Drinks International guest writer Helen Saunders, head of intelligence and operations at brand protection company INCOPRO, gives her insight into the counterfeiting of alcohol in China.
When it comes to counterfeiting, most people think of luxury watches or designer handbags – however, the problem of fake goods extends well beyond the apparel market. In fact, any product for which intellectual property (IP) adds economic value to rights holders and creates price differentials is a prime target for counterfeiters. Last week, it was revealed that a small factory in China has been creating counterfeit cans of Budweiser beer. Viral video footage showed workers in the factory submerging used cans into vats of beer, refilling them to then sell on as the genuine article. Counterfeiting has a significant impact on any brand affected; it’s proven a particularly pertinent issue for drinks brands.
Brand value is a key differentiator for most businesses in the alcohol industry, and so the protection of a drink’s brand is often a core element of its success. Yet between December 2016 and March 2017, a joint operation carried out by Interpol and Europol seized 26.4 million litres of counterfeit alcohol worldwide – it’s an increasing problem, which is putting brands’ reputations at risk. As the recent Budweiser news demonstrates, counterfeit products have continued to pose a threat to the drinks industry.
There are plenty of examples from around the world, such as the 9,000 bottles of fake Moët & Chandon champagne seized last year in France, but the issue is particularly prevalent within Chinese online marketplaces. Spirits brands are particularly badly affected, with a diverse mix of infringing products that are promoted in both local and global-facing Chinese marketplaces. Findings from some of our recent research estimated that only three quarters of infringing marketplace listings are for the sale of finished goods – so that’s complete bottles of alcohol, as seen with the Budweiser and Moët & Chandon examples cited earlier.
The remaining quarter of infringing products sold are promoted through either explicit or implied references to well-known spirits brands. These products include, but are not limited to: adhesive labels; stoppers; replica bottles; barware; display signs; and machinery. While there are fewer listings for these products compared to finished goods, the implications are far more damaging, since the sale of these products enables the manufacturing of counterfeit finished goods on a much larger scale than the small factory in China that produced those fake Budweiser cans.
To compound the issue, it’s also been observed that these Chinese sellers are adept at methods to evade enforcement. Infringing sellers often make references to the most well-known brands with the use of Chinese nicknames, which hides their infringing listings when searching for brand names in full. These Chinese nicknames are typically descriptions in relation to the shape of the bottle or origin of the brand, such as referring to Jack Daniel’s as ‘Tennesse whisky’, Suntory as ‘hexagonal bottle whisky’, or Johnnie Walker Black Label as ‘black rectangular whisky’ (all translated from Chinese).
According to Havoscope, which provides information and threat intelligence on the global black market, The International Federation of Spirits Producers has stated that counterfeit alcohol leads to an estimated $1bn annual loss on revenues. Undoubtedly, this figure should set alarm brings ringing in drinks brands all over the globe. With markets and opportunities becoming increasingly international – thanks to the digital revolution – many companies are increasingly looking at brand protection services to ensure a consistent image, creating consumer trust, as well as the ability to enforce rights wherever they trade.
As such, in addition to preventing counterfeiting through offline trades – which can be achieved by employing the appropriate experts in IP law enforcement – drinks brands must also adopt robust protection to help combat online sales of counterfeit goods. Technology exists today that can help brands feel secure in the knowledge that they are able to track, prioritise, and enforce against counterfeit drinks products across all digital platforms. Once an instance of trademark abuse arises, then these drinks brands have a chance to do something about their problem.
Although the Budweiser incident was restricted solely to China, it’s clear that counterfeiting can strike drinks brands in markets all over the world. As well as being potentially physically dangerous – reusing dirty cans no doubt threatens all sorts of health problems – brands will be all too aware that counterfeit goods steal sales and dilute a brand’s reputation. Ultimately, in our increasingly digital world it’s never been more important for drinks brands to combat counterfeiting.
To view the full article in Drinks International, click here.