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WHY MAKE IN INDIA
WHEN YOU CAN FAKE
IN
INDIA
….an in-depth analysis of the scale of counterfeit
productsin consumer good categories, and what
brands and the government need to do
(and are doing) to control their mushrooming.
Most
of us know at least one person who went abroad during
summer
holidays and returned f launting hisher Gucci bag
and Prada
glasses. Often there would be a clique, green with envy
touting
it all to be `duplicate maal' (fake products).
They
weren't always far from truth considering how rampant
counterfeiting
is, globally, when it comes to luxury products.
India
is one of the hotbeds for the same with every city
boasting
of at least one popular destination for premium
brands
at non-premium rates.
Buying
fake luxury products happens at a consumer's volition
when
he wants to meet his esteem needs but not pay the
price.
It's called `willful counterfeiting' in industry parlance.
And
consumers in India can easily get away with it since we
don't
have laws that can get one arrested for purchasing
fake
premium products (unlike France and Italy).
The
kind of counterfeiting that's cause for concern however
is
daily use products such as food, beverages, medicine,
auto
parts, beauty products, and software. Almost a third
of
each of these categories is plagued with fakes, giving
market
leaders -always soft targets for counterfeiters
-sleepless
nights. Here's why:
FMCG and Packaged
Food:
In
2015, FICCI CASCADE (Committee Against Smuggling
and
Counterfeiting Activities Destroying the Economy)
releaseda
study that says the government lost nearly
`6,000 crore to
the grey market of FMCG personal goods.
The report also
mentioned that 31.6% of FMCG personal
goods space is
several shades of grey.
The number is 21.7% for thepackaged
foods industry.
Which means roughly 15th of all
the packaged food you're
buying may well be counterfeit and
posing a serious threat
to health and safety.
Auto:
20% of road accidents in India are attributed to fake
automotive
components , says a study by Nielsen and ACMA
(Automotive
Component Manufacturing Association Of India).
The
auto aftermarket is worth `40,000 crore, as per the
samestudy.
Fakes account for 36% of the pie.
Amid
the loss to the government exchequer ` 2,700 crore
per annum is the incomputable value of the
loss of life.
Pharma:
India
is one the biggest markets for drug
counterfeiting,
says Zaheer Khan, chairman of EIPR
(Enforcers
of Intellectual Property Rights) an anti-piracy wing
that
specialises in conducting raids to bust these rackets .
Khan
and his team conduct two to three raids every day,
across
the country.
In
one of these, they found life saving drugs being produced
in
a cement mixer. “The level of hygiene was deplorable.
Later
we found the drug had salt at 100 times its
recommended
value.
You
often find such cases in baby products as well,“ says Khan.
Beverages:
Be
it alcoholic or non-alcoholic, the death toll due to fake
products
in both catego ries is alarming. “About a decade
ago,
when returnable glass bottles used to be the primary
package for the beverage industry, it was
grappling with
the
manufacture and sale of spurious products.
It's
relatively easy to fill and seal fake beverages in glass
bottles,“ says
Arvind Varma, secretary general of IBA
(Indian Beverage Association).
With consumer preference
shifting to PET packs
(they
are now 65% of the market), the issue is more of
counterfeit
rather than spurious products, he adds.
You
can't even expect consumers to catch the fakes.
Often
packaging material gets leaked out of the company's
own
supply chain. “The dubious manufacturer picks original
packaging
from the recycled market and refills it with
substandard
liquid. Bottle caps are easy to imitate anyway,“
says
Anurag Kashyap, partner fraud investigation & dispute
services
at EY (Ernst & Young). Some Chinese counterfeit
imports
contain addresses of Baddi (Himachal Pradesh) or
Haridwar
(Uttarakhand) on their packaging instead of
Made
in China'.
This
ensures the consumer doesn't get suspicious given
these
are popular manufacturing destinations in the country.
Apply
this methodology to any branded commodity and
you
have a ready reckoner on `How to make a successful
fake'.
Tales of Online
Fakery
Several
reports have indicated how counterfeiting has been
spreading
to the online luxury space. But with the
ecommerce #BigSaleDay
hysteria, several other product
categories have also
come under the grey cloud.
“25% of all the products available
online would be
counterfeit,“ says Dinesh Anand -partner
and leader of
forensic services at PwC India.
But
that's just his person al assessment, he's quick to add.
Drugs,
electronic appliances, and tech products are the
worst affected.
Says
Rajesh Gupta, country manager India and SAARC
for
SanDisk: “Counterfeit products were typically sold at
known
hot spots in each city: outside railway stations or
weekly
markets, where consumers are in a hurry and it is
not
easy to trace back the seller. Now counterfeiters are also
becoming
active on e-commerce.
Some
unmanaged online marketplaces are abused by
counterfeiters
where they exploit anonymity to sell with
sense
of impunity.“ Sites ending with url extensions like
`.tld'
and `.brand' are usual suspects we hear -easy to go
unnoticed
by an ordinary user. No wonder all the major
ecomm
brands are devising measures to check the
penetration of
fake sellers on their sites. Delisting is common. Amazon
does
it regularly. Flipkart apparently delisted 100 sellers as
of
last October. They also have a `mystery shopping' activity
where
employees buy products to check how fake-proof the
system
is.
Who Will Bring On
The Counter Strike?
It's
a hard task considering this mammoth industry grows
irrespective
of the mini holocausts it's subjected to by way
of
raids and arrests. As EY's Kashyap says, “These are not
entrepreneurs
who want to grow in one line of business.
They
switch to producing whichever brand's packaging
material
is readily available.“ Every day 100 websites shut
down
but 100 others mushroom as well, adds PwC's Anand;
a
given in a huge margin and extremely low risk business.
It's
not that we don't have adequate laws in place.
“But
stricter enforcement has always been the problem,“
says
Dipankar Barkakati, additional director and head
IPR
& FICCI CASCADE at FICCI. Factors like resource crunch,
the
lack of enforcement officials and IPR infringement cases
not
being a priority have also been a problem area, he adds.
“Moreover,
India lacks deterrent punishments in IPR violation
cases;
hence offenders are not intimidated enough.“
Basically,
if things go awry, the punishment is not even a patch
considering
the gravity of the offense and its implications.
With
a new IPR policy in the offing, Barkakati and the FICCI
CASCADE
team hope that the situation will improve.
What Are The
Marketers Doing?
As
a part of its Combating Unfair Competition (CUC) program,
Hindustan
Un i l e v e r ( H U L) applies a three pillar strategy
to
fight counterfeiters: building a dedicated team with ample
money
and resources; educating consumers about IPR;
and
finally working with the government on regulation and
enforcement.
Dev Bajpai, executive director Legal and
Company
Secretary, HUL, agrees with FICCI on the IPR
issues.
“There are still rough edges in IPR related legislations
that
need to be corrected,“ he says.“ These come in the way
of
effective actions on the field and HUL is working through
industry
associations to have these dealt with by the government, he adds.
The
onus is not on the government alone, which is why every
year,
HUL commemorates World IP Day and World
Anti-Counterfeiting
Day, to propagate knowledge about IPRs.
As
Mohit Bahl, partner and head forensics at KPMG India,
explains:
“Creating awareness about genuine and fake
products
by educating consumers is of paramount importance
since
more than the top line it hurts the brand value.
Consumer
trust once lost can be difficult to regain.“
Brands
have started waking up to online counterfeiting as
well.
“Pharma
companies, for instance, now use digital authentication
apps,“
says Anand of PwC. The app allows users to send
images
of a medicine available online and detect whether
the
seller is genuine.
In
fact, brands aren't the only ones embracing tech solutions.
Two
government sector undertakings have adopted Onspot
solutions
-a unique QR code that's integrated in product
packaging
which can be scanned using either the same app
or
a regular QR code scanner, to verify product authenticity
in
real time. “In a scenario where it's so easy to copy
holograms,
cause pilferage in the supply chain, and dupe
consumers
-this technique proves really helpful in detecting
counterfeiting,“
says Rajiv Hiranandani, executive director,
Onspot
Solutions.
Several
other market leaders employ investigative agencies
that
conduct raids on counterfeiters. But raids don't ever
nip
the evil in the bud, feels EY's Kashyap. Often the dealers
have
a nexus with the police, he further adds.
Liaising
with the likes of FDA (Food and Drug Administration)
to
conduct raids and deal with manufacturers, wholesalers,
and
retailers is a better option, he feels.
To
settle the debate between raids and investigation, PwC's
Anand
rightfully concludes: “At this point, everybody is in a
reactive
mode than a preventive one. I don't think anybody
knows
what the right solution is, but every unit is doing its
bit
to check it to the best of their ability.“
You,
dear reader, should do your bit too,
no
matter which side you're on.
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By
Shephali Bhatt
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ET4MAY16
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