PRODUCT CRIME - WINES & SPIRITS
Wines & spirits are:
- Widely counterfeited
- Subjected to various forms of tampering, refilling and / or dilution
- Targeted by smugglers (particularly between countries with contrasting high & low excise tax regimes).
Counterfeiting operations in particular can be scaled up and can be highly lucrative and are known to be often linked to organised crime networks and in some cases terrorist groups.
LOOK-ALIKE COUNTERFEITS VERSUS REFILLING OF GENUINE EMPTY BOTTLES
The problem of copy or look-alike products is widespread for spirits and also wines. Such copy and Look-alike products aim to perform the same function as a genuine product but are produced by an independent manufacturer under a similar name, and nearly always are of inferior quality.
The products are sold in markets where consumers are vaguely familiar with Trade Marks and international brands but often have little comprehension of English - All major spirits brands are vulnerable to such attacks. Nonetheless it is clear that such challenges have by no means deterred counterfeiters in China.
LOOK-ALIKE SPIRITS BOTTLES
Such copy and look-alike products aim to perform the same function as a genuine product but are produced by an independent manufacturer under a similar name, and nearly always are of inferior quality. The products are sold in markets where consumers are vaguely familiar with trademarks and international brands.
All major spirits brands are vulnerable to such attacks, for example:
THE FINE WINE EMPTY BOTTLE TRADE
Increasingly, counterfeiters have been finding that it can be easier to obtain and refill genuine empty bottles of high end wines & spirits than to try to replicate original glass bottles. With this approach the original genuine label is usually still attached to the bottle.
China's booming wine market has created an extraordinary demand for empty bottles of famous wines (primarily from prestigious French vineyards) with fraudsters willing to pay up to $475 USD (or even more for something really special) for a good bottle that can be re-filled with something less expensive.
Fine wine counterfeits in China range from the glaringly obvious to the very subtle (for example by refilling a Chateau Lafite '82 labelled bottle with Chateau Lafite '85 wine (which is quite a lot less expensive). In a country where, for example a highly desirable Chateau Lafite Rothschild 1982 can command as much as US$5,900, the empty bottle can fetch as much as $1,500 USD on the black market (the condition of the empty bottle is of course critical and affects the price).
An empty bottle of Lafite with a damaged label so unauthorised refilling will serve no purpose.
SHALA ONE - THAI WINE WITH A SIMILAR LABEL TO HIGH END OPUS ONE FINE WINE
A wine bar in Thailand called Shala One has been offering for a number of years a house wine with a label design that is uncannily similar to the label used by leading Napa Valley Opus One high end fine wine.
POTENTIALLY DEADLY - INDUSTRIAL SCALE PRODUCTION OF COUNTERFEIT SPIRITS
Raids on a series of illegal counterfeit spirits distilleries over the last several years have also highlighted the terrible conditions in which counterfeit alcohol is manufactured, typically in filthy, back-street factories. Such counterfeit spirits usually contain a variety of lethal chemicals.
Could you tell genuine from fake - Even when they are side by side, which usually they are not?
ESTIMATES OF FINANCIAL LOSSES
Growth rates of financial losses due to counterfeiting and related activities globally have been accelerating at an alarming rate since around 2013 and forecast to continue to grow at an annual rate of around 15.6% through to 2019, up from 6.8% over the previous 5 year period, according to the International Chamber of Commerce / Organisation for Economic Co-operation and Development.
This is a big change for the worse and the ramifications are sure to be far reaching - But still the brand protection industry has yet to really take off - With the global market for brand protection solutions has been estimated to be running at less than 0.5% of related global financial losses which are at an estimated $1,020 billion USD in 2014. Best estimates put forecast growth of brand protection solutions at 12.6% in 2014 and projected to continue at around this level for the next few years.
ILLICIT & COUNTERFEIT ALCOHOL
Estimates for illicit alcohol vary somewhat, although a clear pattern emerges:
- Some 30% of the alcohol consumed globally is reckoned to be counterfeit according to the International Center for Alcohol Policies
- The World Health Organization has estimated that in Southeast Asia, home-brew or other illegally procured beverages account for 70% of overall alcohol consumption (indeed the bulk of this non-commercial alcohol is made and consumed in less developed and emerging countries)
- Best estimates of volumes of unrecorded consumption of illicit alcohol in North America and Western Europe run at a more conservative though still high level of between 10 & 15%.
Note: A distinction must be drawn between mass market branded wines and high-end collectible wines, as the dynamics of these markets are entirely different.
The majority of the World's counterfeit goods originate in China (70 to 80%), making it the counterfeit capital of the world - Indeed, the counterfeiting industry accounts for an estimated 8% of China's GDP.
Not only is a significant proportion of the World's counterfeit wines & spirits physically produced in China but a significant proportion of this output is then consumed within China, the rest being exported all over the World.
Smuggling is an age old occupation and has evolved over the centuries. Smuggling takes many forms in the modern World from the white van or family car on a cross channel ferry from mainland Europe to the UK to the crossing of deserts with camels and asses from Iraq to Iran. The dangers and penalties range from fines and possible imprisonment to death (as in China).
IDENTIFICATION OF HIGH RISK PRODUCT CATEGORIES
Certain types of product tend to be more attractive to counterfeiters than others - Wines & Spirts meet both key criteria:
- Premium Pricing / Strong Brands
- High levels of Taxation.
- When one or both of the above factors are present, in a single product category, for example the wines & spirits sectors, then this can prove a powerful draw for the counterfeiter
- Wines & spirits tend to have the highest unit prices in the drinks sector and generally the highest margins
- Wines & Spirits are also widely targeted by smugglers (in a similar to cigarettes particularly for countries with high excise duty).
TAX & THE ROLE OF GOVERNMENT
UNRECORDED & ILLICIT ALCOHOL
In order to gain an insight in to world of genuine branded wines & spirits it can be helpful to take a look at the murky and multi-faced world of unrecorded alcohol consumption, which can be defined as:
- ‘Alcohol consumption which is not reflected in official statistics on alcohol consumption'.
EXCISE TAX STAMPS
In many countries, excise tax stamps are employed to facilitate implementation of excise tax policy and regulations for wines & spirits. The presence of a stamp signals that the required tax has actually been paid on the specific item. Brand owners must purchase the required tax stamps from the government at their excise value.
DANGER TO HUMAN HEALTH
Properly produced and certified wines & spirits are made with a type of alcohol called ethanol. This is an alcohol that is safe to drink in moderation. Manufacturers of counterfeit alcoholic drinks, on the other hand, are not controlled and this can lead to the use of other lower cost types of alcohol which can have serious adverse effects and lead to life-changing health problems.
BRAND PROTECTION - WINES & SPIRITS
The following 3 major traditional on-pack security technology groups & materials are prominent in the brand protection space:
Table Major Technology Groups - Attributes compared
Source: Vandagraf International Limited.
Refilling of wine & spirts bottles, both partially (topping up) and entirely are big problem for the industry today - For brand owner, consumer & governments.
SMART PHONE ENABLED PRODUCT AUTHENTICATION
In 2014 the installed base of smart phones in the hands of consumers was some 1.8 billion units, forecast to rise to 3.4 billion units in 2019. The appeal to brand owners of smart phone enabled systems for mobile marketing proposes has become abundantly clear particularly in the light of the huge popularity of social media today.
It is perhaps less obvious how consumers can be persuaded to adopt smart phone enabled product authentication. The trick may be to find a way to automate the authentication process by linking it to mobile marketing related activities that attract and engage consumers, such as promotions, money back coupons and the like. In this way authentication then becomes a by-product of marketing promotions activity and is carried out automatically.
Smart phones can read codes which can be presented in a variety of formats. These codes can be scanned with a smart phone camera. This creates access to the brand owner's website that provides information to the consumer about the product (eg: wines or spirits) and by the way also verifies its authenticity.
Table of Contents
- 1.1. TYPES OF PRODUCT CRIME - WINES & SPIRITS
- 1.2. CATEGORY DEFINITIONS
- 1.3. SOME MAJOR INITIATIVES IN BRAND PROTECTION
- 1.3.1. The Anti-counterfeiting Trade Agreement (ACTA)
- 1.3.2. Interface Public Members (IPM) - WCO / GS1 - A Tool for Customs
- 184.108.40.206. New Mobile IPM Launched in 2013
- 220.127.116.11. WCO Operations - Raids & Seizures
- 1.4. KEY DRIVERS - PRODUCT CRIME - WINES & SPIRITS
- 1.4.1. China & the Internet
- 18.104.22.168. The Economic Boom of China
- 22.214.171.124. The Rapid Growth of the Internet
- 1.4.2. Identification of High Risk Product Categories
- 126.96.36.199. Powerful Motivators for Counterfeiters
2. TAX & THE ROLE OF GOVERNMENT
- 2.1. UNRECORDED & ILLICIT ALCOHOL
- 2.1.1. Unrecorded Consumption - Definition, Categories & Market Sizing
- 2.2. SOME PERSPECTIVES ON TAXING WINES & SPIRITS
- 2.2.1. Unintended Consequences of High Taxes on Alcoholic Drinks
- 2.2.2. Tax Differentials between Countries Fuels Product Crime
- 2.2.3. Smuggling & Counterfeiting within the EU
- 2.2.4. Case Study - Alcohol Smuggling between States in India
- 2.2.5. Policy Considerations - Impact on Misuse & Problem Behaviour
- 2.3. EXCISE TAXES ON ALCOHOL.
- 2.3.1. Excise Tax by Country
- 2.3.2. Alcohol Excise Tax Rates - By Country - World
- 2.3.3. Alcohol Excise Tax Rates - By State - US
- 2.4. DANGER TO HUMAN HEALTH
- 2.5. EXCISE TAX STAMPS - ALCOHOL
- 2.5.1. Case Study - OpSec - Tax Stamp Security & Authentication
- 2.5.2. Case Study - SICPAtrace™ - Tax Stamp Security & Authentication
- 3.1. WINES - TRENDS
- 3.1.1. Wines - Key Trends
- 3.1.2. Wines - Regional Trends
- 188.8.131.52. Old World versus New World Wines
- 184.108.40.206. Old World Wines (Europe)
- 220.127.116.11. New World Wines (US, Chile, Argentina, Australia, South Africa, Asia)
- 18.104.22.168. Champagne versus Other Sparkling Wines
- 3.1.3. High Growth Chinese Wine Market
- 3.1.4. Impact of Tax Changes in Asia - Wines & Spirits
- 22.214.171.124. China & Hong Kong - Tax Implications
- 126.96.36.199. Fine Wine Auctions in Hong Kong
- 3.1.5. Chinese Investments in French Vineyards
- 3.1.6. The Wine Market in India - Potential for Growth
- 3.2. PRODUCT CRIME - WINES
- 3.2.1. Counterfeit Wines - A Segmentation
- 3.2.2. Case Study - Red Bicyclette Brand - Ernest & Julio Gallo
- 3.2.3. Case Study - Mis-Labelled Italian Wines - Tuscany's Montalcino
- 3.2.4. Case Study - Counterfeit Wines in the UK - Jacob's Creek & Other Brands
- 3.2.5. Examples of Counterfeit Corks, Capsules & Labels - Collectible Fine Wines
- 3.2.6. Case Study - US Chef Faces Lawsuit - Sale of Allegedly Counterfeit Fine Wine
- 3.2.7. Authentication of Fine Wines - Special Challenges
- 3.2.8. China - Counterfeit Wine - A Special Case
- 188.8.131.52. The Fine Wine Empty Bottle Trade in China
- 184.108.40.206. Case Study - A Visit to a Chinese Winery was Eye-Opening
- 220.127.116.11. Defensive Registration of a Brand Mark in China
- 18.104.22.168. Case Study - Australian Wine Brand Penfolds - Counterfeit Attacks in China
- 22.214.171.124. Online Counterfeit Wine Sales in China
- 3.3. BRAND PROTECTION - WINES
- 3.3.1. The More Traditional Approach to Brand Protection of Wines
- 3.3.2. Some Leading Brand Protection Solution Providers - Wines
- 3.3.3. Case Study - Rioja Wine
- 126.96.36.199. Wine Labels with Generic Hologram Denoting Region of Origin - Rioja
- 188.8.131.52. Spanish Wine with Scrambled Indicia Code Label
- 184.108.40.206. Case Study - Promotion and security of Spanish Wines - CTOV
- 220.127.116.11. EU Systems for Geographical Indication and Traditional Speciality
- 3.3.4. Case Study - Opus One - US
- 3.3.5. Case Study - Shala One - Thai Wine with a Resemblance to Opus One Label
- 3.3.6. Case Study - Chateau Margaux & Chateau Lafite- Multiple Security Devices
- 3.3.7. Case Study - BubbleTag™ & Other Devices from Prooftag
- 3.3.8. Case History - Kodak Helps Napa Valley Wineries Fight Wine Fraud
- 3.3.9. Dispute Goes Legal - Mr. Koch (Collector) vs. Mr. Kurniawan (Counterfeiter).
- 3.3.10. The Mr. Koch Approach to Brand Protection - Fine Wines
- 4.1. SPIRITS - TRENDS
- 4.1.1. Spirits - Key Trends
- 18.104.22.168. Premiumisation in the Spirits Sector
- 22.214.171.124. Proliferation of Flavour Variants in Spirits - Vodka & Whiskey
- 126.96.36.199. New Entrants & More Obscure Spirits Brands - Niche Appeal
- 188.8.131.52. Implications of Key Trends for Counterfeiting of Spirits
- 4.1.2. Spirits - Regional Trends
- 184.108.40.206. Western Markets - North America & Europe
- 220.127.116.11. Emerging Markets
- 18.104.22.168. Case Study - Diageo Asia Investment in Spirits Brand - Some Dangers
- 4.2. PRODUCT CRIME SPIRITS
- 4.2.1. Counterfeit Spirits Manufactured by Criminals Hurts & Kills People in the UK
- 4.2.2. Case Study - Bootleg Alcohol - From Criminal Manufacture to Poor Students
- 4.2.3. Case Study - Counterfeit Spirits in the UK - A Steady Stream over the Years
- 4.2.4. China - Counterfeit Spirits - A Special Case
- 22.214.171.124. Crackdown on Multiple Luxury Product 'Gifting' in China
- 126.96.36.199. Protection for Chinese Brands in China
- 4.2.5. Russia - Counterfeit Spirits - A Special Case
- 188.8.131.52. Vodka in Russia
- 184.108.40.206. Counterfeit Whiskey in Russia
- 220.127.116.11. Price Control Measures on Alcohol in Russia
- 4.2.6. India - Counterfeit Spirits - A Special Case
- 4.2.7. Case Study - Taiwan Seizures - Counterfeit Wines Spirits
- 4.3. BRAND PROTECTION - SPIRITS
- 4.3.1. Tamper evident / Holographic Shrink Sleeves
- 4.3.2. Molecular Micro-Taggants - Spirits
- 4.3.3. Case Study - Wu Liang Ye White Spirit - Multiple Brand Protection Features
- 4.3.4. The Scotch Whisky Association (SWA) - Anti Counterfeit Activities
- 18.104.22.168. Protection as a Geographical Indication (GI)
- 22.214.171.124. Brand Abuse by Subtle or Oblique References of Scottish Origin
- 126.96.36.199. Counterfeit Scotch Whiskey Made in Europe - On the Increase
- 4.3.5. International Federation of Spirits Producers - IFSP
- 4.3.6. Operation Opson - Europol / Interpol -$ Millions Seized
5. SUPPLY SIDE INDUSTRY STRUCTURE
- 5.1. MARKET REACH OF BRANDS - WINES VERSUS SPIRITS
- 5.2. LEADING COMPANIES - WINES & SPIRITS
- 5.2.1. Structure of the Wine Industry
- 5.2.2. Structure of the Spirits Industry
- 5.2.3. Leading Wine Companies - World
- 5.2.4. Leading Spirits Companies - World
- APPENDIX - Leading Brands & Brand Owners - Wines & Spirits
6. A STRATEGIC APPROACH TO BRAND PROTECTION
- 6.1. THE PATH TO BECOMING A PROVIDER OF INTEGRATED SOLUTIONS
- 6.1.1. Integrated Brand Protection Solutions
- 6.1.2. Levels of Defence - 1st, 2nd & 3rd
- 6.1.3. The Layered Approach for Enhanced Security
- 6.1.4. Major Types of Security Solution& Selection Criteria
- 6.2. THE IMPORTANCE OF PACKAGING
- 6.2.1. Central Role for Packaging / Label Converters in Creating Integrated Solutions
- 6.2.2. Packaging Design can Provide Additional Security
7. SECURITY WITH PACKAGING
- 7.1. PACKAGING COMPONENTS - WINES & SPIRITS
- 7.1.1. Characteristics of Packaging - Wines & Spirits
- 7.1.2. Structural Packaging Formats - Wines & Spirits
8. GLASS BOTTLES - WINES & SPIRITS
- 8.1. ECONOMICS OF GLASS BOTTLE MAKING
- 8.2. ILLICIT APPROACHES TO THE GLASS BOTTLE CHALLENGE
- 8.3. HIGH TECH TESTING TECHNIQUES FOR GLASS BOTTLES
- 8.3.1. Centre d'Etudes Nucleaires de Bordeaux Gradignan (CENBG) Laboratory
- 8.3.2. The Isotope Cesium-137 Test
- 8.4. EXISTING MOULDED BOTTLE CODES
- 8.4.1. How to Read Moulded Glass Bottle Codes from O-I (Owens IIlinois)
- 8.5. UNIQUE CODES FOR INDIVIDUAL BOTTLES
- 8.5.1. Laser Etched Coding / Marking Solutions - Glass Bottles
- 8.5.2. Case Study - Domino Laser Etching - Château Cheval Blanc
- 8.5.3. Unique ID Marking for Glass Bottles - Saverglass / St. Gobain, France
- 8.6. PERSONALISATION OF BOTTLES - COLOURS, ENGRAVING, INSERTS
9. CLOSURES, CORKS, SHRINK SLEEVES & CAPSULES
- 9.1. POTENTIAL SECURITY BENEFITS
- 9.1.1. Multiple Security Solutions - Wines & Spirits
- 9.1.2. Plastic Injection Moulded & Metal ROPP Closures - Wines & Spirits
- 188.8.131.52. Case Study - Amcor Closures & N'CRYPT™ - Anti-counterfeit Solutions, Australia
- 184.108.40.206. Case Study - Global Closure Systems (GCS) / UCP - UK / Germany
- 220.127.116.11. Case Study - Guala Closures Group, Italy / Luxembourg
- 18.104.22.168. Case Study - Reynolds Group / Closure Systems International, NZ
- 22.214.171.124. Case Study - Herti, Bulgaria
- 126.96.36.199. Case Study - Manaksia, India
- 188.8.131.52. Case Study - Shandong Lipeng, China
- 184.108.40.206. Examples of Premium Closure Designs - Spirits
- 9.2. CORKS - WINES & SPIRITS
- 9.2.1. Traditional Cork Stoppers Facing strong Competition
- 9.2.2. Cork Stoppers versus ROPP Aluminium Closures
- 9.2.3. Cork Stoppers - Natural versus Synthetic
- 9.2.4. Cork Stopper Types
- 220.127.116.11. Case Study - Corticeira Amorim, Portugal
- 18.104.22.168. Case Study - Noel Corp. - Nomacorc, US
- 9.2.5. Corks are Central for Authentication of High-End Wines
- 9.2.6. Laser Etch Marking of Wine Corks
- 9.3. SHRINK SLEEVES & CAPSULES - WINES & SPIRITS
- 9.3.1. Shrink Sleeves
- 22.214.171.124. Case Study - Sleever International & Piper Heidsieck Champagne, France
- 9.3.2. Case Study - CCL Decorative Sleeves, UK
- 126.96.36.199. Case Study - Gilbreth Shrink Sleeve for Malibu RED Rum, US
- 9.3.3. Capsules
- 188.8.131.52. Case Study - Amcor Capsules for Wines & Spirits
10. SMART PHONE AUTHENTICATION - THE NEW NORM?
- 10.1. WORLDWIDE FOOTPRINT - SMART PHONES
- 10.2. ADVANTAGES OF SMART PHONE READABLE CODES
- 10.3. ADDRESSING THE EMPTY BOTTLE REFILLING PROBLEM WITH SMART PHONES
- 10.4. OVERVIEW - SMART PHONE ENABLED AUTHENTICATION
- 10.5. WHY SMART PHONES FOR BRAND PROTECTION?
- 10.6. SMART PHONES - MOBILE MARKETING & ANTI-COUNTERFEIT
- 10.7. SELECTED SOLUTION PROVIDERS - SMART PHONE ENABLED BRAND PROTECTION
- 10.7.1. Digimarc Discover™ - Smart Phone Enabled
- 10.7.2. Document Security Systems (DSS) - AuthentiGuard™ - Smart Phone Enabled
- 10.7.3. DuPont Authentication IZON™ - Smart Phone Enabled
- 10.7.4. Graphic Security Systems (GSSC) - Security Indicia - Smart Phone Enabled
- 10.7.5. Spectra Systems / InkSure - TruBrand™ - Smart Phone Enabled
- 10.7.6. tesa Scribos - dtect™ App - Smart Phone enabled
11. MARKET SIZING - WINES & SPIRITS
- 11.1. EVOLUTION OF MARKETS FOR WINES & SPIRITS - BY VOLUME / VALUE
- 11.2. PACKAGING COMPONENTS - MARKET SIZING ESTIMATES
- 11.2.1. GLASS BOTTLE VOLUME ESTIMATES - WINES & SPIRITS
- 11.2.2. CAPS / CLOSURES VOLUME ESTIMATES - WINES & SPIRITS
- 11.2.3. CAPSULES / SHRINK SLEEVE VOLUME ESTIMATES - WINES & SPIRITS
- 11.2.4. LABEL VOLUME ESTIMATES - WINES & SPIRITS
- 11.3. GLOBAL FINANCIAL LOSSES - COUNTERFEITING & PIRACY
- 11.4. ILLICIT ALCOHOL & COUNTERFEIT WINES & SPIRITS
- 11.4.1. Counterfeit Wines & Spirits - Branded, Bottled & Traded
- 11.4.2. Counterfeit Wines & Spirits - China
- 11.4.3. Financial Losses Due To Counterfeiting - Wines & Spirits
- 11.5. BRAND PROTECTION SOLUTIONS
- 11.5.1. Overview of the Market for Brand Protection Solutions - All Verticals in 2014
- 11.5.2. Financial Losses from Smuggling - Wines & Spirits
- 184.108.40.206. Alcohol Smuggling Today
- 220.127.116.11. Tax Differentials between Countries / States - An Important Driver of Smuggling
- 18.104.22.168. Financial Losses - Uncollected Tax Revenues - Selected Countries
- 22.214.171.124. Case Study - Excise Tax in the UK
- 11.5.3. APPENDIX - Market Data - Wines & Spirits
- 126.96.36.199. Global Breakdown - Wines by Product Types
- 188.8.131.52. Global Breakdown - Spirits by Product Types
- 184.108.40.206. Global Breakdown - Wines & Spirits by Region
- 220.127.116.11. Wine Sales Volumes - Some Famous Wine Growing Regions
- 18.104.22.168. Wines - Annual Consumption by Country - Top 10 Ranking
- 22.214.171.124. Spirits - Annual Consumption by Country - Top 10 Ranking
- 126.96.36.199. Per Capita Consumption - Wines & Spirits