FMCG products, along with pharmaceuticals and tobacco, are one of the most affected industries by counterfeiting. Investment in covert and overt anti-counterfeiting measures can help brands make life harder for counterfeiters and recover losses in sales and brand reputation.
What is FMCG?
Fast Moving Consumer Goods (FMCG) are packaged consumer goods that have a short shelf life due to quick consumption or perishability. FMCG goods include packaged foods, beverages, over-the-counter drugs, dry goods, toiletries, and more.
The FMCG industry is projected to reach $15.3 trillion by 2025. Currently, the biggest FMCG players in the world are Procter & Gamble, Johnson & Johnson, Nestle, Unilever, JBS, Coca-Cola, and Pepsi.
FMCG goods typically sell at thin margins but large volumes. Consequently, every aspect of the product and its packaging is optimized for the bottom line. This makes it trickier to add costly counterfeit protection elements to the packaging or frequently change it to stay one step ahead of counterfeiters.
The Problem of FMCG Counterfeiting
Conservative estimates indicate that the FMCG industry loses trillions of dollars to counterfeit goods—around $1.7 trillion to $4.5 trillion of counterfeit products are sold each year. Also, the country most affected by counterfeit goods happens to be the United States, with American shoppers buying
The issue of counterfeit products has grown to such an extent that the illicit market has overtaken the GDP of many major countries like Canada. Not only does it lead to lost revenues and damage to brand trust, but is also responsible for around 2.5 million lost jobs globally.
How Does Counterfeiting Affect FMCG Brands
Counterfeit goods are a source of direct revenue loss for brands. FMCG companies have to worry about not just legitimate competitors but also fake goods stealing market share from them.
Customers either mistakenly purchase counterfeit goods or start preferring them over their genuine counterparts due to lower cost and comparable quality. Customers often lose trust in the brand due to no fault of the brand, leading to a future loss of sales.
Besides the direct financial hit, this loss of trust also hurts brand reputation and competition on a global scale. In fact, Nike’s 2019 decision to stop selling on Amazon was due in part to tackling counterfeit sales of its products on the ecommerce platform.
Counterfeiting Pose Health Risks for Consumers
The impact of counterfeit goods is not limited to the financial and business loss for brands. It can even pose serious and sometimes, fatal health risks for the end consumers.
In one instance of counterfeit goods posing serious health concerns, Abbott and Beingmate were two brands that suffered due to counterfeit baby powder in China in 2016. More than 22,000 cans of fake baby milk powder were sold under the brand names Abbott and Beingmate. China’s chaotic sales channels were blamed for the easy distribution of counterfeit milk powder. Beingmate suffered an almost total wipeout of its revenues after the incident. Surprisingly, this wasn’t the first case of counterfeited milk powder in China. A similar incident happened in 2008 involving the Sanlu Group, which affected 300,000 children.
In 2013, a Europe-wide ‘horsemeat scandal’ came to light when the Food Safety Authority of Ireland found horsemeat and pig meat in beefburgers from various supermarkets. Besides Ireland, Britain and 13 other European countries were found to be part of the scandal. Many European food suppliers were found to be guilty of meat adulteration. The scandal exposed the vulnerability of supply chains and the risk of harmful substances finding their way to consumers.
In a recent INTERPOL operation across 92 countries, thousands of fake online pharmacies were shut down. In the UK alone, counterfeit drugs and devices worth more than $13 million were seized. In the week-long operation, more than half of all medical devices seized were found to be fake and unauthorized COVID-19 testing kits.
Counterfeiters often take advantage of the lack of stringent government controls, adequate authentication measures, and general awareness about authorized retail channels.
What is The Cost of Counterfeit Protection?
As stated earlier, FMCG brands operate on thin margins. Adding the additional cost of implementing anti-counterfeiting measures can seem too much. But brands need to realize that these protections should be seen as an investment.
Protecting FMCG products against counterfeiting will not only bring back lost sales and increase customer trust but also help brands stand out from competitors. And with the advent of innovative and cost-effective anti-counterfeiting digital solutions in the market today, the costs of protection have come down drastically.
Decision-makers should keep in mind that their investment in counterfeit protection is a fraction of the revenues they stand to recover. Moreover, the benefits in terms of brand protection and customer trust far outweigh the initial investment.
Why FMCG is Often Not Protected Against Counterfeiting
Due to the vast and complex nature of FMCG supply chains, it’s often impossible to keep track of fakes in every single region. Moreover, there is also a huge dependency on retailers to be able to keep counterfeit products at bay. Retailers might knowingly or otherwise stock counterfeit products instead of their genuine counterparts.
Another reason that often comes in the way of counterfeit protection is the cost. As discussed earlier, any alteration to product packaging to include a protection measure will inevitably reduce the bottom line.
Even when the internal resistance at the brand’s end isn’t an issue, other players in the supply chain can be the culprits. Brands need to keep a tight check on each of their suppliers, contractors, and sub-contractors in order to verify the legitimacy of each player in their supply chain.
Types of Counterfeit Protection
Counterfeit protection ranges from obvious physical safeguards to more hidden measures. Depending on the scale of the business and the complexity of implementation, brands need to choose between the different types of counterfeit protection available.
Overt solutions are visible to the naked eye and are obvious anti-duplication measures often included in the form of stickers or other unique identification markers. They don’t require specialized tools to authenticate the products. Users can simply verify the authenticity of the products with a visual inspection.
Examples of overt solutions are QR codes and Holograms on the product packaging. These solutions can help customers or end users verify the authenticity of the product by comparing the hologram against a reference or by scanning the QR code.
Covert solutions are not visible to the naked eye and are embedded in the product packaging in a way that can only be revealed by specialized tools or methods.
Microtext, UV and infrared inks, synthetic tagging, and more are examples of covert solutions.
The Case Against Overt Solutions
Overt solutions have the advantage of being easily detectable by the end users and hence, are a simple way of building trust with the consumers. They’re also often cheaper to implement than covert solutions. QR codes and holograms are inexpensive means of adding an extra layer of counterfeit protection to products.
But this simplicity is a double-edged sword. Counterfeiters can easily replicate almost all overt solutions a brand chooses to implement. They can simply copy any number of overt protection layers to their counterfeits and sell them as genuine products.
End consumers will be lulled into a false sense of security by the fake product, thinking the unique sticker or QR code on the packaging ensures they’ve received the genuine product.
Another disadvantage of using overt solutions is that counterfeits can sometimes have a protection feature never implemented by the genuine brand. In such cases, customers will overwhelmingly choose the counterfeit over the genuine product, simply because the alternative has a sticker or QR code on the packaging.
How Covert Solutions Protect Against Counterfeiting
Unlike overt solutions that are easily replicable and offer no real protection against counterfeiting on their own, covert solutions are much harder to replicate. Due to the technology involved, replicating a covert solution is often not a worthwhile financial exercise for counterfeiters.
Modern covert solutions don’t even require specialized equipment to verify the authenticity of products. Solutions like hidden fingerprints and micro-holes embedded in the product packaging can be scanned using a smartphone app by any end user.
However, creating unique fingerprints is often costly as every product has a different identification mark. For FMCG products, this type of fingerprint protection isn’t cost-effective.
On the other hand, AlpVision Fingerprint is adapted for molded and stamped products. You can secure a high volume of products with the same reference while keeping the costs low.
These solutions don’t require major modifications to the packaging or the production process in order to implement, saving the brand additional costs and hassle. As a result, you still have well-designed branded packaging while having multi-layered protection at the same time.
Combining Covert and Overt Solutions for Multi-Layered Protection
It might be surprising but overt solutions still have a place in counterfeit protection. If brands choose to remove already-implemented overt solutions or simply stop applying new ones, consumers are likely to doubt the authenticity of genuine products.
Hence, a combination of covert and overt solutions is the way to go. With the invisible and hard-to-replicate protection of a covert solution and the visible and easily detectable promise of an overt one, your product can enjoy the best of both worlds.
While customers will think they’re authenticating using the overt feature, the real authentication will be happening in the background with the covert features.
Solutions like Cryptoglyph and Secured QR Code offer easily implementable and detectable counterfeit protection where the covert and overt technologies are seamlessly integrated to create a powerful anti-counterfeiting technology for fast-moving consumer goods.
- Cryptoglyph adds thousands of invisible micro-holes to the product packaging and offers smartphone authentication by end users. The micro-holes are invisible to the naked eye.
- Secured QR code modifies the standard QR codes with invisible micro-holes in the black area of the QR code and is also detectable with a smartphone app.
- Cryptoglyph can also be used to secure a QR code by applying it on top of the QR code. Brands can choose between Cryptogylph and Secured QR Code based on their business case.
These advanced covert features combined with easily identifiable overt solutions can offer brands unprecedented protection from counterfeiting. To choose the most suitable protection for your brand, read our Secured QR code vs Cryptoglyph whitepaper here
Every technology has its limitation and can’t be looked at in isolation. Hence, based on your product type, the solutions need to be tailored to your specific requirements. This is where AlpVision comes in — AlpVision offers covert solutions tailored to your brand and products.