In 2021, the global food and fast-moving consumer goods (FMCG) sector generated a whopping revenue of over 8.2 trillion US dollars – and it is expected to grow by 1 trillion by 2025. However, every year, the global food industry loses over 34 billion US dollars to fraud and counterfeiting. What’s worse is that food counterfeiting carries a severe public health risk for consumers, alongside the significant economic impact perceived by manufacturers.
Luckily, new technologies and tools in the smart packaging field are today offering solutions to fight counterfeit, food fraud, and other FMCG illegal activities.
Thanks to tools such as anti theft labels, NFC tags, blockchain, and AI, customized smart packaging solutions are enabling manufacturers and consumers to enjoy a greater level of control over their food’s ingredient, origin, supply chain, and distribution.
Food Counterfeiting: An Overview
Counterfeiting is a global issue not limited to the food and FMCG markets. Indeed, in 2020, 26.3 billion euros were lost to counterfeiting in the clothing sector, and the cosmetic and personal care industry lost just under 5 billion due to fake goods.
However, in the food sector, this international issue is made worse by the environmental and public health concern it carries. What’s more, is that the percentage of counterfeit goods on the global food market is constantly increasing. For example, in major markets such as the UK, fake goods are rising at a rate of 15% year-on-year.
Types of Food Counterfeiting
Counterfeited foods and ingredients fraudulently imitate original products. However, there is more than a way in which distributors of counterfeited foods will deceive buyers and consumers. The different types of counterfeiting include:
- Adulteration – adulterated products are compromised by ingredients of lower quality than the one specified. It can lead to consumer mistrust and food safety scandals.
- Tampering – tampering usually happens in the middle of the supply chain and aims to compromise one or more of the product’s qualities or functionalities.
- Over-run – this refers to overproducing a certain product, and the excess stock, if released onto the market, could affect the principle of scarcity, thus driving the cost of luxury goods down.
- Theft – food theft happens when the goods are stolen before they are sold to the consumer. This type of fraud can significantly affect the manufacturer’s revenue.
- Diversion – diversion happens when goods destined for a certain market or distribution channel are diverted into another. The consumers might be unknowingly consuming goods that are either illegal in the country of consumption, or not authenticated by local authorities and procedures.
- Simulation – simulated products imitate original or premium ones, but they might lack the quality of the original goods.
Depending on the type of counterfeiting, the consumers can deal with a poor product experience, lower than expected quality, or severe health concerns.
What Is Smart Packaging?
Smart packaging is a term used to describe those packaging solutions that are enhanced by technology. This packaging category does much more than providing an envelope to the product itself. Indeed, smart packaging is able to:
- Improve the consumer experience
- Extend the lifespan of the product, thus reducing food waste
- Protect the product from external agents
- Provide quality control indicators
- Ensure authentication
- Provide an efficient, seamless track-and-trace system
Thanks to the right smart packaging solution, a company can provide added value to supply chain players, distributors, retailers, and consumers.
Reducing Vulnerabilities in the Supply Chain
Most counterfeiting happens at some point during the journey from the raw material suppliers to the consumers. Indeed, the supply chain causes the product to be handed from an agent to another. As supply chains are becoming more extended, global, and dispersed, the journey of foods from producer to consumer is becoming longer and riskier.
Some of the most vulnerable links in the supply chain include:
- The risk of adulteration is greater when there is an exchange of goods between suppliers, manufacturers, and retailers.
- Tampering, overrun, and theft are more common when the product moves from the manufacturer to the distributor
- Diversion and simulation risks are higher when there is an exchange between distributors and wholesalers.
Thanks to smart packaging, a secure and decentralized database such as blockchain, smart seals, tamper-proof sealing, and NFC tags consumers, distributors, and manufacturers can track products and prevent counterfeiting.
Smart Packaging as a Track and Trace System
Each food manufacturer and producer will face different counterfeiting risks. Those FMCGs that are considered as premium, exclusive, or have a strong brand heritage are targeted more consistently than other products.
However, there is also a correlation between the size and length of a certain supply chain and the likelihood of fraud. In this case, smart packaging tools can effectively be used to implement a track and trace system and prevent counterfeiting.
For example, blockchain solutions and NFC tags are extremely effective in safely and accurately recording transactions. In turn, this can help prevent the adulteration of ingredients and allergens and ensure authenticity and the ingredients’ provenance.
Smart Packaging Anti-Counterfeiting Tools and Benefits
Smart packaging solutions are uniquely designed to reduce the risks that a certain food manufacturing company runs in its supply chain. Some of the most effective tools to implement include:
- RFID (radio frequency identification tags) chips
- NFC tags
- Security seals
- Prints using security ink
- Mass encoding and digital encryption
Depending on the smart packaging solution used, these tools can offer a variety of services and advantages to both the manufacturer and consumer, including:
- The food producer or distributor can now ensure that the product arrives at its destination
- The consumer can check the authenticity of the product
- Some smart packaging tools can help monitor temperature and chemical changes inside the package.
- Facts and information about the food’s ingredients, provenance, and manufacturing can be accessed by scanning a label with a smart device
- Smart packaging can effectively track food goods and prevent tampering and fraud, thus reducing the health risk of fraudulent goods
- Increased top-line savings and prevention of loss of revenue to fraudulent goods and imitations
- By reducing the risk of counterfeiting, manufacturers and brands can protect their image, reputation, and customer loyalty
Whatever the chosen solution, it is important to remember that the harder will be the possibility to clone the tool the safer your products will be. NFC and RFIDs, for instance, are able to resist forgery, whilst Barcodes and QR codes, being visible to everyone, could be easily copied.
Customized Anti-Counterfeiting Solutions
Each food producer or manufacturer is unique, and thus should be its anti-counterfeiting solution. Whether you opt for investing in a private blockchain, or you prefer to incorporate NFC labels into your packaging solutions, partnering with a product authenticity expert such as Authena can help you protect your company, finances, consumers, and supply chain.