In this post, we look at the fast-moving customer goods (FMCG) sector and explore counterfeit FMCG protection and prevention solutions.
In a time where counterfeit products are rampant and grey markets thrive, businesses are losing revenue and brand loyalty. In 2017, it was estimated that businesses were losing up to 30% in revenue due to counterfeiting. It was also observed that there has been a steady increase of counterfeiting in the FMCG sector by 44.4% per annum.
Over the years, this alarming discovery has been a catalyst to push businesses in the direction of wanting to protect their products, and this article will touch on the types of protections business can get, and exactly why they need it.
What are FMCG Products?
Fast moving consumer goods (FMCG) refers to a wide variety of frequently purchased products. These products can be sold quickly, and at a relatively low cost. They have low unit value, and high-volume potential. This means that this product may be consumed in a single or a few purchases, which is why it will be frequently purchased.
Major types of FMCG include:
- Food and Beverage
- Home and Personal Care
- Alcoholic Beverages
What is Brand Protection?
Brand protection refers to an anti-counterfeiting measure focused on protecting the intellectual property of companies, their products, and their associated brands against piracy.
Some examples of physical brand protection in the form of product authentication are as follows:
- Encrypted AR/QR codes with Mobile Verification Apps
- Track and Trace Solutions
- Optical Variable Devices (Labels, Foils, Stripes)
- Tamper Evident Labels, Seals -RFID Tags & System
- Security Inks/Paper
- Hidden Images
Typically, in these forms of protection, it involves putting one of these brand protection solutions or technologies on the physical product itself. This is for consumers to be able to verify the product’s authenticity.
To dive further into one example, in the case of encrypted AR/QR codes, the brand protection service provider will often work with a brand’s appointed printer to print their unique code onto each product packaging. This allows consumers to easily scan to verify their purchases with their mobile phones.
In this case, AR Codes do not refer to Augmented Reality codes – it refers to Access Real QR Codes. While they are similar in functionality to a standard QR code, there are still a few key differences between the two, with the AR code being the superior alternative.
- Visual Appearance is Different from Normal QR codes (Can Be Customized). Also Has a Patented Watermark Feature.
- Highly Secure with Bank Graded Security: Anti-copy and Anti-counterfeit. Authentication is Done Through a Separate App.
- Suitable for Printing Directly onto Important Documents, Product Packaging, Or onto E-Documents. Meant Primarily for Multiple Attempts of Quick Authentications.
- Able to Have a Unique ID Code for The Product Packaging (Offset or Digital Printing Required). This Allows for Track & Trace, Another Brand Protection Solution, To Be Implemented.
- Normal QR Code Can Be Copied or Simulated to Point to A Fake Website.
- Even with Encryption, QR Codes Can Still Be Copied and Simulated to Pass Off as Genuine and Authentic.
- Needs to Direct User’s Device to A Website, Mobile Site, or Another Application. Unable to Provide Direct Authentication/Content Upon the Scan Itself.
- Does Not Allow for Authentication and Track & Trace.
On top of consumers being able to verify if their product is genuine, the AR code allows for locations of counterfeit products to be detected and displayed on a heatmap (as below), down to the street level. The FMCG company would then be able to use this data to have supply chain visibility and analyse exactly where the counterfeit FMCG products are primarily located in the world. This would give the FMCG company valuable insights as to where potential fake products are being manufactured and/or sold.
The requirement to print the AR code is generally at least 200 lines per inch for an offset printer, or 600 dots per inch for a digital printer. These requirements are normally achievable for the FMCG’s printing house as they are considered a basic resolution and falls within the printing machines capability. As such, there is no additional process or step needed in implementing this AR code solution.
Due to its simplicity in application and efficacy in brand protection, it is one of the most favoured brand protection solutions in the market.
Why Do FMCGs Need Brand Protection?
Without counterfeit FMCG protection, there are two potential ramifications that could happen to a brand.
Because FMCGs are goods that are often consumed in the form of food and beverage, having counterfeit products can be a large safety issue. Back in 2008, there was a large case involving counterfeit milk powder, killing 6 and causing over 300,000 babies to fall sick. The implications are huge and can still be felt till this date. Because of this incident, some families in China are still unwilling to trust local milk powder brands despite the Chinese government taking serious actions by heavily regulating infant formulas.
The financial impact on revenue can be felt in two ways. Firstly, through a loss of sales for a brand due to a lack of trust, and secondly, through a loss of sales where consumers knowingly or unknowingly purchase counterfeit FMCG products.
In the former, counterfeit FMCG products generally suffer from reduced quality as compared to authentic products, and because of that, consumers might feel ripped off and unhappy especially if they are paying the full price for a bootleg product. This might cause them to lose trust in a brand, and as more word of the reduced quality or safety concerns gets around, brand erosion (a decrease in perceived value of a brand) can occur, negatively impacting a brand.
In the latter, brands can lose out on sales where customers knowingly or unknowingly purchase counterfeit items. There are a multitude of reasons why people would do this, but most of the time, if the quality is not very far off from the original, most people would not hesitate to buy a counterfeit especially if it is sold for a fraction of the original price. This could potentially cause a brand to lose out on a large amount of sales.
To put things into perspective, the FMCG market is massive and is projected to reach $15 trillion in sales by 2025. If we take the 2017 statistic of 30% revenue loss due to counterfeiting, that is a massive sum of $4.5 trillion worth of potential business being lost every year, and this sum is constantly increasing.
Without brand protection, FMCG companies stand to potentially lose a vast amount of revenue and also the trust of their consumers. If nothing is done to address the matter in a timely fashion, the counterfeit market will continue to thrive at the expense of genuine brands.
Nabcore specializes in brand protection solutions and has 10 years of experience in dealing with counterfeit products in Asia. In Nabcore’s experience, interlocking brand protection solutions are always more effective than a single brand protection technology. Contact us today to find out more in a free consultation.