COUNTERFEITING: Dem’s the fakes

Have you ever eyed a fake watch in a market? Spied a Louis Vuitton rip off? Or been approached by a Chinese guy hoping to sell you a rip-off DVD? Let’s face it we’ve all been tempted.

Perhaps some of us have even succumbed to temptation and are proudly sporting a fake Cartier watch as we read. Counterfeiting is all around us – be it jeans or be it a dodgy 10 pound note – in some way all of us will have come across rip-offs at some point in our lives.

But what about when it comes also to our working lives? What about counterfeiting in the drinks trade – are you aware of how much is going on? Or do you think that it is a problem just for a few of us who ship to the Far East?

Across the categories counterfeiting in all of its forms accounts for 8% of total world trade, it is a multi-billion euro industry and is usually perpetrated by the poor people of a criminal persuasion, some terrorists and even rogue government agencies.

Counterfeiting and piracy cost the G20 governments and consumers an estimated e100 billion (£91.2bn) every year, in the UK it is thought that 380,000 jobs are destroyed as a result of the phenomenon and it costs us e4.1bn a year, according to a BASCAP (Business Action to Stop Counterfeiting and Piracy) carried out in May this year.

It is predominantly an international issue which becomes more prevalent in the run-up to Christmas and statistically speaking is more frequent during recession when it can be more attractive to some retailers as a short-term fix for quick cash flow.

There is no doubt that if counterfeiting happens to your brand or in your shop or outlet it can be damaging for business, not to mention the possible health risks for the consumer.

This issue unquestionably affects the drinks industry on a global level in both the spirits and the wine trades – notably at the top end of the business. As a result the drinks business embarked upon an extensive piece of research to discover what are the current perceptions in our trade about counterfeiting and how aware we are of where the problems are and how they affect our industry.

Our sample was based on an online survey carried out between August and September this year, among industry professionals from the beer, wines and spirits industries. The survey had a total response of 174 people who all occupied management positions; from junior management through to managing director and director level.

On being asked the question, “Have you ever been given counterfeit alcohol? (eg on holiday, a business trip or at a restaurant)”, the response was split between 39% of respondents admitting to having been given counterfeit alcohol, 35% being unsure whether they had or not and the remaining 26% being sure they had not been given counterfeit alcohol.

The questionnaire then asked respondents to estimate how many bottles of alcohol out of 10 were in fact fake – on a global basis. The response, from the sample, was spread between one and eight out of 10 with 43% believing that one in 10 bottles of alcohol are fake, 21% believed that three bottles out of 10 were fake and a further 17% stated that two out of every 10 bottles of alcohol are fake.

There are no official figures for the total amount of fake bottles of alcohol sold around the world but when you consider, according to the Alcohol Law Review, that in Russia more than 40,000 people die from consuming alcohol substitutes each year, that in Vietnam 60% of spirits are counterfeit brandy, in the UK 8% of spirits are fraudulent and in South Africa 17% of all wine sold there in 2007 was made illegally you can appreciate the problem our industry faces.

Our survey then moved on to ask respondents where in the world they considered consumers to be at most risk when it came to receiving or being served counterfeit alcohol. 39% of respondents felt that this was most likely to happen in the Far East, however they also believed that consumers were quite likely to receive fake alcohol in Africa (47.5%), Russia and CSI (Community of Independent States) (46.6%) and India (41.8%).

In Western Europe only 40% of the sample felt that there was an average risk of receiving fake alcohol and Scandinavia was believed to be the lowest risk area where 35% of respondents believed it to be the place where you are least likely to find counterfeit alcohol.

Perhaps the most striking data from the research was that nearly 70% of respondents had no idea as to whether they had experience of counterfeit alcohol in the last six months to a year. Equally they were unaware of whether there had been any increase in the incidence of alcohol counterfeiting in the same period (83.5%). Only 17 out of 103 respondents to this question admitted to having any knowledge of an increase in the last 12 months.

Nearly half of the sample believed that the spirits category was most likely to be affected by counterfeiting (46.7%). Twenty-eight per cent of respondents believed that the wines category was most likely to be affected.

Rightly or wrongly, 37% of our sample believed that the impact of this phenomenon to be very insignificant on their business, but the same amount of respondents believed that anti-counterfeiting packaging was significantly important to their business.

This may appear to be somewhat of a contradiction but it proves the point that while sector professionals have not yet in the main suffered from counterfeiting they are taking precautions to guard against it. Similarly the survey indicates a lack of awareness of this issue within our industry and the impact that it is having.

We will be continuing the debate in the December issue of the drinks business when we bring together a group of industry experts, specifically involved in counterfeiting and its prevention, to discuss the impact of this phenomenon, what is being done to stem the flow of fraudulent products and the latest methods in counterfeit prevention.

Charlotte Hey, November 2009