Original4Sure

Combating Counterfeiting in Indian FMCG Industry

India has one of the largest consumer bases in the world owing to its huge population count. To cater such a large audience, multiple brands are operating in the market with high levels of competitive rivalry. In a competitive environment, costing plays a crucial role.

According to the Indian Brand Equity Foundation (IBEF), the Indian FMCG sector is the fourth largest sector of the economy with total market size of INR 3.4 lakh crore in 2018 with projected double-digit growth by 2020. With the sector projected to reach a market size of INR 71,947 crores by 2020, trading of counterfeit consumer goods is posing a huge threat to the sector. Studies indicate that the fake goods market is growing by 44.4% per annum, which is higher than the growth rate of the overall FMCG market. This is also supported by industry reports that suggest that 7–10% FMCG products worth INR 3 lakh crore circulated in India are counterfeit and incurs annual losses of more than INR 21,000–30,000 crore for branded products every year.

According to FICCI CASCADE, a committee established by the Federation of Indian Chambers of Commerce and Industry (FICCI) to tackle the nuisance of growing illicit trade in counterfeit products, there are seven sectors in FMCG that are more prone to counterfeiting. These include FMCG — packaged and personal goods, tobacco, auto components, alcoholic beverages, computer hardware, and mobile phones. The committee states that the fake consumer goods in only these seven sectors caused INR 1,05,381 crore losses in taxes to the exchequer. A detailed analysis shows that the highest revenue losing industry was FMCG (packaged and personal goods) at INR 35,413 crores, followed by auto components at INR 9,198 crores, mobile phones at INR 9,042 crores, and tobacco at INR 8,965 crores.

According to another report by FICCI CASCADE, around 20% of road accidents in India are caused by counterfeit automobile parts. The same is true for the pharmaceutical industry, which in India, is the biggest market for fake drugs. According to Zaheer Khan, chairman of Enforcers of Intellectual Property Rights, an anti-piracy wing, the menace of fake medicines is unbelievable. One of the sites that his team raided was creating lifesaving drugs in a cement mixer. Upon forensic tests, these medicines had 100 times more the prescribed salt level. More recently, the FDA raided a unit in Mumbai’s busy Crawford market to seize counterfeit products of renowned cosmetics companies such as L’Oreal, Nivea, and Lakme worth INR 2.39 crores. During these raids, large quantities of fake products were found along with the packaging material.

Source: ORG Survey of 12,500 retail outlets and independent estimates. Counterfeiting is not confined to the stated brands only.

Contrabands are also becoming increasingly popular in e-commerce. Recently, an e-commerce company, ShopClues was barred by the Delhi High Court for selling products of L’Oreal almost four years after the French cosmetics giant filed a case against it. Clearly, contraband consumer products have an adverse impact on consumers, manufacturers, and even the national economy of the country. While the manufacturer suffers from low sales and an irreversibly tarnished brand image, the consumer is not only at the risk of losing money but is also compromising their safety and health. The national economy also takes a blow since these activities lead to tax evasion and a host of other criminal activities, including smuggling. It also puts unwanted pressure on the public health system.

Causes of Counterfeiting

Easy procurement and technological advancements have enabled counterfeiters to create small backyard factories for producing fake goods. While 30% of FMCG items sold are counterfeit, around 80% of consumers are incapable of differentiating between genuine and fake products. Other reasons include higher pricing, lack of awareness, lack of stringent law and its enforcement, cheaper alternatives, and a huge gap between demand and supply. These products are generally sold at a few hot spots such as railway stations, flea or weekly markets, where buyers don’t pay much attention and sellers are not easily traceable.

O4S’ contribution in the fight against counterfeiting

At O4S, we are dedicatedly working on technology innovation to discourage counterfeiting activities. One such way is by helping millions of consumers verify the authenticity of their products every day. With a trusted brand protection technology, we have been helping various FMCG, agriculture, pharma and apparel companies, among others to not only check counterfeit issues but also enhance their supply chain management. O4S solution unfolds in the below-mentioned manner:

Digital Fingerprints - During the manufacturing process, each product is provided with a QR code that is embedded with Unique Digital ID (UID) akin Aadhar card that acts as its digital fingerprint. Thus, allowing easy scaling of operations by assigning UID to millions of products at once.
UID Track and Trace - Intervention of counterfeit goods in the supply chain becomes negligible with increasing product traceability through a complete end-to-end smart supply chain. Increasing product visibility across the distribution channel makes it convenient and easy for brands to check fraudulent activities.
Customer Interaction - O4S’ Original4Sure mobile App (or even any simple QR code App) puts the ball in the customer’s court as they can simply scan QR code or input UID to verify the authenticity of any product.
Consumer Outreach - With a reliable customer support team, which is active around the clock, helps consumers get all their queries solved within minutes.
In this way, we help companies achieve an all-inclusive view of their supply chain activities. Our solutions encompass advanced capabilities and enable customers to achieve their targets.