Ways Printers Can Fight Brand Thievery

By Keith J. Cutri

In today's business climate, rare is the printer that isn't searching for new ways to build business. New products or services that create new revenues and new clients are needed… especially ones that don't require sizable investments. Fortunately for package printers and converters, just such an opportunity exists, and it's becoming greater every year.

Consider the unpleasant reality faced today by brand owners—manufacturers and legitimate marketers of branded products—who've spent heavily in developing their brand's attributes. Building a global brand today requires investing millions upon millions of dollars over a long time. Seeing that investment diminished or destroyed overnight is the nightmare scenario in today's competitive global marketplace.

Companies increasingly find themselves locked in a continuous battle to protect their brands from attackers trying to steal the monetary value inherent in successful brands.

Brand attacks come in a variety of forms, such as counterfeiting, gray-market product diversion, tampering, refilling, repackaging, and copyright, trademark, and patent infringement. Despite their best efforts, many brand owners lag behind as criminals continue to find new improved methods for committing fraud.

Brand owners need brand protection solutions to maintain trust, safety, and integrity with their customers. To fully comprehend the potential demand for solutions, think about these numbers:

The International Chamber of Commerce expects the market for counterfeit goods to exceed $1.7 trillion by 2015—more than 2 percent of the world's total economic output. This hurts both businesses and entire economies through lost sales, lost tax revenues, and at least 2.5 million lost jobs.
Fraud related adulteration is estimated to cost the global food and consumer products industry $10-$15 billion annually. (1)
Online counterfeiting sales are estimated to cost businesses $135 billion annually. (2)
Product diversion is estimated to cost as much as $63 billion in sales per year in the U.S. alone. (3)

Initially, it might seem counter-intuitive that criminals—thought to have limited resources and crude technologies—repeatedly outwit multi-million dollar brand owners. However, the reality is that many of today's attackers are not "mom-and-pop" shops but sophisticated global operations. Well-funded, these criminal enterprises easily purchase the knowledge or tools they need to commit fraud. In addition, other factors such as supply chain complexity, outsourcing, lack of monitoring, limited awareness, or failure to implement basic security solutions all contribute to a brand's vulnerability.

Brand owners want brand protection that can counter the sophistication and knowledge of well-organized criminal operations, and packaging printers can expand the brand owners' portfolio of offerings by meeting this demand.

From discussions with more than 100 brand owners in recent months at events such as the International AntiCounterfeiting Coalition (IACC) Conference, the Anti-Counterfeiting & Brand Protection Summit, and the Product Authentication & Brand Security Conference, Kodak heard loud and clear that brand owners are primarily concerned with two major issues: product diversion and product counterfeiting.

Knock-offs are flooding the market and getting ever harder to detect. Just look at what we're up against. Counterfeiters and diverters understand where to find print security features, countermeasures, track-and-trace codes, and covert marks. Our brand owner clients have told us that these criminals run "boiler rooms," employing workers in sweat shop conditions to find security markings in packaging; tamper or remove and replace the markings; then put the product package back together—thwarting the security countermeasures put in place by the brand owners. Many advanced counterfeiters and diverters are even capable of mimicking overt security markings such as holograms.

Package printers role

Adding authentication capabilities to combat counterfeiting can pay off in new business revenues and new customers for package printers and converters. Multiple techniques can be integrated into your current workflow.

Authentication methods can be deployed through covert markers formulated from ink and varnish concentrates that can be shipped directly to your printer facilities and dropped into your production runs with no change in work processes. Many delivery options exist, including offset ink, varnish, pulp, fibers, digital toners and inks, plastics, powders, liquids, and textiles. A combination of covert and visible markings, layering QR codes, two-dimensional bar codes, mass serialization, and embedded solutions to validate packaging, provides brand owners with "insurance" to defend against multiple threats. Converters and package printers can use a premium solution through random pre-serialization, to create authenticated codes to enable track-and-trace capabilities.

This Drop-in-Technology, enables package printers to apply pre-formulated inks and varnishes that already contain covert security markings using existing print processes and equipment, thus providing no initial start-up costs. Compatible with commonly used flexo, rotary letterpress, gravure, or offset techniques, Drop-in-Technology is capable of providing invisible security features to your standard print offering.

Drop-in-Technology is also available for digital presses, further lowering barrier to entry, enabling more printers to offer variable print security features such as pre-serialization and layered track-and-trace codes. Digital capabilities can enable brand owners to access software databases for superior tracking and monitoring, and also enable consumers to use their smartphone devices to check for authenticity or to participate in marketing campaigns and brand loyalty programs. Using visible QR codes, consumers scan their product packaging or labeling, which sends information back to a database and alerts the brand owner to suspicious activity such as products being scanned in the wrong geographies (indicating product diversion issues) or duplicate or incorrect serial numbers scanned (indicating potential counterfeit issues).

The optimal anti-counterfeiting solution changes the game. New marker/reader technologies allow real-time, lab-quality testing to be conducted in the field, using covert markers at very low concentration levels, thereby making it virtually impossible for counterfeiters to identify and replicate. The appearance and artwork of labels or cartons is not modified in any way. This technology can be used anywhere in the distribution chain, where a brand owner investigator, auditor, or authorized employee with a reader will be able to conduct what are essentially high-security, forensic-level diagnostics on-site and in real time.

Systems such as these (Kodak's Traceless System is one example), enable "choke point execution." Whether inspecting luxury handbags at point of import, wines at auction, or cosmetic cartons at retail outlets, on-site instant authentication greatly diminishes a counterfeiter's ability to operate in these markets. Authentication can be layered with other technologies that offer tamper protection and serialization for additional security.

Fighting diversion

A more complex and insidious problem, gray-market product diversion costs brand owners hundreds of billions of dollars worldwide.

Through fraudulent methods, gray marketers prey on the inability of brand owners to detect product diversion as their products wind through complex distribution channels around the globe. Product diversion reduces brand owner profits, revenues, and market share, while eroding brand equity. In addition, gray-market activity creates supply and demand imbalances, disrupts competitive pricing, and raises safety, regulatory, warranty, and liability concerns.

Diversion also jeopardizes the integrity of the supply chain itself. Local distributors are forced to compete with artificially lowered prices and increased supply by gray market activity. Considered a fraudulent means of inflating profits for participating distributors, gray marketers capitalize on surplus inventory, lower manufacturing costs, fluctuating distribution costs, economic conditions, and currency exchange rates, by exporting goods without the permission of brand owners. The gray marketers then undercut the prices of authorized domestic distributors by selling at lower price points or selling large inventories to meet demand, while achieving similar or higher profit margins due to the lower cost of product acquisition in the originating countries.

Creating an end-to-end diversion solution is a precursor to a tightly integrated and secure brand. The latest technologies enable package printers and converters to use standard continuous inkjet (CIJ) printers to apply both visible marks, such as bar codes, QR codes, and other marks, and a layered invisible marker embedded in the CIJ ink onto packaging and labels. This function allows brand owners to secure their investment in a track-and-trace system with the knowledge that they can easily authenticate their marks with specialized portable readers.

Where to find opportunities

The pharmaceutical industry—Counterfeit drug sales in 2008 were estimated at $40 billion worldwide. When a problem arises with one of the counterfeit products, the legitimate producer may be held responsible, and may have to recall perfectly good products or fight lawsuits defending a faulty product that they didn't manufacture. New regulations in the EU and certain state legislation in the United States will require pharmaceutical companies to implement tracking requirements.

Phony medicines remain the "greatest concern" for the United Nations, which cites preventable diseases and fatalities as a result of mislabeled products, especially in developing regions. From the consumer's perspective, a counterfeiting scandal may be perceived as the result of careless operations by a large, unethical drug company. Counterfeit drugs are very dangerous, with the potential to cost people their health and even their lives.

Retailers—Estimates indicate that more than five percent of all returns are fraudulent. Further, a recent case of counterfeit wines in South America unearthed $100 million of wine fraud. The repercussions of such findings are shocking—if $100 million is just one shipment of fraudulent wine, imagine the magnitude of counterfeit operations. The high-end wine and spirits industries are major targets for both counterfeiting and diversion.

Electronics—Including electronic games and toys, these items are highly attractive to fraudsters thanks to their sizable price tags.

High-end collectibles—The demand and value of these products is totally dependent on their authenticity. For companies that sell high-end sports memorabilia and game-worn merchandise, embedding unique "signatures" on these items can ensure that they are genuine articles.

Critical benefits

Effective implementation of anti-counterfeiting or anti-diversion strategies deliver three critical benefits in great demand in today's global marketplace: