The alcohol industry is one of the most appealing for bad actors looking to add counterfeit goods to the market, primarily due to the industry’s taxation as well as the level product demand from a large number of consumers. With the potential for reputational damage, lost revenue streams, and danger to public health, we explore how alcohol businesses can boost their supply chain management and counter bad actors through traceability.
What is track and trace?
Track and trace technology allows businesses to identify products across multi-level and complex supply chains, from its initial manufacturer to the end customer. This can include scanning QR codes or looking for specific identification markings, so that all parties can distinguish genuine products from counterfeits.
Without these solutions and processes in place, companies are at a much higher risk of falling prey to issues such as smuggling, theft, tax evasion, and counterfeit production from criminal organisations.
Why is track and trace important in the alcohol industry?
The alcohol industry is a highly lucrative market and has many levels within the supply chain, including producers, distributors, retailers, and government agencies. As a result, there are more opportunities for supply chain vulnerabilities that criminals can exploit, making traceability absolutely vital for ensuring supply chain resilience.
The volume of counterfeit alcoholic products being consumed cannot be underestimated. In 2022, OLAF, the European Anti-Fraud Office, reported that 14.8 million litres of illegal alcoholic drinks had been seized across Europe (OLAF) alone. Meanwhile, counterfeit alcohol costs UK businesses more than £200 million in lost sales per year, and it has resulted in almost 3,000 job losses (Fraud Advisory Panel).
Illegitimate alcohol products can cause issues beyond just revenue loss. They can be an enormous risk to public health and safety, as in many cases counterfeit alcohol is unfit for consumption. Legitimate alcohol products must pass standard industry checks and regulations before reaching consumers, however counterfeit goods often bypass trading standards entirely. With dangerous toxins and chemicals in the mix, the risk goes beyond just sickness and poisoning, as some can prove fatal. Food Alert For Action: Consumers and Food Businesses who have purchased Glen’s Vodka (35cl) | Food Standards Agency
Companies falling victim to acts such as counterfeiting and smuggling could also face problems with their brand integrity and consumer trust, stemming from unmet quality expectations or unfair pricing on products in branded packaging. Beyond the potential for falling profits and sales figures, the costs associated with rebuilding credibility could also be an area of concern, as it could take months or years of brand health management to get the brand back to where it was.
Global countries that apply tax brackets on alcoholic products make the industry a significant target, with criminals smuggling counterfeit products across borders to sell as a means of generating tax-evasive income on the grey market. When governments don’t receive these revenue streams it can affect funding for public services, with HMRC previously estimating that £1.2 billion is lost per annum in avoided taxes on illicit alcohol (HMRC).
How can track and trace protect alcohol brands?
As cases of illicit trade in the alcohol industry are high, brands must do their due diligence through track and trace to ensure they’ve done everything possible to secure their products at each stage of their supply chain.
H3: International supply chain visibility
With supply chains in the alcohol industry often larger than in other industries, there is a higher chance of risk within the entire process. Utilising track and trace technology allows brands to have complete visibility across all levels and all areas of their supply chain, from manufacturers to suppliers and sellers.
Throughout the supply chain, companies can opt into receiving regular updates and insights to ensure their products continue to move through legitimate and approved logistical routes. This gives supply chain owners and managers the knowledge that their products remain in the chain as intended.
Any blind spots give criminal organisations a chance to intercept, providing a space to replace legitimate products with counterfeits, smuggle contraband across borders, or take products out of the chain altogether with the objective of selling them elsewhere.
By leveraging end-to-end international track and trace procedures, it’s possible to halt these activities and secure your products from any criminal activity.
Quality assurance and due diligence
Without the quality control undergone by legitimate alcohol products, many counterfeit products likely don’t meet the same safe consumption prerequisites. Imitation products are often made as cheaply and quickly as possible to create maximum profits for criminal organisations, with everything else being an afterthought.
Track and trace systems give partners and suppliers, including governments and regulatory bodies, the confidence that they are completing their due diligence to comply with quality assurance approvals across supply chains. It also allows brands to detect and record if any illicit products make their way into the chain, so that they can quickly rectify any issues before products reach consumers.
Ultimately, this technology doesn’t just help to ensure public safety and confidence; it’s also an important step in protecting the reputation of alcohol brands and mitigating the need for public relations crisis communications.
Peace of mind for consumers
In an industry flooded with pale imitations, brands must implement procedures to indicate which products are legitimate. Track and trace measures help to create complex, hard-to-replicate labels and product tags that indicate to consumers and businesses that the products they buy are quality and, most importantly, safe. Through this, customers can gain peace of mind as they can easily purchase products of the quality and offering that they’ve come to expect.
In addition, digital traceability offers alcohol brands the opportunity to include QR codes as part of their product packaging. This allows customers to scan and learn about their brand and protection measures and often provides a transparent history of the supply chain. These measures help to boost trust and build positive sentiment towards the brands that are taking responsibility and providing easy visibility from production to purchase.
Enforcing brand protection
With the risks associated with counterfeit products, it’s important that companies take the time to not just prevent issues, but to actively enforce brand protection. This helps to stop activities from bad actors at the source and allows brands to protect themselves from criminal activity long term.
Track and trace technology gives brands the chance to identify when counterfeit and tax-evasive products enter the supply chain and criminal activities such as smuggling occur. It also allows them to understand problems within their supply chain more efficiently, giving them opportunities to improve processes from end-to-end and action risk mitigation tactics quickly.
Increased visibility and tracking across all levels also means that brands can use this information in court should they need to provide evidence of criminal activity. This helps to guarantee that criminals are prosecuted, preventing them from acting again, and it also creates a deterrent for bad actors as their movements can be more easily traced.
Protecting your alcohol brand with Traceology®
Alcohol brands that fail to embrace track and trace technology are falling behind the curve, as more companies within the sector race to tackle the problem of counterfeit alcohol. Through Traceology®, the innovative track and trace software from De La Rue, both brands and customers can rest easy knowing that their alcohol products are of high quality, are fairly priced and taxed, and are safe for consumption.
With years of experience in track and trace, De La Rue’s Brand Protection services empower organisations to feel in control of their supply chain management. With our leading services, we can help you to provide accountability, visibility and accuracy at every stage of the journey.
Discover more about our innovative traceology solution now.
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Having partnered with leading wines and spirits companies over a number of years, De La Rue understands what it takes to protect alcohol brands throughout the supply chain
until the point of sale. Our latest application study gives an insight into the proven strategies De La Rue uses to combat counterfeiting and illicit trade in the wines and spirits industry.
