The growth of counterfeiting in the liquor industry

The entire nation was jolted by the ill-fated deaths of people due to counterfeit alcohol in the first half of this year. Not just precious lives were lost but families were left devastated in the states of UP, Uttarakhand, and Assam. The onus of the tragedy fell upon the respective State Governments and a debate ushered in the by lanes of media and forums on the present regulatory and anti-counterfeiting measures against fake and illicit alcohol in the country.

According to a study published in the journal Lancet, India’s alcohol consumption has increased by 38% in the last seven years-that’s 4.3 to 5.9 litres per adult per year. Another study states that India is the biggest consumer of whisky in the world. However, the rising demand for alcohol has led to the growth of spurious alcohol industry.

There have been frequent reports of seizures of counterfeit and bootleg alcohol from different states of India. According to a report by FICCI, “The grey market loss to the alcoholic beverage industry stood at INR 14,140 crore in 2014 which had increased from INR 5,626 crore in 2012 observing an increase of over 150 per cent.”

There are various reasons for the growth of counterfeiting in the alcohol industry. Lack of awareness regarding the effects of counterfeit alcohol is one big reason. The poor consumer is lured by the cheap prices of counterfeit alcohol and thus ends up buying counterfeit alcohol which may contain toxic adulterants. These adulterants lead to serious repercussions like kidney failure, liver failure, blindness, and even death.

The government must address the problem of counterfeit alcohol seriously as it hampers the growth of manufacturers, leads to a loss of Government exchequer and jeopardizes the health of the consumers. The combination of digital and holographic solutions can prevent the growth of counterfeit alcohol to a large extent. The U.P state government is currently using bar codes which have not been completely successful in clamping down on counterfeits, therefore, authentication solution providers association (ASPA) has suggested governments to incorporate holographic products along with bar codes/QR codes on liquor bottles to battle the menace of duplication in the liquor industry.

Do let us know if your brand or product is facing duplication. We offer tailormade anti-counterfeiting products and solutions. Call us on +91–785-785-7000 or mail us at connect@ec2-54-210-245-44.compute-1.amazonaws.com

What are the effects of counterfeiting on the alcohol & beverages industry?

At the start of this year, two ill-fated hooch tragedies in the states of Uttarakhand, UP and Assam took more than 200 lives and shocked the entire nation. A big question was raised on the regulatory framework of the states’ excise departments and the government machinery. However, hooch tragedies have been happening in India for the past so many years.

Here are the number of people who died due to counterfeit and adulterated liquor in the last 10 years.

Year State No. of deaths
2009 Gujarat 136
2011 West Bengal 172
2015 Mumbai 102
2016 Bihar 13
2019 UP & Uttarakhand 99
2019 Assam 114

The disturbing figures

According to Illicit Markets- A threat to our National Interests published by FICCI and Thought Arbitrage Research Institute in 2015, the grey market loss to the alcoholic beverage industry stood at INR 14,140 crore in 2014 which had increased from INR 5,626 crore in 2012.  This resulted in a huge tax loss to the government with an estimated revenue of INR 6,309 crore.

The figures are quite disturbing and have a direct impact on the alcohol and beverages industry in many ways. Let’s discuss them one by one.

Effects of counterfeiting on the alcohol and beverage industry

  1. Loss of tax revenue: Counterfeiters or forgers use different channels or means to sell illicit liquor which leads to evasion of taxes meant to collected by state and central governments.
  2. Promotes criminal activities: No wonder, the sale of counterfeit alcohol directly or indirectly benefits criminals and crime syndicates who use the profits incurred from it on other crimes.
  3. Loss of brand image: The sale of counterfeit or spurious alcohol tarnishes the image of the company and its products.
  4. Loss of consumers: One of the biggest threats of counterfeit alcohol is its effect on the health of the consumers. Besides serious conditions like liver or kidney failure, counterfeit alcohol can also take away their precious life.

The solution

One of the best solutions against illicit liquor is the use of tax stamps which include both physical and digital security features. For example, tax stamps must include bar codes or QR codes along with a hologram for enhanced two-step security. This helps in checking the counterfeiting of liquor to a large extent as fraudulent are not able to copy the holographic features with ease. Moreover, the digital security feature also helps in tracking the product in the supply chain along with a host of other IT-enabled supply chain management features.

How can liquor industry secure their products against counterfeiting?

The high number of deaths caused due to hooch tragedies took the entire nation by storm. Counterfeit or low-grade adulterated liquor lead to many deaths in the states of Uttarakhand, Uttar Pradesh and quite lately in Assam where the hooch tragedy claimed 150 lives.

As per franchiseindia, “India’s alcohol industry is the third largest in the world with a value of $35 billion. The industry is divided into three categories: Indian Manufactured Foreign Liquor (IMFL), beer, and homemade liquor. Revenue in the Alcoholic Drinks market amounted to US$67,661m in 2018. The market is expected to grow annually by 7.9% (CAGR 2018-2021).”

Due to the massive market for alcohol in India, counterfeiters are using it as an opportunity to sell counterfeit alcohol. Counterfeiting of alcohol has considerably increased with the import of high-quality liquor of globally famous brands. Most of the duplicators use old bottles to refill them with counterfeit alcohol. Along with this they also copy packaging and paste new tax stamps and labels on the bottles.

Holostik has been providing advanced anti-counterfeiting solutions to excise departments of many states in India. However, as per new excise policies, many excise departments have replaced holographic tax stamps with barcodes to ensure track and trace technology.

This has led counterfeiters to easily copy the bar codes and use it on liquor bottles. Perhaps, one of the biggest disadvantages of bar codes and QR codes is that they can be easily copied and pasted on counterfeit products to make them look real.

Holostik has been suggesting a combination of physical and digital security to safeguard liquor products. A multi-layered approach towards securing liquor helps in minimizing the risks of counterfeiting to a large extent, this means that if even if a forger is able to copy bar codes then he would not be able to copy the holographic label. Its like two-edged sword which helps in tackling counterfeiting effectively.