In a market with guaranteed growth and ever-evolving technology, converters and suppliers must stay on their toes to thrive.
By Catherine Diamond
In the year 350 BC, Greek philosopher Aristotle said, “poverty is the parent of both revolution and crime.” Fast forward nearly 3000 years later, and global government agencies, regulatory organizations, and also label converters and industry suppliers can confirm that that’s true.
The global recession – also called The Great Recession or The Lesser Depression – sparked a renewed interest in anti-counterfeiting measures. As economies of both national and personal scale were stressed to the point of collapse, criminals saw significant financial opportunities in counterfeit pharmaceuticals, high-end handbags, and automotive products, to name a few.
Last August in Beijing, China, police seized more than $182 million in counterfeit pharmaceuticals. According to the Wall Street Journal, Chinese police are keen to promote their anti-counterfeiting victories, as the country has historically been a haven for criminals in this field. In fact, the European Commission reported in 2010 that China accounted for 85% of counterfeit goods seized in the European Union that year.
But China is not alone. As recently as October, the US Department of Transportation’s National Highway Traffic Safety Administration issued a consumer safety advisory to alert vehicle owners and repair professionals to the dangers of counterfeit airbags in cars. According to the agency, the counterfeit airbags look “nearly identical to certified, original equipment parts, including bearing the insignia and branding of major automakers.”
Stopping the production of counterfeit goods is essential not only for health and safety concerns, but for the incredible financial implications. The Intellectual Property Center – an affiliate of the United States Chamber of Commerce, which was established primarily to champion intellectual property rights – said in 2010 that reducing the piracy rate in the US by just 10% would add more than $52 billion to its gross domestic product within two years. To put that number into perspective, that is an amount close to the corporate profits for all US manufacturing of durable goods in 2009. That reduction in piracy would also boost US tax revenues by more than $8 billion.
The agency also says that consumers in G20 countries lose $125 billion annually as a result of counterfeiting and piracy. Losses in tax revenue are included in that figure. Beyond that, counterfeit and pirated products account for a staggering $360 billion in losses in international trade annually.
With all of this in mind, it’s not hyperbolic to say that label converters and industry suppliers in these often-counterfeited markets are on the front lines of anti-counterfeiting efforts. In order to stay ahead of the curve, suppliers must have an acute understanding of the products that are currently on the market, and converters must stay up-to-date on the techniques and applications associated with them.
The best defense
The best security measures - in labeling or any other field – are presumably the ones you don’t see. The catch-22 in labeling, however, is that brand protection and individual unit protection require two different types of security measures.
Covert security measures are highly technical and prevent counterfeiting at the branding level. Overt security measures, on the other hand, are readily seen with the naked eye. They’re designed to help consumers discern between a product that may have been compromised and one that has not been. To put it simply: the detailed markings on a one dollar bill are covert. Only a close inspection (often with the use of a machine) could identify inconsistencies in the illustration of George Washington’s face. The specific color of a one dollar bill is overt. If the green ink were just one shade off, people would immediately notice.
Avery Dennison Label and Packaging Materials supplies facestocks that offer different levels of security features. The company recently launched TurnLock, a technology that allows converters to produce protected graphics with 30% less material cost and 25% greater operational efficiencies. According to Mark Pickner, North American business director of durables, the company is frequently asked to provide films that offer overt features that are easy for consumers and other points in the supply chain to quickly authenticate product at the item level.
“Converters can then add their covert features on press to provide deeper levels of security. Certainly, activity in the overt area will continue to be a focus point for the market and an area that Avery Dennison is working on,” Pickner says.
Domino Amjet offers digital print ink jet systems that are engineered to print variable data and other security systems. According to Bill Myers, digital print marketing manager, brand owners and manufacturers want the aforementioned overt security features, but not at the cost of vanity. “While manufacturers want these identifiers or codes applied on the product at the unit-of-sale level, they do not want this information to diminish from their company’s brand image or marketing message, so they want it in an unobtrusive, small footprint,” Myers says. “For example, 2D codes such as Datamatrix, pack a lot of data into very tiny space. And while the manufacturers want these 2D or human-readable codes to be present, in many cases they want to keep the codes inconspicuous and do not want them ‘taking over’ the image of their packaging.”
Conversely, Myers adds, in some applications, the 2D code (such as a QR code) is intended for the public to easily see and use. “An example of a code geared for consumer use is the Harvestmark code that can be found on many packages in the produce aisle,” he says. “By using a smartphone, the consumer can scan a code on their clamshell package of berries and learn such information as where their berries were grown and packed. It’s transparent, allowing the consumer to see where their produce came from. With recalls due to salmonella and E. coli highly visible in the news over the past several years, growers, packers and shippers are doing whatever they can to provide peace of mind to consumers that their produce is safe to eat. And in worst-case scenarios, if there is a recall, the tainted produce can be identified and isolated. Traceability in this example helps the entire industry, so that perfectly good produce is not destroyed due to one bad seed (pun intended). So in that application, and others similar, the code is not just about traceability, but also about education, building peace-of-mind and loyalty, and serving as the vehicle to deliver this value-added information to today’s tech-savvy consumers.”
Arjobex Security - a division of Arjobx America - is dedicated to providing its customers with anti-counterfeiting and tampering products. The company’s product service manager, Bruce Gordon, says that his company provides both overt and covert options.
“Arjobex has long manufactured and sold a tamper-evident product that delaminates if a product seal is removed. The film and adhesive break apart if someone tries to remove the label from the container,” he says. “We can also add covert security elements to a coating applied to the product.
“Our covert offerings include fibers, taggants, fluorescent dots, and micro-spheres. For the IML label user, we can customize a formula of these ingredients and add to the coating applied to base film. Once a container is blown and the label is part of the packaging, a dedicated reader can show a company’s ‘footprint’ in the label. The film is suited for either PE or PP containers. We also have a coated wet glue cut-and-stack product that can be supplied with the same security features on the print side for non-IML labeling applications.”
According to Michael Manley, business development manager of RFID (radio frequency identification) and NFC (near field communication) at WS Packaging, many of his customers choose RFID as a security measure, and most prefer to have it integrated under existing packaging.
“This can be in the form of imbedding an RFID inlay with an existing label structure, or in the case of shrink wrap and other film-based materials, we can simply apply the RFID inlay to a product before the shrink wrap or other film process,” he says. “Most every brand owner does not want to alter or detract from the brand image built into existing packaging. Optical technology, such as bar codes or holograms often impact packaging artwork, which most designers do not like. Thus, RFID does not require ‘line of site’ to function, so designers tend to prefer a technology that doesn’t impact their work and the brand image. It’s there, but not seen. And if someone tries to defeat it, the packaging is destroyed in the process, rendering the product largely unsellable. As such, the bar is raised greatly for diverters or counterfeiters.”
Another growing trend among brand owners is using an anti-counterfeit adhesive. Mike Messmer, VP and general manager at Nova Vision – which specializes in security labeling – says that non-residue labels have increased in popularity. In addition, companies are beginning to think about sustainable measures for security labels.
“Most security labels leave an adhesive residue on the surface when removed. We are seeing more applications for ‘non-residue’ labels – these labels show the hidden release pattern (such as VOID and OPENED) in the film, but leave no adhesive residue on the surface when removed,” he says.
“For environmental reasons, more corrugated cartons are made using recycled content. As a result, these containers have lower surface strength compared to virgin corrugated. Security labels for these applications require a more sensitive release chemistry to avoid ‘scalping’ the surface (when the carton surface tears, the hidden VOID feature will not activate),” he adds. “Plastics and textured plastics are more common too. These ‘low energy’ surfaces require special adhesives to assure the VOID feature will be activated when the label is removed.”
Spending to save
One major challenge unanimous among brand owners, converters and suppliers is the cost associated with highly effective security measures. The investment can be arduous for brand owners, but as suppliers and converters will argue, the initial investment is significantly less expensive than the potential costs of counterfeit products.
Lori Campbell, chief of operations at The Label Printers in Aurora, IL, USA, says that a major challenge for brand owners is balancing the universal need to remove cost from the operation against the backdrop of increasingly sophisticated threats to their products and intellectual property.
“The demands on an organization’s resources to monitor, measure and keep a step ahead of the crooks is immense,” she says. “The nature of global business is such that supply chains are often so complex; it’s a major task just to identify where problems are coming from. Of course the internet, where bogus websites and counterfeit products are rampant, only adds to the complexity.
“In one respect the brand protection market is a fairly tight-knit community and it is relatively easy to identify the legitimate players. However, new products, new suppliers, mergers and acquisitions are all on the rise. As a supplier-partner to the brand owner, our challenge is to keep abreast of these developments. The technologies that exist and that are being developed are pretty amazing and it can be easy to get caught up in the next ‘shiny new toy.’ For this market, the label development process extends beyond the traditional form, fit and function; function takes on a whole new meaning and must consider the entire supply chain requirements. Our role is to be the customer’s advocate and apply our knowledge of all of their requirements in the initial evaluation process,” Campbell says.
According to Gordon, of Arjobex, the financial aspects of security labeling is just one problem for brand owners. He says that many may not have the accurate and up-to-date information required to make an informed decision about the issue.
“The challenges as a supplier in the security market center around locating the appropriate sources at a consumer goods company that have a clear awareness of counterfeiting costs either to that company’s brand or their specific market in general,” Gordon says. “Brand protection is a global issue and corporate headquarters of major multi-nationals, especially based in the United States, may not have clear data from respective regions, although this is increasing as awareness of brand damage and loss of credibility due to counterfeiting spreads.”
ATL (formerly Ad Tape & Label Co.), based in Menomonee Falls, WI, USA, specializes in anti-counterfeiting security labels. Doug Czarnecki is the company’s business development manager and security project specialist, and he takes brand protection and counterfeiting seriously. Czarnecki says that the biggest challenge in the market is getting customers to realize that they need security features in order to protect their investments and, more importantly, their customers from harm.
“I believe that the biggest risks that are taken when a company does not take security measures are lost products and knock-offs – profits are lost, there could be lawsuits, you could go out of business, and people could lose their lives.”
The risks of inaction
Bob Lowe, global business manager at 3M Performance Labels, finds that most brand owners are reactive in securing their product, as opposed to proactive. “Once it is obvious that they have a battle on their hands with a counterfeiter, then they place significant emphasis and energy on brand protection,” he says. “A reactive company faces many risks including lost revenue, brand damage, legal fees, warranty fraud and potentially lower royalties. That is why it is so important for brand owners to address this question on a more proactive basis.”
UPM Raflatac provides a variety of security materials, including customized papers and films, to its customers. Trevor Richardson, business development manager of specials at UPM Raflatac, agrees that many companies will take a reactive approach, but also emphasizes that proactive approaches can have a cumulative effect.
“A proactive approach to security labeling and brand protection could help identify areas of risk and the level of threat and liability up front,” Richardson says. “Proactive analysis of the threat allows the brand owner to understand what is the packaging cost to protect the brand up front. Also, more importantly, what is the cost or liability of not protecting the brand up front? That’s an assessment that should be made by brand owners at the packaging design and manufacturing stages prior to launch.”
Campbell, of The Label Printers, emphasizes that high-end brands are not the only brands being counterfeited. In fact, the potential is there for a counterfeiter to make more money off of a large number of inexpensive products than a lesser amount of a high-end product.
“There is a very broad perception amongst many brand owners that the products they make aren’t attractive to counterfeiters and, therefore, they won’t have a problem,” she says. “The reality is that there is virtually no product that is safe from that threat. Nightlights, toothpaste, eggs; these are but a few products being knocked off today. If there is a dollar to be made, the counterfeiters will be attracted to it.”
Staying one step ahead
Perhaps the one consolation in dealing with security and anti-counterfeiting measures (and their opponents) is the unequivocal guarantee that business will never slow down.
“So long as there is a risk of tampering, a security breach, or a brand protection issue, there will be a place for security labels,” says Hugo Dell, sales director of Security Labels International. “Society and human nature dictates the levels of criminality, and we don’t see that disappearing.”
In fact, as quickly as technology is developed to deter counterfeiters, it is used as a means to create counterfeit labels. For that reason, Richardson, of UPM Raflatac, concludes, “The future of security labeling and packaging is one of continuous evolution and innovation. With counterfeiters improving their sophistication at rapid levels, no one solution can be deemed as bulletproof. Forensic level identification is an area of interest to us in adhesives and papers but we truly believe multi-layered technologies – the best from our suppliers, what we can provide in our process and what can be completed on-press, is a winning solution to provide to the end product packaging.”