Counterfeiting: An evolving risk that can damage your brand

Many incidents can have an impact on your brand such as a product recall, malicious tampering, fraud, or a social media storm associated with your business. Although high profile companies do still underestimate the power of social media (United Airlines being a recent case in point) or handle a product recall badly (the Takata airbags saga which has now resulted in them filing for bankruptcy), generally businesses are aware of these risks and try to mitigate them.

However, an area that we are seeing companies getting caught out by and is an evolving risk, is the ever-growing threat of products being counterfeited. It is big business for criminals and an estimated 5% of goods imported into the EU are counterfeit products.  Globally the total value of fake goods was estimated at $461Bn for 2013*. Much of this is going into the hands of organised crime syndicates. Over 75% of the counterfeit goods being seized are coming out of China.

In certain sectors such as premium alcohol, pharmaceuticals, luxury fashion and branded accessories the risk is more widely understood and these industries have developed brand protection teams who look after anti-counterfeiting strategies which starts with the NPD process when designing new products. However, it has always been felt that high volume, low cost goods would not be vulnerable to the fakers, but this is changing. With the cost of printing high-quality packaging coming down and the anti-counterfeiting measures on higher value products getting harder to reproduce, the fakers are turning to more mainstream products. We have seen cases where the  counterfeiters only make a few cents on each item, but because of the very high volumes associated with FMCG products this can equate to millions in profit.  Criminals of course don’t care about the quality or safety of these products, so they flood the market with potentially dangerous product with your brand name emblazoned across it. This could be fake toys that haven’t met safety standards and have detachable small parts or contain hazardous chemicals; brake pads made of compressed grass; counterfeit microchips for civilian aircrafts; whisky bottles filled with cold tea or even polluted river water; all these and many more may, and tragically already have, led to injuries and deaths. The discovery of counterfeit product being sold within your supply chain may leave you with no option other than a full product recall to prevent harm being caused to your consumers from the fakes.  Whilst this could be a difficult decision, lack of response could severely affect consumer confidence in your brand.

Therefore, it is essential that businesses outside of those seen as traditionally at risk, wake up to the risks of counterfeiting across the food, consumer products and automotive component industries and carry out a risk assessment on their products. Then having understood the risk they face, look at some simple anti-counterfeiting strategies like controls on the printing and storage of genuine packaging, tamper evident seals, and overt and covert security markings on packaging. Obviously, the value of the product can limit what is economically feasible, but understanding your risk and having a strategy heightens awareness throughout the business and, critically, your supply chain. This means that any suspicious ingredients, components or products are more likely to be flagged and checked.

RQA have a highly experienced global network of specialist consultants and investigators who can assist companies in assessing the risk of counterfeiting to their products and advise on anti-counterfeiting strategies, and assist with the response to a counterfeit incident.  We also have field personnel to carry out market sweeps in counterfeit hotspots, pick up complaint samples and assist with removal of product as part of a targeted recall action.

Click here for more information on our brand protection & anti-counterfeiting services: