Fake foods, drinks on the increase, says OECD

Fruit such as kiwis, conserved vegetables, milk powder, butter, ghee, baby food, instant coffee, alcohol, drinks, confectionary, and hi-breed corn seeds are the most faked items in the sector, the OECD stated. Worldwide trade in fake foods not only costs processors in terms of damage to brands, but also means companies have to spend more on security measures - such as putting holograms on the packaging. The OECD draft report found that alcohol products are the prime targets for counterfeiters in the drinks sector, both because of their brand value and the high tax and excise component of the final price. Alcohol was one of the more frequently mentioned products mentioned in the OECD survey of customs authorities and companies. Industry respondents noted that the most common infringement was the refilling of original bottles with inferior substitutes, the OECD reported. Alcohol commonly used in cocktails are also particularly attractive as the mixer can mask the distinctive taste of the underlying alcoholic base, the OECD stated. While many of the substitutions use original bottles and are carried out as small scale cottage industries, industry representatives noted the increasing evidence of large scale operations that include the use of semi-automated bottling lines as well as sophisticated printing machines, the OECD stated. The investment in such operations could also include bottle moulds, production of packaging and the production of raw spirit. Industry representatives indicated that organised crime may be entering the sector. The majority of infringements in the food and drink industry involve the misappropriation of trade marks or registered designs, the OECD noted. Kiwi fruits, baby formulae, tea and Scotch whisky are examples of such substitutions. While the food and beverage industry provided relatively little information of the economic effects of counterfeiting on firms, one respondent estimated the cost to a liquor industry company at a minimum of US$54m in terms of lost sales. To counter the threat the company invested considerable sums each year to ensure that it afforded workable anti-counterfeiting protection to its brands, the OECD stated. "The nimbleness of counterfeiters in responding to changes in packaging and other security measures meant that these had to be constantly updated,"​ the OECD reported. "These measures include non-refillable elements, sophisticated packaging and overt and covert devices and images to authenticate the original products."​ The company estimated the annual cost of the rolling programme of anti-counterfeiting measures at about US$75m. "Together these sums indicate the degree of financial exposure, both in lost sales and precautionary measures, faced by firms in this sector with a large number of trademarks to protect,"​ the OECD stated. Other actions taken by firms in the sector involve technological deterrents to counterfeiting, such as holograms, microdots, modifications to printed data codes, use-by dates, batch numbers, markers, the OECD stated. "However, respondents also noted that counterfeiters were becoming more nimble in responding to these technical solutions, emphasising that counterfeiters were being aided and abetted in this by ever improving and cheaper manufacturing, computing and printing technology,"​ the OECD stated. Estimates of the amont of fake food and drink products on the market are hard to come by. he European Brands Association (AIM) reported that figures from Customs indicated that seizures of food and drink products increased by 250 per cent by volume between 2003 and 2005. Respondents fingered China as a main source of manufacturing, distribution and sale of counterfeited food and drink products. In the drinks sector AIM reorted that during 2004 the industry's global anti-counterfeiting actions resulted in the seizure of about one million fake items, and the closure of 148 illegal manufacturing sites. The industry's evaluation of these manufacturing sites was that over a 12 month period their cumulative production capability was 155,000 cases with a potential full revenue value of around EUR19 million. The European Commission also reported that while the number of cases register has remained relatively constant in recent years, about 5.2 million items of counterfeited foodstuff, drinks and alcohol were seized in 2005, a 118 per cent increase over 2003.