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The Authentication Times
Issue 29
Cover Story
FMCG Industry in India:
The fast moving consumer goods
(FMCG) segment is the fourth
largest sector in the Indian
economy and is estimated to
grow from US$ 30 billion in 2011
to US$ 74 billion in 2018.
Broadly classified into three
categories- Packaged Food or
Food &Beverages, Personal
Goods and House Care Products,
food products are the leading
segment, accounting for 43
per cent of the overall market.
Personal Care (22 per cent) and
Fabric Care (12 per cent) come
next in terms of market share1
.
Size of Counterfeit FMCG
Market in India
Measuring the exact size of
counterfeiting in FMCG industry
is methodologically challenging
for various reasons. Firstly, the
packaged food sector consists of
a large unorganised sector, which
is particularly vulnerable to
counterfeiting. Secondly, it is an
illegal activity and illicit traders
attempt to remain invisible
and are unlikely to record their
activities. Thirdly, due to the
nature of industry, most of the
times various cases remain
unreported in evidence of used
products.
by Chander S Jeena
1. India Brand Equity Foundation
FMCG being one of the largest
sector in Indian economy is
currently facing the heat of
counterfeit products. The
grey market percentage in the
FMCG-personal goods industry
has increased from 25.9 per
cent in 2010 to 31.6 per cent in
2012. Parallelly, the loss to the
industry has also increased to
approximately ` 19,243 crores
in 2014 to ` 15,035 crores
from 2012, attributable to the
increase in the industry size as
well as grey market percentage.
This story highlights this core
issue and details on the kinds
of counterfeiting prevalent
and its impact along with
the factors involved for the
increase in counterfeit FMCG
products and the usage of
various authentication solutions
adopted by FMCG companies to
counter this menace.
Combating
in India
Counterfeiting
FMCG

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Cover Story
However, according to various
media reports it is estimated that
FMCG sector loss 30 per cent
of its business to fake products
and 80 per cent of consumers
who purchased these products
believed that they had bought
originals. Further, according
to a study by FICCI CASCADE
in 2013-14 the estimated loss
of sale to FMCG industry was
approximately (INR 21957+INR
19,243 crores)2
.
Factors responsible for
increase of illicit trade in
FMCG products
In FMCG sector, counterfeiters
take advantage of and use
advanced technology to imitate
original products and replace
them with inferior substitutes.
These could be contrabands or
look-alikes passed off as original
products.
There could be various factors
driving the illicit trade in FMCG
sector, however, the key reasons
seem to be as follows;
• A large unorganised sector in
the packaged food industry;
• Weak regulatory and
implementation mechanism;
• High price of branded and
premium products;
• Huge income disparities
creating a market for cheap
alternatives to the branded
andpremiumproductsamong
the low income population.
Impact of counterfeiting
in FMCG sector
Counterfeit goods can be
dangerous and potentially
harm or even kill unsuspecting
consumers. These products may
contain hazardous and untested
ingredients and provide no
assurance of safety or efficacy.
Apart from the health and safety
issues, counterfeit products in
the market mean low satisfaction
or benefits to the consumers and
poor value for their money.
Impact on Consumers
A recent study by the Delhi
Institute of Pharmaceutical
Sciences and Research (DIPSAR)
found that many of the toothpaste
manufacturers are adulterating
toothpastes and toothpowders
with high quantity of nicotine.
Out of 24 well-known brands
of toothpastes examined, which
were produced and marketed by
leading FMCG companies, seven
were found to contain nicotine,
which is expressly banned as the
Cigarettes and Other Tobacco
Products Act, 2003, prohibits use
of tobacco in any non-tobacco
product. Similarly, out of 10
well-known 23 toothpowders,
six contained nicotine. The most
remarkable aspect of these
findings was that the companies
involved were leading national
and international brands of the
FMCG world. Similar cases have
been reported from Mumbai
and Ahmedabad in which nearly
half of all cosmetic and beauty
care products sold over the
counter (OTC) were found to
be fake or spurious and more
than half contained harmful
ingredients. Ayurvedic products
manufactured by some FMCG
giants were also found to have
misleading information about the
ingredients.
This is a scenario when 62 out
of the top 100 brands are owned
by MNCs, and the balance by
Indian companies. Out of these
62 brands, 27 are owned by
Hindustan Unilever and the rest
by other fifteen companies.
Impact on Government
Any counterfeiting activity,
whenever it takes place, is bound
toimpacttheGovernmentheavily.
Globally, government loses
billions of dollars in tax revenue
due to counterfeit and smuggled
Industry
Sector
Direct Tax Loss Change Indirect Tax Change
2014 2012 INR crore % age 2014 2012 INR crore % age
Personal
Goods
1,111 867 244 28% 4,842 3,779 1,063 28%
Packaged
Goods
594 552 42 8% 5,502 5,108 394 8%
Table 1: Loss of taxes to Government (in INR crore)
Source: FICCI CASCADE
Industry Sector 2014 2012 Increase/Decrease
FMCG-Personal Goods 19,243 15,035 + 4,208
FMCG-Packaged Food 21,957 20,378 + 1,579
Table 2: Loss of Sales to Industry (in INR crores)
2. FICCI CASCADE

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The Authentication Times
Issue 29
products. Coupled with the costs
incurred in judicial proceedings
and various associated law
enforcement agencies, the effort
and cost entailed by the various
governmentsbodiestoseizethese
goods in gruelling. In totality,
Government lose tax, incur higher
expenditure on public welfare,
insurance and health services as
well as consumer distrust, loss of
country image and reputation.
Impact on Industry
Manufacturers are hit badly by
illicit trade. In addition to revenue
losses, many other things at stake
due to counterfeiting. Some of
these include:
a) Loss of trust, goodwill &
brand image:
Consumers lose their trust in
themanufacturerafterbuying
a fake product unknowingly.
Forabrand,yearsofhardwork
spent in brand-building is
lost due to a single incident of
fake or counterfeit activity.
b) Curtail Innovation:
Increasing magnitude
of counterfeited and
smuggled goods discourages
companies to invest and
deploy resources in product
innovation. According to the
FICCI study, FMCG sector
is spending very little on
innovation. The lack of new
copyrights, trademarks or
patents in this industry, could
be attributed to the fear of
lower returns on investments
by legitimate manufacturers
due to counterfeiting and the
growing illicit markets.
c) Loss of Sales:
The grey market percentage
in the FMCG-personal goods
industry increased from
25.9 per cent in 2010 to 31.6
per cent in 2012. Loss to
the industry also increased
to 19,243 crores in 2014
from 15,035 crores in 2012,
attributable to the increase
in the industry size as well as
grey market percentage.
Solutions adopted by
FMCG companies
Counterfeiters today are tech
savvy and can easily produce
packaging material similar or
better than that of genuine
products. But, if there is a
problem, there are solutions. In
India, consumers do not have
any tool/medium to differentiate
genuine products from their
fake counterparts at the time
of purchase. Due to lack of
awareness and illiteracy, they
rely on the visual appeal and
can only check the quality of
products with the marking of
ISI/AGMARK or FSSAI number.
However, with the advancement
in digital technology, it has
become easy for unethical
manufacturers to produce fake
ISI/AGMARK/packing products
as well. Therefore, there remains
a constant need to spread
awareness on ‘How to identify
genuine products from the fake
ones?’
Technology-based solutions
could be one of the strategies to
counter the problem. The proven
adoption of these technologies
by various brand like Patanjali,
Mother Dairy and Amul can be
treated as case studies. These
authentication solutions have
multiple benefit as they provide
Cover Story
Proven adoption
of authentication
technologies by various
brand like Patanjali,
Mother Dairy and Amul
can be treated as case
studies

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The Authentication Times
Issue 29
Cover Story
a) Tamper proof packaging;
b) Product authentication and
c) Tracking and tracing of product
Some of the technological
solutions that seem to have
worked for the industry are listed
below:
i. Visible Features:
These are prominently
visible features put on a
pack or carton to verify or
authenticate a product and
difficult to replicate. These
also include features that
cannot be removed without
damaging or defacing the
pack. Examples:
• Transparent film wrappers
with distinctive designs
around a product
• Use of inherently tamper
proof packaging like tin
cans, tetra packs sealed
hermetically
• Breakable caps like those in
drinking water and soft drink
• Holograms
ii. Hidden Features:
These features enable the
brand owner or grocers
to identify and verify a
product that may require
image scanning devices and
may not be detected by the
consumers, such as encrypted
texts or marks on the product
or package.
iii. Trace and Track
Technologies:
These involve assigning
unique identity to each stock
unit during manufacturing,
which remains through the
supply chain. The identity
includes name of the product,
the lot number and expiry
date. Examples: bar codes,
watermarks, taggants (multi-
optical layers) unique pack
serialisation, nano printing
or microscopic application of
UV inks which allow invisible
printing, etc.
Apart from technology solutions,
manufacturers also use other
measures like consistent brand
packaging to ensure better brand
recall value. Frequent changes
in packaging can create barriers
to identification of products
and make a brand vulnerable to
counterfeiting.
Conclusion
These efforts seem to have
produced results as our estimates
show that counterfeiting in
packaged foods has come
down. Adopting authentication
solutions is a win-win situation
for all stakeholders as the brand
owner and authorities enjoy
the revenues and tax/duties
respectively and the consumer
gets access to the original
product. These authentication
solutions also help the end
consumer to identify the genuine
product, in turn winning his
loyalty and boosting brand value.
Figure: Example of FMCG brands using authentication security solutions.