reduce the quantity of smuggled goods, safeguard consumer health and protect manufacturers from the risk of private litigation and legislative penalties.

Brand owners often take a tactical geographic approach to the anti-counterfeit solutions they use since the level of threat varies between regions. As a result, different security packaging components may be used for a single brand depending on where the products are sold. In Europe products can have fairly simple closures since the refilling of genuine bottles here is rare. However, the same product may carry a more complex closure when it is sold in Far Eastern and South American countries due to the increased threat of refill.

Solutions: Caps, Labels and Shrink Sleeves
Complex closures can provide an effective tamper evident method since a piece of the cap breaks off when the bottle is opened. Capsules can also be placed over the cap for added security and anti-syringe properties can be incorporated to prevent refill.  However, these technologies are very expensive. Furthermore, even the most complex solutions do not constitute fool-proof systems as sophisticated techniques are available to counterfeiters that enable them to produce copies.

Product and brand security can be effectively achieved by applying both overt and covert technologies on closures. Overt technologies offer visible tamper evidence to brand owners and consumers, whereas covert technologies allow brand owners and enforcement agencies to authenticate products. 

It is recognised that producers of high value wines and spirits may be reluctant to use modern, complex closures instead of those traditionally associated with their brand. However, this can be effectively addressed by incorporating invisible security features into existing caps by using covert technologies. In that way, security is achieved without changing the brand’s style.

Labels are placed on bottles to define a particular product and carry standard information, including the brand name, barcode, ingredients and origin. Further to their descriptive role, labels can also provide a security function. A label can carry a combination of state-of-the-art overt and covert security technologies, including security print, security inks, holography, security taggants and tamper evident security slits. These technologies work together with the label substrate to prevent label reproduction, protecting brands from counterfeiters and providing effective tamper evidence and authentication means.

However, with counterfeiting techniques becoming more sophisticated, steaming off labels for reuse has become common practice. To address this shortcoming, the industry has sought labels that are highly difficult to remove and used them in conjunction with other components, such as over the top of the cap. So called ‘lollipop’ labels provide an obvious tamper evident feature since they are destroyed once the cap is removed along with the overt and covert security features they incorporate.

Another anti-counterfeiting device used in the spirit industry is the shrink sleeve. Numerous brands currently use this method in Far Eastern and South American countries, where refilling of genuine bottles is a big issue. In those countries, regular drinkers of a specific brand know that the bottle should carry a shrink sleeve and if missing they know that it is probably a counterfeit product.

Like ‘lollipop’ labels, shrink sleeves are placed over the top of the cap. They constitute a cost effective and simple way of adding another security layer to a product without using a complex, expensive technology. Shrink sleeves can be treated with security printing techniques and tear tapes carrying overt holographic technologies can be incorporated within a shrink sleeve to offer brand protection and tamper evidence. The shrink sleeve can only be removed by removing the tear tape, which serves as the product authentication medium.

Conclusion
Security packaging solutions can help combat illicit trade and counterfeit alcoholic products. They can be used to detect tampering of genuine goods and as authentication devices to allow detection of counterfeit products, allowing wine and spirit producers to protect their products and their brand and prevent loss of sales and damage to their brand value.

Involving customers can serve as a means of increasing the efficiency of anti-counterfeit packaging solutions. Consumers must be thoroughly informed about security packaging features in order to be able to identify counterfeit products as well as to know which bottle components they should destroy following consumption to prevent them from being reused.

For further information on Payne Security and its innovative anti-counterfeiting solutions, please email payne@scottpr.com, call +44 (0) 115 975-9000 or visit payne-security.com.      

About Payne Security
Payne Security is one of the world's leading companies in the fields of brand protection, document authentication and personal ID solutions providing customers with an extended range of products designed to beat counterfeiters and prove personal identity.

Payne Security is a part of the Coated & Security Products division of Filtrona plc, the international, market leading speciality plastic and fibre products supplier. With the backing of Filtrona plc, we are able to continually invest in our production facilities and quality procedures ensuring the highest standards of manufacture.  

Payne Security’s sister companies within Filtrona C&SP are Payne, the world’s leading tear tape business, and the track & trace business FractureCode Corporation.

April-May 2010