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.