The Hindu Business Line : Fake accompli

A peddler blatantly sells coloured drink in Limca bottles to make a quick buck from tribals in the Chintapalli area near Visakhapatnam (left); Spurious goods being destroyed by a roadroller in Delhi to mark World Consumer Rights Day.

Fake is big business - for racketeers, that is. And a margin-denting one for the companies which spend huge amounts on marketing and advertising every year only to find a duplicate product mustering sales in the kirana store.

The problem has become more acute over the years. Consider this. Industry watchers point out that there are 128 ‘known versions’ of Parachute Hair Oil, 113 of Fair & Lovely cream, 44 of Vicks VapoRub, and 38 of Clinic Plus Shampoo. The reasons they are so popular with counterfeiters is because they are volume-garnering brands with wide appeal, and can be easily reproduced and sold in the market. The problem is prevalent across all product categories including medicines, FMCG products, cosmetics, foodstuffs, aerated soft drinks, liquor, watches, clothes and even currency.

The magnitude of the issue can be clearly assessed from the figures. According to the estimates of the International Anti Counterfeiting Alliance, counterfeit automotive parts sold in the country annually accounts for about Rs 20,000 crore, constituting nearly 35 per cent of the market.

A survey conducted by the Bureau of Indian Standards has shown that about 88 per cent of gold jewellery tested was found to be of much less caratage than claimed. The Mashelkar Committee on drugs set up by the Ministry of Health and Family Welfare reported that the extent of adulteration in drugs ranged between 0.5 and 35 per cent.

Further, the cost to the top companies in India is a whopping Rs 4,000 crore per annum due to competition from counterfeit products or look-alikes, excluding the crores of rupees spent to protect top-selling brands from this threat. In fact, estimates suggest that FMCG company Hindustan Lever is losing more than Rs 100 crore every year due to counterfeits.

On the whole, the FMCG sector seems to be bearing the brunt of this problem with losses for the industry estimated at about Rs 2,600 crore annually.

Counterfeiting is a headache for the Government as well. The cost to the Government - more than Rs 900 crore - is lost due to non-payment of excise and tax evasion alone, according to market estimates.

However, after the recent high profile cases concerning the cola majors, in which large quantities of spurious products came to light, the Government seems to have upped the ante against the menace of fake products. In a recent development, the Government mooted an independent authority to initiate action to protect consumers from the menace of spurious and contraband products.

This recommendation came from the Working Group on Counterfeit, Fake, Spurious and Contraband Products set up by the Department of Consumer Affairs, which submitted its final report recently.

There is to be thrust on critical areas affecting consumer health and provision of safe drinking water, milk, food and drugs, the report says, and underlines the need for all concerned ministries and departments to join hands and launch a vigorous campaign to enhance consumer awareness in the areas concerned. The report suggests that the industry should also review its pricing policy and bridge the gap between the fake and genuine products as far as possible. Industry associations should jointly set up ‘Better Business Bureau’ to protect the interest of consumers as a similar institution has been found effective in the US.

India Inc on its part has been trying various measures to combat the issue that results in a loss of around Rs 30,000 crore to the industry and Rs 15,000 crore to the Government annually. For instance, Hindustan Lever and Procter & Gamble are working with FICCI’s Mumbai-based Brand Protection Committee (BPC). The BPC tracks down manufacturers and sellers of spurious goods and tries to eliminate these channels by interacting with the Government agencies and judiciary.

Soft drink major PepsiCo has market intelligence and resources in place to survey suspect locations and identify manufacturers/distributors of spurious goods. It also frequently interacts with the police, especially on raids in different markets. Recently, the District Investigative Unit in Delhi found a fake bottling plant where several spurious versions of brands including Pepsi, Limca, Mirinda and Coca-Cola were unearthed. This included bottles, caps and coloured liquids/chemicals.

By the looks of it, companies are doing their best to combat this problem. In most cases, analysts observe that it’s the company that bears the cost of the battle.

While some measures such as tamper-proof sealed packaging and hologramming are available to the company x and are being undertaken by those who can afford them - others feel such packaging practices are exorbitant and by themselves result in price increases.

But considering the level of losses, the war against counterfeit products is far from over.

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