Analysis: Tackling the counterfeit spirits market

Tuesday 6 November 2018 10:11am

Counterfeit brands have always been around, and affect spirits like any industry, but are today's brand owners winning the war?

Officers discovered a sea of counterfeit vodka and Cognac being filled by four bottling lines with a capacity of 50,000 bottles a day.

That was dismissed by a BBC report in January, which quoted Yevgeny Yakovlev, a Moscow- based economics professor, as saying: "The amount of illicit alcohol, or consumption that cannot be accounted for, in our country has not changed much in recent years, and makes up less than 10% of overall consumption."

This is despite Euromonitor's estimate that illicit vodka accounts for 30% -50% of total alcohol sales in Russia, or the news that in 2013 Russian retailers sold 9.9m more bottles of whisky than were officially imported.

Andrew Barber, managing director of the International Federation of Spirits Producers (IFSP) that was set up to combat counterfeiting, says: "I find it hard to deal with macro figures.

Only three years ago Brown- Forman was reported as saying that around 30% of the Chinese market was counterfeit.

Yet buying a fake Rolex, often knowingly, given the price, is nothing like buying a dodgy bottle of Chivas Regal that could kill you.

As Mathieu Prot, brand security and anti-counterfeiting director at Pernod Ricard, says: "We're lucky in that the immense majority of our consumers don't want to be exposed to fake products."

Prot believes that a sustained 15 -year campaign in China is now paying dividends, although fake spirits are becoming more of a global issue.

While not downplaying the ingenuity of counterfeiters in this ever -changing landscape, he says: "In the long term, I'm optimistic."

By contrast, Russia wasn't considered a real priority in the fight against counterfeits five years ago but has since become a serious concern, according to Prot.

"The striking difference is that in Russia you have complete fakes with bottles manufactured there, which is proof that the counterfeiters have industrial capabilities," he says.

Running in parallel with counterfeit brands is the issue of generic category fraud that preoccupies the legal affairs team at the Scotch Whisky Association (SWA).

Glen Highland Green blended whisky was aimed at rather more discerning Chinese consumers, who were informed by the blurb on the gift box that 'A Whisky is usually taken on the rock or with soda water, ice water and ginger ale', and that 'Scottish Whisky will penetrate your blood vessel, all the way to the capillary'.

Lindesay Low, the SWA's senior legal counsel, is "cautiously optimistic" about China, even if "brand counterfeiting is still a significant issue".

"Ninety per cent of our detected frauds are in China, where counterfeiters are becoming more and more organised," she says.

In June, the International Alliance for Responsible Drinking (IARD) published Alcohol in the Shadow Economy, which spells out the scale of the problem from contraband and counterfeit through to 'surrogate' alcohol derived from solvents, formaldehyde and even jet fuel.

That could be bad for India's bottle wallahs, who ensure that every bottle of Johnnie Walker has at least nine lives, according to legend.

For now the industry is putting its faith in smart bottles fitted with a CapSeal, as is the case for Remy Martin, where consumers can tap the bottle with their smartphones to check if the seal is intact.

He says: "Never underestimate the ingenuity of the counterfeiters, but equally never underestimate the enthusiasm and commitment of our brands to come up with solutions.

Source: The Spirits Business