Brand protection. How to secure the real deal?
Trade in counterfeit and pirated goods has risen steadily in recent years – even as overall trade volumes stagnated – and now stands at 3.3 percent of global trade, according to a new report by the OECD and the European Union’s Intellectual Property Office.
Fake goods, which infringe on trademarks and copyright, create profits for organized crime at the expense of companies and governments. The value of imported fake goods worldwide last year based on customs seizure data has been estimated at 509 billion USD, up from 461 billion USD in the previous year, accounting for 2.5 percent of world trade. In the European Union, counterfeit trade represented 6.8 percent of imports from non-EU countries, up from 5 percent. To magnify the scale of the problem, these figures do not include domestically produced and consumed fake goods, or pirated products being distributed via the internet.
‘Counterfeit trade takes away revenues from firms and governments and feeds other criminal activities. It can also jeopardize consumers’ health and safety,’ said OECD public governance director Marcos Bonturi, commenting on the report.
Forged items like medical supplies, car parts, toys, food, cosmetics and electrical goods also carry a range of health and safety risks. Examples include ineffective prescription drugs, unsafe dental filling materials, fire hazards from poorly wired electronic goods and sub-standard chemicals extending from lipsticks to baby formula. In a recent survey, nearly 65 percent of consumers said they would lose trust in the original products if they knew it was relatively easy to buy counterfeit goods of that brand. Nearly three quarters of consumers would be less likely to buy products from a brand that is regularly associated with counterfeit goods.
‘Brand protection is a complex problem as it encompasses different publics, products and problematics,’ says Louis Rouhaud, global marketing director at Polyart. ‘Brands are not always ready to pay extra for additional layers of security or trust. It is a mix of marketing too: adding a security seal on a fancy organic drink will certainly drive the sales up, though there is no real challenge to the integrity or quality of the product.’
"Counterfeit trade takes away revenue from firms and governments and feeds other criminal activities. It can also jeopardize consumers' health and safety"
According to Oliver Kay, director of sales and business development at 3D AG, a Swiss specialist in high security applications and finished security labels, brand protection must be a holistic approach encompassing many aspects, from trusted suppliers and stakeholders, to a secure and transparent supply chain and distribution system, to high-quality manufacturing standards, monitoring and incentivizing of sales channels, minimizing gray market activities and end-consumer empowerment. ‘Once all these aspects of brand protection are in place, high-security labels and the packaging itself can play an important role of communicating the authenticity and quality of the brand and the original product,’ he says.
Consumers – the biggest challenge?
According to Oliver Kay, consumers underestimate the problems and the negative impact that counterfeits have on the economy, society and their health.
‘Consumers simply do not know what a security label is, and they do not know how to differentiate an original product from a counterfeit product,’ adds Kay. ‘There is also a misconception as to what authentication is. It is a multi-step process that involves physical characteristics of the packaging itself (including security labels), but also “common sense” of the consumer. Security labels are often counterfeited themselves, and consumers don’t know how to differentiate an original from a fake.
‘Consumers must be educated and encouraged to use their common sense when determining if a product is an original or not. Security labels and supporting technologies should augment the consumers’ common sense, not turn it off.’
A big challenge in the current security labels market is selecting the right type of protection at the right value. As more and more unique technologies flood the market, it can be difficult to narrow the field and select those which best fit the situation. However, good dialogue between brand owners and converters can uncover these needs and identify the right solutions.
How to determine the best solution?
There are numerous packaging systems designed to protect products from counterfeiting and tampering, but labels provide perhaps the most easily identifiable way for consumers to know a product is ‘real’ and for brand owners to incorporate covert technologies.
‘Anti-counterfeiting label technologies, which aid in protecting consumers from fake products, can play a major role in improving brand protection and trust by providing security at different points in the product’s journey,’ says Paul Purdef, marketing director for Durables at Avery Dennison. ‘Labels can be used to fight counterfeiting by selecting materials with characteristics that respond to how the product might be handled in an instance where counterfeiting had occurred.’
‘There is not one single best brand protection technology. It depends on the problem or challenge of the product that a brand tries to protect,’ adds Oliver Kay. ‘It’s usually a combination of different physical and digital brand protection technologies combined together, which best suits the product, the sales channel and the brand in question.’
According to Purdef, understanding the journey of the product will help to identify each touch point at which it could be inspected for counterfeiting. ‘Will the warehouse personnel at the distributor be inspecting the product? Maybe the inspector will be the receiver at the retail location, the doctor at the hospital or the end consumer,’ he says. ‘These pieces of information will guide the selection of a labeling material that is difficult to reproduce and has an identifiable characteristic that indicated that counterfeiting has occurred.’
Rouhaud thinks that QR codes can be efficient enough in many cases, but the majority of brands do not favor them as they do not necessarily look good on their product. ‘Probably there is not one unique answer, but rather different solutions adapted to different problems,’ says Rouhaud. ‘The most technical solution is worthless if you can’t make sure that the genuine label (with all the technology) has not been placed on a fake product or that the genuine container, has not been opened and tampered with, so the best brand protection is starting with an effective tamper evidence.’
Ken Moir, vice president of marketing at NiceLabel, suggests that while RFID can be the best way forward to improve brand protection and trust, it needs to be implemented as part of a centralized cloud-based solution. ‘The reason why RFID is so effective is that every RFID chip has a TID – a unique number that cannot be edited or counterfeited,’ he says. ‘If the business connects their RFID labeling solution to the cloud, controls what people can print and then marks the label and connects it to a TID, it has invulnerable anti-counterfeiting brand protection in place. This will in turn enhance trust in its products.’
‘It can be complex to set up RFID tags to work with labels,’ adds Moir. ‘A big part of the problem is the decentralized approach. Typically, manufacturers ask suppliers to implement RFID themselves, but they are unlikely to have the expertise to make it work. The challenge can be overcome through a centralized cloud solution, specifically built to encode RFID and supported by IT. This approach enables the manufacturer to roll out software, printers and RFID-encoded labels for suppliers to use. The whole process works best if it is standardized and carefully monitored and controlled.’
"Trade in counterfeit and pirated goods has risen steadily in the last few years and now stands at 3.3 percent of global trade"
Avery Dennison proposes that the best approach to brand protection is a layered technology, which can include frangible and void materials for tamper evidence, overt technologies for consumers to distinguish between real and fake, and covert or forensic technologies that the brand owner can use to identify fakes via buybacks or on-site analysis.
‘Anti-tampering and anti-counterfeiting solutions such as frangible and void products are quite popular,’ says Purdef. ‘The use of micro-printing and holograms at the converter level are also prominently used. Depending on the level of security a layered approach of multiple different elements is still the most popular. With the rise of Item-level authentication with RFID, this will only become more popular as it facilitates immediate product authentication from manufacturing down to the consumer.’
Digital printing and variable data have helped to more seamlessly include information such as unique identifiers in each label. ‘Flexo presses with digital stations allow for variable information printing with ease, whereas in the past this process would have had to be taken off-line and came with more limits as to what information could be unique,’ says Purdef. ‘The resolution of printing has also improved, allowing for techniques like microprinting that can aid in preventing counterfeit. Additional technologies are in development from several suppliers, many of which can be incorporated into labels. It is critical to stay aware of these and build layers of protection.’
Xeikon and HP Indigo both offer high-resolution digital printing systems, which can be used as the base for microtext, hidden patterns and guilloches.
‘Within our proprietary software – Xeikon X-800 – some unique features are possible, variable patterns, hidden coding and track and trace functionality,’ says Jeroen van Bauwel, director of product management at Xeikon Digital Solutions. ‘Printers can make use of several anti-counterfeiting techniques at low cost, since most of these techniques are part of the production printing process and don’t require extra investments or special expensive fraud detection systems.’
Microtext, particularly when used in conjunction with holograms or other overt security devices, utilizes print down to 1 point or 0,3528mm. This is virtually impossible to copy, duplicate or reproduce and can be used for specific hidden messages or codes introduced into the layout. Invisibility to the naked eye also makes it possible to introduce microtext in linear illustrations or text and other overt layout elements, without the consumer or potential counterfeiter’s knowledge. Using this method, covert messages can potentially authenticate the document or packaging by simple visual enlargement of the element with a magnifying glass. In order to further optimize this feature, microtext can also be used as a security raster in an image or design element.
"The much-heralded move to RFID has not fully happened yet. Businesses have been using more basic technologies like hidden watermarks. The future must be about RFID"
As technology and counterfeiting practices advance, innovative labeling systems that include hard-to-replicate features can help to provide security. Avery Dennison’s photoluminescent products, for example, deliver a multicolored pattern which enhances the level of protection offered. Smartphones meanwhile allow consumers and brand protection agents to make use of serial-numbered labels and lean on cloud-based information to verify that the serial number on the label matches the product. This kind of smart technology will increasingly play a factor in providing an added level of security.
‘Labels can now be programmed to include information about where the product was sourced, how it was made, and a unique identifier or serial number,’ comments Purdef. ‘In the food segment, this technology is being used to verify the authenticity of rare and expensive cuts of beef and fish and include information specific to each individual product that describes where it was sourced from. As consumers become more concerned about the authenticity and security of products, or more curious about their journey through the supply chain, more information can be included and accessed through intelligent labeling. Customers can then access that information through their smartphone.’
What to expect?
‘Counterfeiting activities can never be fully stopped,’ says Kay. ‘It’s a “cat and mouse” game, but existing and new brand protection technologies will make it much harder for the counterfeiters to produce fake products that look and feel genuine.’
Brands are looking to take back control of their products and uniquely identify every item – but that is not easy to achieve, as NiceLabel’s Moir points out: ‘The much-heralded move to RFID has not fully happened yet. Businesses have been using more basic technologies like hidden watermarks. The future must be about RFID, enabled by the unique TID number, and fueled further by centralizing cloud environments.’
Cloud and RFID are developing quickly and in tandem. These are the two leading technologies in this space and are likely to continue to be so in the immediate future. ‘Often brands will start with watermarking and move over to cloud and RFID over time,‘ says Moir. ‘Blockchain also has potential, but while there has been much noise around the technology, it is uncertain how it will be applied over the longer term.’
‘Blockchain enabled brand protection technologies will develop with great speed when consumers learn the benefits and trust these new developments,’ argues Kay. ‘Also, a constant evolution of smart phones with better cameras will enable consumers to check the authenticity of products, new brand protection technologies will emerge, and existing ones will improve.’
Engaging with the consumer through smart labels promotes confidence and assurance in a brand. Once the consumer can confirm that the product they are purchasing is legitimate with a valid history, they are likely to purchase from that brand again.