22 May A new study on the problem of counterfeiting in the area of wines and spirits, and presentation of anti-counterfeiting technologies
Counterfeiting in the wines and spirits market:
key issues and presentation of anti-counterfeiting technologies
Brussels, Paris, 22 May 2014
Fake bottles, fake labels, problems with bottle refilling and gray markets are all criminal practices which generate direct economic loss and damage the image of the wines and spirits industry. Such methods also present a health hazard for consumers as illustrated by deaths resulting directly from the consumption of illegal spirits, with at least 80 fatalities in Kenya at the beginning of May1.
Eric Przyswa, a consultant and Associate Researcher at Mines ParisTech at the Centre for Research on Risks and Crises, was commissioned by Selinko, a company involved in the fight against counterfeiting, to write a new report on the problem. This study offers us an initial, rigorous insight and highlights the most relevant international sources as well as providing an academic view of the various anti-counterfeiting technologies in existence. The research for the report is based on the analysis of specific cases, interviews with acknowledged experts and the best academic works on the subject.
Counterfeiting in the wines and spirits market: a shortage of analytical research
This research study firstly underlines the lack of statistical analysis of the counterfeiting phenomenon in the wines and spirits sector. Some of the reasons for this could be the traditional difficulty in analyzing illicit markets and the lack of international statistics on seizures of alcohol by customs (wines and spirits being included in the more general category of “food and beverages”).
However, the report does present a number of available and credible analyses of certain regions, such as Italy, the UK and Latin America, and the issue of online counterfeiting is also discussed. Due to the sheer size of its market, there is a particular focus on China.
In just a few years, China has become the biggest consumer of red wine2 giving rise, over the last five years or so, to a major counterfeiting market3. Thus 25% of European spirits imported into China are thought to be counterfeit4, and Nick Bartman, a lawyer specializing in the counterfeiting of wines, has already established during a five-week visit there in 2010 that 50% of the imported wines he saw were fakes.
The main anti-counterfeiting technologies on the wines and spirits market
Before describing the main anti-counterfeiting technologies, the report offers a detailed description of what needs to be protected: the contents, the container, the label and counter-label, the cork, the capsule and the packaging. The study also reveals the extent of bottle refilling, regularly cited by the industry as being the main problem it faces. Furthermore, merely protecting the product alone is not enough unless the supply chain is also properly monitored.
The various anti-counterfeiting technologies are classified below according to their use:
- Anti-theft devices: no authentication function, but enable the integrity of a product and its packaging to be verified.
- Overt technologies (visible elements): characterized by their accessibility to the user (e.g.: holograms).
- Covert technologies (encoded or concealed elements): characterized by the need for an expert scanning system, these technologies cannot be read with the naked eye (e.g.: RFID/NFC, inherent features).
- Forensic technologies (elements involving scientific analysis): based on scientific analysis and requiring the use of laboratory tools (e.g.: nanoparticles).
- Track and Trace technologies: these come from the logistics industry and ensure that goods are traceable (e.g.: bar codes).
- Tamperproofing technologies: these use procedures which prevent access to the protected objects (e.g. seals).
Trends and criteria in the choice of anti-counterfeiting technology
Analysis of developments in the anti-counterfeiting market reveals that technology is being used more than ever for security purposes. Two main trends stand out in this context: the increasing importance of RFID-NFC and the involvement of the end customer in the security system. It has indeed become paramount to place consumers at the center of the anti-counterfeiting system by enabling them to carry out their own authentication of the item they are buying, for example by using their mobile telephones.
A technological choice is always associated with specific constraints, such as the production environment or product marketing. However, six main criteria are often used in the decision-making process.
As the above diagram6 shows, NFC appears to be the most appropriate technology for the needs of the high-end wines and spirits sector. It provides a high level of security and is part of the logical development of digitization in small business and industrial settings, with full integration of the end consumer (ease of control and marketing requirements). Choosing such a technology, however, involves taking into account a certain number of variable conditions, such as the importance of the service and advice offered by the supplier, compliance with standards, the digital culture of the wine or spirits producer, etc.
What the experts say
“RFID, and especially NFC (Near Field Communication) is an anti-counterfeiting technology which performs extremely well as regards ease of control and making imitation difficult for the counterfeiters”, points out Jean-Michel Loubry, expert in traceability and anti-counterfeiting and chairman of the AFNOR committee on the performance of anti-counterfeiting solutions.
“A strategic point raised during discussions, in particular with Château Latour, is the importance of protecting the bottle at capsule level”.
According to Maureen Downey7 of Chiai Consulting, it is equally important to combine a “low tech” solution with “high-tech” solutions, because several levels of security are needed when faced with counterfeiters who are developing increasingly sophisticated and rapid strategies. This viewpoint is confirmed by the wine producer Châteaux Margaux, which uses three security systems (laser etching, bubble tag and secure paint). “These three solutions make it possible for this great vintage to cross-check information and optimize security if any of the protection methods fail, and it also acts as a deterrent”, reiterates Olivier Chotard, Head of Information Systems at Château Margaux.
Facts and figures
- According to the International Center for Alcohol Policies, 30 % of alcohol consumed worldwide is illicit 8.
- The experts from Wine Spectator estimate that 20% of the wine consumed worldwide is counterfeit9.
- China is the fifth largest consumer of wine in the world10 and has become for the first time the biggest consumer of red wine, ahead of France and Italy11.
- Counterfeit European products are reported to make up around 25% of all imported spirits sold in China.12.
- Nick Bartman, an expert based in China, saw almost 400 different wines in seven Chinese regions during a five-week stay in 2010: approximately 50% of the foreign wine he saw was fake13.
- According to Wine Intelligence, wine counterfeiting was one of the five main trends in the Chinese market in 201314.
- In 2009, 75% of consumers stated that they would prefer to purchase a brand of wine protected by anti-counterfeit technology15.
- The primary barrier to the purchase of wine for Chinese consumers is that they do not know whether or not the wine they drink is authentic (44%)16.
About the author
Eric Przyswa, consultant and Associate Researcher at Mines ParisTech at the Centre for Research on Risks and Crises, is the author of this report. He conducts research in the area of human security in industrial environments and is particularly interested in public health issues and the risks associated with new technologies. He also acts as a consultant in this field to institutions and businesses. The author writes in many leading academic reviews in France and abroad, including Hermès, Futuribles, Tribune de la santé, Information and Society, etc.
SELINKO is a Belgian public limited company, formed in September 2012. It developed the first secure and integrated platform giving each object a unique and universally verifiable identity. This identity enables us to provide a robust authentication solution to combat counterfeiting, both physical and online. The security system also offers an end-to-end traceability solution and innovative direct marketing services, by fitting each item with an NFC chip. This solution is based on a standard technology which has been tried and tested in the banking world for over 20 years. Each chip contains a certificate encrypted at hardware level, which can be read using an NFC-enabled phone containing Selinko’s secure application and guaranteeing completely secure communication between cell phone and chip. The Selinko solution is aimed at different sectors such as Luxury Items, Wines and Spirits, Perfumes and Cosmetics, Art and Design, Sporting Goods, etc.
Selinko was confronted with an apparent lack of recent official data on the problem of counterfeiting in the Wines and Spirits sector, prompting the commissioning of this study. In the interests of objectivity and transparency, Selinko required the exhaustive analysis by independent experts of the various anti-counterfeiting technologies in existence, in order to enable players in this market to understand more clearly the field of activity in which they are each involved and the various levels of security, and to anticipate future trends.
Report Contact• Eric Przyswa • Associate Researcher, Mines Paristech, Consultant • +33 6 18 57 90 41• firstname.lastname@example.org
Contact Presse Selinko® • Gwennaelle Festraets • VP Marcom • +32 496 28 25 26 • email@example.com
1Jeune Afrique, AFP, 80 morts après la consommation d’alcool frelaté, 8 mai 2014
2 Scheherazade Daneshkhu, « China overtakes France as biggest consumer of red wine », Financial Times, 29 janvier 2014.
3 Entretien César Compadre, journaliste Sud-Ouest.
4 Spirits Europe, http://www.spirits.eu/page.php?id=80&parent_id=30
5 Jim Boyce, Matured two years : Nick Bartman’s investigation of fake wine, other IPR issues in China, 3 juin 2012, http://www.grapewallofchina.com/2012/06/03/matured-two-years-nick-bartmans-investigation-of-fake-wine-other-ipr-issues-in-china/
6 Source : Jean-Michel Loubry, Eric Przyswa, avril 2014.
7 Maureen Downey citée par Chris Bennett , « Wine fakes didn’t begin or end with Rudy Kurniawan », Western Farm Press, 10 septembre 2013.
8 Alan Rappeport, Jan Cienski, Counterfeit alcohol problem takes a deadly toll, Financial Times, 5 novembre 2012.
9 Robert Taylor, Wine Spectator, 21 novembre 2013.
10 Joshe Bateman, « How education is driving China’s unquenchable thirst for wine », asiancorrespondant, 17 janvier 2014.
11 Scheherazade Daneshkhu, « China overtakes France as biggest consumer of red wine », Financial Times, 29 janvier 2014.
12 Spirits Europe, http://www.spirits.eu/page.php?id=80&parent_id=30
13 Jim Boyce, Matured two years : Nick Bartman’s investigation of fake wine, other IPR issues in China, 3 juin 2012, http://www.13 grapewallofchina.com/2012/06/03/matured-two-years-nick-bartmans-investigation-of-fake-wine-other-ipr-issues-in-china/
14 China: Five trends for the wine market in 2013.
15 Rhys Pender, « Counterfeit – Its Impact on the Business of Wine », dissertation, The Institute of Master of Wine, mars 2010.
16 Wine Intelligence, Is your back label right for China ?, 27 juin 2013.