Putting Security First

A growing need for security packaging opens up opportunities for converters to increase their customer base and income.

THE TYLENOL MURDERS of 1982, the 1993 bombing of the World Trade Center, and last year's Procrit® drug scare all have something in common: they're all the result of product counterfeiting and/or tampering. Once deemed relatively harmless problems, counterfeiting and tampering have turned out to be sinister crimes that threaten public safety and encumber economies around the world.

The statistics are dismal.

• In a blitz this past summer, the FDA and the U.S. Customs Service found that 88 percent of drug products examined at mail facilities in Miami and New York City were found to be counterfeit and contained "potentially dangerous" substances.

• Shrinkage—revenue lost to product pilferage, tampering, counterfeiting, etc.—cost U.S. retailers $31.3 billion in 2002, according to a presentation by Valeron Strength Films (Houston, Texas), which cites information from a National Retail Federation National Retail Security Survey from November 2002.

• According to the International AntiCounterfeiting Coalition (IACC), the worldwide computer software industry loses between $12 and $16 billion per year due to piracy and counterfeiting. That's more than 40 percent of all global software business revenues.

• In 1993, the U.S. Customs Service estimated the total American job loss due to product counterfeiting was 750,000 jobs.

• In 1994, New York City's consumer affairs commissioner, Mark Green, approximated that counterfeiting cost the city more than $350 million in lost tax revenues, according to the IACC.

The numbers say it all. Yet, in the midst of this uphill battle to save lives and bottom lines, there is hope. In recent years, new security packaging has emerged that's affordable, easily integrated into a converters' current processes, and—most importantly—makes criminals work harder than ever.

Thus, security packaging presents an ample opportunity for many converters to expand their portfolio, while adding value to their capabilities.

Opportunity knocks

Interest in security packaging has escalated in the last two years for many reasons. After 9-11, manufacturers faced pressure from new FDA regulations and recommendations, retailers, and their consumers to ensure the safety of their goods.

And now, as criminals get better at product simulating and tampering, brand owners need to protect their end users from the resulting health risks, subpar products, and higher product costs, said Ken Traub, president/ CEO of American Bank Note Holographics, Inc. (ABNH, Elmsford, N.Y.).

Manufacturers also have to protect themselves from lost revenues and liability issues, and problems related to the integrity of their brand. "Financial documents such as currency and credit cards have long been designed with strong counterfeit deterrence features, and now consumer packaged products are greatly improving the security of their packaging in order to address the increased threat of counterfeit products," Traub said. "Counterfeiting and tampering undermines the integrity and the consumer confidence in a branded product. A single tragic incident can tarnish the reputation of a manufacturer or brand owner for decades."

In other words, manufacturers need security packaging, and most converters already have the capability to offer it. From this combination of needs and capability emerges a long-term business opportunity for converters to increase their revenue per package.

According to James Kipp, Crown Roll Leaf (Paterson, N.J.) senior product manager, "Anytime a printer gets into a security packaging program, more often than not it's a one-year or longer program because brand packaging applications don't change designs too often. It usually means long-term business for the converter."

In addition, with security packaging, converters gain the ability to offer a larger portfolio of capabilities, as well as the ability to produce higher-grossing margin products, Kipp said.

There is a catch, however. While most security packaging devices and equipment are easily integrated into a converter's current processes, the addition of some security applications requires a secure facility, a trustworthy team of employees, and the steadfastness to hold the customer's security application specifics in confidence.

"On the converter's end, manufacturers need to make sure that they, or their converters, are documenting the process—how much of the security stock comes in and goes out, and how much is wasted," said Richard Zucker, DuPont Authentication Systems (Bridgeport, Conn.) executive vice president. "They need to account for every security label used and not used to ensure the security device isn't slipping out the back door and into the wrong hands."

Safe guards

From simple security devices like induction seals and shrink bands, to high-tech substrates such as near-magical materials and holograms, there's a large selection in security packaging.

Tamper-Evident Devices: Before the Tylenol Murders, tamper-evident packaging wasn't used very often. In the case of induction sealing, it wasn't until after seven people died from taking cyanide-laced Tylenol they purchased at local drugstores that the technology went from a leak prevention device to the security device of choice for pharmaceutical packages, explained Bill Zito, vice president of sales at Enercon Industries Corp. (Menomonee Falls, Wis.).

Today, brand owners take no chances and layer their packages with security devices to further safeguard their products and consumers. For example, many bottles with induction seals also have shrink bands on the outside of the container. Both devices are virtually impossible to remove without leaving behind evidence that the package was opened, making them ideal tamper-evident technologies.

In addition to the old faithfuls, new tamper-apparent devices are hitting the marketplace like Nanoventions' (Roswell, Ga.) Conseal, which uses micro-optics to protect packages. When intact, Conseal can display information or appear like a clear tape. But once the label is disturbed, the two layers of the security device separate to reveal a message. "If it's been tampered with, it's essentially impossible to put it back together again," said Nanoventions CTO Rick Steenblik.

Another unique tamper-prohibiting security device is Blisterguard™, a tear-resistant solution to tampering and pilferage. Made by Colbert Flexible Packaging using Valeron® Strength Film and board, Blisterguard is like a PVC clamshell, except it costs less and is safer for the buyer to open, said Steven Speyer, Valeron sales and marketing manager of Performance Packaging.

Anti-Counterfeiting Devices: Manufacturers and their converters have a slew of anti-counterfeiting devices at their disposal. From optically variable devices like KURZ Transfer Products' (Charlotte, N.C.) Trustseal® which adds fine detail and color brilliance to packages; to Appleton's (Appleton, Wis.) TechMark® which uses embedded taggants, threads, and fibers to protect a product; or Nanoventions' micro-optic Unison material that creates an effect unlike any other seen today—anti-counterfeiting security packaging offers a world of hard-to-simulate materials.

But the question remains: how effective is security packaging, really?

Never say counterfeit proof

According to results of a survey conducted by the IACC, Fortune 500 companies spend an average of $2 to $4 million per year to combat counterfeiting. Some companies reported spending up to $10 million. However, year after year, these same companies lose millions and millions of dollars to counterfeiters.

It's a fact: protecting the integrity of a brand product from counterfeiting is extremely difficult. With the advent of desktop printing, counterfeiters have access to technology that is capable of reproducing branded packaging, almost to a "T." Even hologram forms have slid into the realm of counterfeiters' possibilities.

Criminals are capable of anything. Steenblik said, "You can't ever say counterfeit proof—maybe counterfeit resistant, but not counterfeit proof."

All it really comes down to is a matter of time and money before counterfeiters figure out the latest security devices and manufacturers have to think ahead, said Joe Pleshek, Appleton segment manager for the Brand Protection market. "Brand owners have to think long-term. They have to think that in 6, or 12, or 18 months, counterfeiters will figure out what they have and replicate it. They have to figure that in a year or so, they'll need to add new security packaging."

In spite of the increase in the cost of packaging and the inevitable copies and lost revenue, security packaging is worth the extra money. "Security packaging is definitely worth the increase per package," said Gregg Metcalf, KURZ national account representative for Security Packaging. "You have people taking drugs, some on a daily basis, and some of those drugs are very expensive, which makes them prime targets for counterfeiting, and counterfeiters don't care whether or not they have actual product or substandard pharmaceutical ingredients in the products they counterfeit. It's definitely worth it when people's lives are at risk."

by Kate Sharon, Associate Editor