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The AntiCounterfeiting Industry –An Overview of Recent Developments

Astrid Mitchell

Reconnaissance International

April 2002

2Reconnaissance International

Established in 1992Leading global intelligence source onauthenticationSpecialists in brand protection, document securityand personal identificationPublishers of newsletters and anti-counterfeitingpublicationsOrganisers of anticounterfeiting conferencesConsultantsOffices in UK and USA

3Reconnaissance International

Publications:Authentication News®Authentication News®Holography News®Holography News®Holo-pack.Holo-print GuideBookProtecting Medicines & Pharmaceuticals: Manual ofAntiCounterfeiting Solutions™Holo-pack.Holoprint Industry Study and Market Report

Conferences:Authentication and Counterfeiting Protection (ACP)Holo-pack.Holo-printGlobal Forum on Pharmaceutical AntiCounterfeiting

Consulting:Strategic counterfeit planningAuthentication implementation

4Market and Industry Overview

Authentication Markets

Authentication Technologies/Systems

Authentication Suppliers

Catalysts for development

5Main Forms of Brand Attack

Counterfeiting

Product diversion (parallel trading)

Tampering/alteration

Piracy

Passing-off

6Counterfeiting and Diversion - the

Risk ChainDesign Manufacturing Distribution Retailing Consumer

Designcopyright

Copycat

design

Genuineproduct

Counterfeitproduct

Approvedwholesaler

DistributorImporter

Parallel trader

ParallelImporter

Black Market

AuthorisedRetailer

UnauthorisedRetailer

Street Vendor

Flea market

Satisfiedcostumer

'UnwillingVictim'

'Willing victim'

7Losses Due to Counterfeiting

spirits $11.5 billion (10%)

car parts $12.0 billion

videos $ 2.5 billion (50%)

software $17.5 billion (36%)

pharmaceuticals $15.0 billion (6%)

clothing/sports $12.0 billion (11%)

music $ 8.0 billion (33%)

8Public Willingness toPurchase Counterfeit Goods

clothing/footwear 76%

watches 43%

perfumes 38%

electrical goods 22%

car parts 14%

children's toys 12%

pharmaceuticals 5%

pesticides 4%

(source – MORI)

9Impact ofCounterfeiting/Diversion

Consumer welfare/safety (direct and indirect harm)

Company profits and reputations (reducedturnover, lower margins, less investment)

Regional/national economies (lower tax receipts,job losses)

National security (criminal and terrorist funding)

10Key Market Characteristics

widespread and increasingly sophisticated productcounterfeiting and diversioneconomic globalizationextended manufacturing and distribution chains throughoutsourcing, licensing, franchisingdifferential pricinggrowth of brands as assetsprice-sensitive, publicity-aversegovernmental involvementgrowing demand for multi-function security solutions tocombat counterfeiting and diversion

11The Solutions Approach

Problem assessment/risk analysisSystematic internal and external managementLegal and enforcement solutionsEffective investigationUse of appropriate technologiesPublic/private collaborationEducationBack-end evaluationEffectiveness measurement

12Technical Solution Criteria

Counterfeiting – authentication andverification

Diversion – track & trace

Theft – EAS/security

Tampering – anti-tamper, tamper-evidence

13Authentication TechnologiesIn product marking (taggants)On product marking:

Security graphics - microtext, anti-copy backgroundsScrambled indicia, digital watermarks

Diffractive OVDs (holograms)Security inks and pigmentsSecurity substrates and carriers

paper/boardfilms/seals/labels/adhesivesmagnetic coding

Numbering and encodingRFID

14Performance Criteria

Overt/covertLevel of verification:

PublicFieldForensic

Variable informationMethod of reading/decoding

Optical/machineContact/remote

Level of securityCostFunctionality

15Authentication Technologies

Technologies,Products,and ServicesIn Context

16Key Technology Trends

rapid growth in number of anti-counterfeitingtechnologiesOVDs remain prominent - but now layered withcovert technologiescombined/multiple functionalitysecurity features supported by systemstechnologies for encoding, reading and processinginformation will become dominant for largercompaniesenormous interest in tracking technologies eg RFID

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Key Industry Trendswide spread of industry sectors now involved in brandauthentication

market no longer driven just by technology providers, butconverters as well

consolidation through acquisitions & mergers

lower barriers to entry

new entrants with major investment capability and marketspread

traditionally dominated by providers of single technologies

industry becoming more customer-focused - switchingfrom products to systems solutions

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Authentication Suppliers

BRANDPROTECTION

OVDsKurz/OVDK

AOTLight Impressions

Hologram IndustriesAPI

Dai Nippon

Raw MaterialsUCB

DuPontFasson

Security TechnologiesFlying Null

BiocodeFlex Products

InkSure

PrintersDe La Rue

G&DBundesdruckerei

Converters 3M

WestvacoSchreiner

Avery Dennison

Security SubstratesSICPA

LuminescenceDrewson

ModoArjo Wiggins

Technical Graphics

Systems &IntegrationSiemensPhilipsTexas

Infineon

19Industry News

New entrants eg:DuPont Authentication SystemsWestvaco Brand SecurityStardust TechnologiesJohan Enschede

Partnerships eg:Light Impressions – Flying NullOptaglio - DNA TechnologiesABNH – DigimarcBundesdruckerei - November

Acquisitions:AOT – OpSec/BridgestoneITW – Foilmark, ScharrAPI - Chromagem

20Industry Successes

Automotive (Daimler Chrysler/General Motors)Fuel (East Africa)Merchandise (Olympics)Electrical and electronic components (France,Germany)Vodka (Russia)Clothing (Italy)Software (Microsoft)PC consumables (OKI)

21Development Drivers

Increasingly sophisticated multi-functiontechnologiesOverall supply chain managementAuthentication for the InternetCross-industry collaboration/public-privateinitiativesAnti-counterfeiting legislationIPR enforcementCommunication and education

22Public and Private Cooperation

National cross-industry groups – QBPC,ACG, INDICAM, UdF, Andema...International specialist organisations -GACG, AGMA, IFSP, IFPIInternational associations – IHMA, IFPMA,BSAGovernment groups – CAP, 4IPRInternational organisations – WHO, UN

23Market Expectations

Accredited and effective technologies

Provable benefits

Low costs

Compatibility with existing productionprocesses

Guaranteed monitoring in open systems

On-going improvements/upgrades

Industry communication and cooperation

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Reconnaissance International

The End

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