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Barry Mansfield looks at how the packaging industry is tackling brand protection issues in 2014, including counterfeiting and the grey market.

The global market for brand protection technologies is forecast to reach $3.8 billion in 2018, an annual growth rate of over 10% according to a recent market report from Smithers Pira. In 2014 Europe’s top brands are focusing their attention on new technologies designed to thwart, detect or mitigate threats to brand equity through grey markets, counterfeiting, privacy, diversion, tampering and theft of IP protected products. The driving forces of growth are a recovering economy, heightened awareness of the counterfeiting problem, and supportive legislation.

Smithers Pira suggests that the highest growth will take place in track-and-trace technologies for supply chain security, with an anticipated yearly growth rate of over 20%. The latest technological innovations in packaging span anti-theft to anti-tamper, track-and-trace to open, covert, and forensic product authentication. The food and beverage segment is predominantly concerned with anti-tampering, and the industrial sector with track-and-trace. Consumer packaged goods, particularly expensive luxury items, focus on overt product authentication and anti-theft.

In the pharmaceutical segment, brand owners are worried about the potential health and safety issues involved in counterfeit products, and they are aware that they need to be in compliance with regulations to ensure the safety of the product. Anti-counterfeit packaging, brand protection and secure packaging are global supply chain concerns; the biggest growth is seen in Asia, South and Central America, and Africa, with the Middle East and Eastern Europe not far behind. Asia is forecasted at an annual growth rate of 12.5% and Eastern Europe at 10.1%.

A series of laws, regulations, standards, and guidelines aimed at the pharmaceutical, critical component (electronics and semiconductor), food and beverage end-use markets, has inspired a sea-change in process management with regards to controlling the security and integrity of the supply chain. In the next decade, further regional and global legislation, regulation, and standardisation will come into effect. For example, serialisation is expected to become mandatory in the EU from the end of 2017. International co-operation will strengthen; track-and trace will evolve.

Identity documentation is an essential part of anti-fraud schemes. For instance, secure Visas are integral to the safe movement of people and goods from one country to another. Companies like Sekuworks now specialise in Visa printing for the strongest possible anti-counterfeit protection. The company’s approach to printing and applying multi-layered security technologies in a single pass involves two-colour intaglio and high resolution flexographic print, holographic and standard foils, and the use of wide ranging security technologies in web format.

The World Health Organisation (WHO) reports that more than 8% of medical devices in circulation are counterfeit and more than 10% of global pharmaceutical commerce is counterfeit. To tackle the problem, Rollprint Packaging Products developed a new technique to manufacture composite flexible anti-counterfeit packaging materials. The method, called Ghost, creates an integrated, repeating watermark embedded in the packaging to make it technically and economically challenging to duplicate. This can take the form of a corporate logo or brand name.

Ghost is billed as suitable for the chevron-style pouches used in medical device applications such as catheters, scalpels, pre-filled syringes, artificial joints and sutures. The technology can also be used in conjunction with blister packs, packets and packaging for other security-driven or luxury goods. The latter may include electronic components, collectables, documents or jewellery. The technology can be used with a range of material combinations. For instance, peelable and weld seal options can be utilised in conjunction with foil, nylon, polyester and a number of other substrates.

Most current anticounterfeiting measures add significant cost to the final product and they frequently demand highly specialised equipment. Examples include micro printing and inks only detectable under UV light. Rollprint’s watermark is added during normal processing, so the company is able to add its feature at little or no additional cost. Dwane Hahn, Rollprint’s VP, describes this as "just one more way of providing value to clients." Anti-counterfeit technologies are also offered by companies like Ingenia, TruTag and AlpVision.

Counterfeiting is only one aspect of the brand security and protection scene. For example, Seagate’s director for Northern and Central Europe, Henk Van Den Berg, emphasises the financial harm that grey stock causes to Europe’s information technology channel. KPMG and AGMA estimate that the global value of grey market IT products stands at around $58 billion (£34 billion) each year, equivalent to between five and 30% of total IT sales, with a typical impact on profits of between $8 and $10 billion (£5 billion and £6 billion).

Van Den Berg regards the scale of the problem as "unacceptable" and has taken measures over the last year to close it down. He suggests resellers can be deterred from the grey market through the widespread use of serial numbers. The idea behind serialisation is that the number can be tracked from manufacturer to reseller, enabling identification through the entire supply chain. In fact, rival hard drive vendor Western Digital already tracks its products using serial numbers, and has taken action against customers who breach contractual obligations or infringe property rights.

WD North European sales manager Jermaine Campbell warns that a grey HDD may not come with a valid warranty and may have a different specification than an in-region product. Another course of action would see manufacturers refusing to honour cross-regional warranties. Seagate made this decision in May 2013. Van Den Berg wants to see that resellers are educated on the ramifications of grey goods in the channel, such as the erosion of franchise. Seagate’s new market integrity policies include tighter reporting requirements, fines and withholding sales programme funds.

So, from where does the grey market issue originate? Are vendors, distributors, resellers and other traders equally at fault? Raste Khan, product manager for distributor Northamber, who once worked at now defunct supplier KMS Components, admits the majority of KMS’ stock was grey, and says that resellers are the only actors capable of putting an end to the grey market. However, Rich Marsden, director at distributor VIP Computers, insists the blame shouldn’t be pinned on resellers. Marsden’s belief is that the resellers are just the end result of the problem.

Resellers have the choice to buy or not. If they stopped purchasing goods from grey market traders, the practice would gradually disappear. But resellers are motivated to provide the best possible value for their business. Marsden suggests that price parity on official and grey would see resellers opting for officially sourced stock "every day of the week." That’s why he hopes vendors will make an effort to clean up the channel. "It’s their stock," he says, imploring vendors to "get a grip of their inventory management" and control it. Then the grey market doesn’t have to be there.

This is also the view of CK Kohli, MD of UK retailer YoYoTech, who describes grey stock as "a thorn in our industry." Many retailers are involved in the grey market and end up selling stock cheaper than anyone else, sometimes at more competitive prices than those available in the UK distribution channel. The only party in a strong position to kill this practice is the vendor, he concludes: "They must take a stand and shut down those channels, as Apple and others have begun to do." Harsh fines may be a possible final resort.
Kohli references Apple as a company that knows its channel and polices it effectively; he suggests other vendors could easily follow that same model. Reseller Anthony Lay from AML Midlands adds: "Grey markets exist because of buyers who only care about pricing and not where the goods come from. You’ll never persuade these buyers to change their stance." In limited cases, particularly where public health is threatened, regulators are prepared to use strong-arm tactics; for instance, the FDA shut down the websites of Canada Drugs, the pharmacy notorious for counterfeit Avastin.

However, this is not an approach that technology vendors have been able to rely on so far.

Industry confusion: software or hardware?

Helmut Schneider, product group manager packaging at Atlantic Zeiser, expects around 80% of all drugs to be subject to compulsory serialisation within the next seven to 10 years. Turkey and China are among the markets in which regulations have already been adopted, while others, including the USA, Brazil and Russia, are currently in the drafting process. Against this background, manufacturers and packaging service providers are looking for relevant serialisation solutions, but are unsure whether to turn to partners in the software or hardware industry.

In the software sector, some providers have emerged from the database systems segment, and others have developed from origins in photographic technology. For years Atlantic Zeiser has supplied both software and hardware to industries that are highly sensitive to security issues, ranging from individualisation software with high security architecture to high speed printing systems capable of coding products individually. In serialisation, good interaction between the software and hardware is crucial – as well as effective co-ordination with the production machine.

Schneider says pharmaceutical producers and packaging service providers alike are pining for a single software solution for serialising drugs for all markets. To address this desire, the company developed Medtracker, a modular, easy-to-implement software package that covers all the regulations. It has been designed to offer compatibility even with heterogeneous third party hardware. If parts of an end-to-end solution are already in place, therefore, adopters of the software can dispense with hardware investments.
Medtracker was exhibited at the Interpack trade show this year. In addition, the company demonstrated a range of other technologies, including a near-line system for the short run printing of blister lid foil, and an end-to-end system for printing serial numbers on carton sheets and flat carton boxes. The company expects to unveil further developments at its Open House event and the Pharma Packaging Days that it has scheduled for September at its headquarters in Emmingen in the German state of Baden-Württemberg.