Manoj Kochar, President, ASPA in a recent interaction with Mary Janifha Evangeline. X, Editor, Asia Manufacturing Review, shared his views on the scope of the counterfeiting problem in terms of global economic impact, how counterfeiting affects manufacturers' revenue streams, the various industries that are most susceptible to the effects of counterfeiting, and more.
Manoj Kochar is a graduate of Commerce stream from St Xavier’s College, Kolkata, he is among those who led the introduction of hologram technology in India. He is the first Asian to serve as the Chairman of the International Hologram Manufacturers Association (IHMA), a London-based association that represents the global hologram industry.
He has a background in both holography and authentication – he’s currently the President of the Authentication Solution Providers Association (ASPA), a New Delhi-based association of authentication solution providers, which is a widely respected and perhaps the most active industry association in the global authentication industry. He is also a current IHMA Board member and also serving on the Governing Body of the Indian Institute of Packaging. Manoj has participated as a speaker and session Chair at several national and international conferences.
What is the scope of the counterfeiting problem in terms of global economic impact? How does counterfeiting specifically affect manufacturers' revenue streams? Which industries are most susceptible to the effects of counterfeiting?
Counterfeiting is a rapidly escalating issue, which is growing every year at an alarming rate and the true scale of the problem is quantified with estimates that range from USD 4 trillion to USD 5 trillion, this surpasses the GDP of most countries. Furthermore, it poses a significant threat to brands and thus prompts governments, brands, enforcement agencies, and regulators to work tirelessly to achieve victory over it.
Counterfeiting also impacts the revenue streams of the manufacturers severely. This is because counterfeiters hijack legitimate products, brands and USPs. What leads to a significant loss for businesses in the market is the counterfeiters mimic original brands while pushing inferior products & quality under the disguise of the authentic brand. Many brands are now realizing the real issues they have to face due to this.
FMCG & pharmaceuticals are some of the industries that are specifically vulnerable to counterfeiting. The pharma industry is especially concerned since counterfeit medicines most often lack API or contain minimal quantities of API in them and this will not only damage the brand’s reputation but also lead to ineffective treatment.
Auto components, consumer durables & agriculture are some of the industries that are affected heavily besides pharma. All of these sectors face challenges from counterfeiting and this continues to threaten both brand integrity as well as consumer safety.
In what ways does counterfeiting directly impact a manufacturer's bottom line? How does the presence of counterfeit goods in the market affect legitimate pricing strategies? What hidden costs are associated with combating counterfeiting beyond immediate financial losses?
Counterfeiting impacts both the top as well as the bottom lines of brands. While brands earlier used to compete against legitimate rivals, today they face the challenge of combatting the counterfeiting versions of their products. These counterfeited products not only undermine the consumer trust as well as the brand promise but they also lead to dissatisfaction when customers realize that they have bought a counterfeited product and this often leads to consumers abandoning the brand altogether as they do not want to risk another fake purchase.
As a consequence, brands lose their market share and this in turn affects their profitability directly. In one the surveys by Incopro it was found that 52 percent of the customers lost trust in the brand after purchasing a counterfeit product online and almost 64 percent of them lost trust in the online marketplace. Unfortunately, the online environment has become the hotspot for counterfeit products and this has made it easier for fake products to infiltrate the market when compared to the conventional distribution channels. Also, it has made some of the major brands to stop selling their products in various online platforms.
What technological advancements are available to manufacturers to secure their supply chains against counterfeiting? How can blockchain technology be utilized to verify the authenticity of products? What role do smart labels and RFID tags play in tracking and authenticating products?
Today owing to technological advancement, there are various types of technologies available to combat counterfeiting. These include physical features on the products such as holograms, specialty inks, security printing and digital technologies such as track & trace systems. Track & trace in particular have gained traction and have become important.
Another latest trend is the integration of physical and digital technologies – known as “phygital”. This feature helps in combining visual features which include holograms with digital tools such as smartphone-scannable codes. For instance, non-cloneable codes comprise secure graphics within a QR code that can be verified by apps that distinguish between fake and authentic codes.
Although blockchain technology operates primarily in the background, it plays a key role. While the front-end technology is the track and trace system, the back-end mainly relies on blockchain for secure data storage, and since it is a distributed ledger it's nearly impossible to hack. And, this combination enhances traceability and product authentication.
Also, smart labels & RFID tags simplify product identification further. By using a mobile phone or a reader, these technologies render unique identifiers which link to the database and this helps in verifying the authenticity of the product and tracing it back to its origin. Although it is expensive with limited applications currently, the cost of these technologies are anticipated to decrease in the years to come and this is expected to lead to wider adoption.
How can manufacturers measure the effectiveness of the anti-counterfeiting strategies, and what immediate steps should they take to begin safeguarding their revenue brand equity, as well as consumer trust?
Anti-counterfeiting strategies must be planned carefully and manufacturers should identify the problem areas which include breaches in the supply chain or other specific regions where counterfeiting is more prevalent. Manufacturers can track where the counterfeit codes are being scanned & can focus more on those areas for identifying & addressing the breaches by using product codes.
The strategy should commence with assessing specific issues be it the label, product tampering or packaging. For instance, when someone is replacing genuine content with fake content, corrective measures should be taken once the problem is identified. The best approach to follow here is to use a combination of covert, overt & forensic features. While the overt features are visible to the consumers, allowing them to identify authenticity by sight or touch, covert features are hidden and can be verified by using small and portable instruments. Forensic features are extremely advanced and these are detectable only in laboratories these are especially valuable when a brand is required to defend against liability claims since they can determine if a product involved in a claim is genuine or not.
Some of the measures include implementing multi-technology solutions, selecting an ASPA member as your solution provider is also advisable since they use the latest technology & can collaborate to develop effective anti-counterfeit solutions which protect revenue & brand equity. Lastly, brands must refer to ISO 22383, - a guideline to select & evaluate authentication solutions for material goods. It is one of the valuable resources which guides to formulation of an anti-counterfeiting strategy, measuring its effectiveness & making improvements, although it is not a certification.