By Roger Field
International brand name companies are losing valuable market share to a thriving counterfeiting industry.
Up to 30% of certain branded FMCG goods on sale in GCC markets could be fake, anti-counterfeiting experts have told Retail News Middle East.
The problem, which is worst in healthcare and beauty products such as shampoo, soap, toothpaste, skin cream, and some food items, is so bad that in many cases, even brand owners are unable to differentiate between the genuine and the counterfeit products.
“[Counterfeiting] accounts for 15% to 30% depending on the goods in Saudi Arabia,” said Nayab Gohar, business development director at Hemaya Universal, a KSA-based company that aims to help bring counterfeiters to justice. “That depends on the demand for the product itself and which category side of the market it falls in. It’s more the healthcare items, skincare, cosmetics that are being hurt mostly.
“Counterfeiters are copying the packaging and internally changing the product and making sure it looks the same. Sometimes even the brand owners aren’t able to tell whether it is the real product or not.”
The counterfeit goods originate from various countries but often have their packaging changed or altered in the country of sale to evade customs authorities during import, Gohar added.
“Sometimes they [products] are re-filled locally,” he said. “They bring in a shampoo with one name, and it comes into the country. They have new labels printed up in the local market and then start selling them. There are various different means of bringing products to the market and selling them.”
The problem is made worse by some retailers who willingly buy fake goods in order to achieve higher profit margins than they would from the genuine article, according to Ahmed S. Al-Zubeidi, president and CEO of Hemaya Universal. “They are calling it the crime of the century,” he said. “The profit margin is better than the drugs industry.”
But a big part of the counterfeiting problem, which is estimated to cost GCC countries about $7 billion annually, is a lack of awareness among brand owners, according to Gohar. Many companies try to tackle counterfers alone, often spending a fortune just to bring a few retailers to court.
“We tell brand owners not to waste their effort taking every shop seller to court,” he said. “We tell them [brand owners] to seize goods at the retail level so that the consumer will not be exposed to the counterfeit and your obligation to the consumer has been met. Once we find out through these retailers about the importers and distributors, and are able to catch them, then you can go and take them to court.”
For Al-Zubeidi, the best option for brand owners is to outsource their anti-counterfeiting operations to private companies and focus on the source of counterfeit goods rather than just trying to tackle retailers who sell them. “Most brand owners lack the knowledge and manpower, and tackling this problem requires huge amounts of manpower.
“Brand owners need to be protecting their brand by suing the importers and distributors. Then they’re protecting the consumer by taking administrative action against the retailers,” Al-Zubeidi said. “They’ve got to take action on the ground.”
For retailers keen to avoid buying fake goods, Hamaya’s advice is simple; buy branded goods through official channels; either official suppliers or agents. “The retailers have to make sure they buy from the proper channel,” Gohar said. “In the Middle East you have the distribution networks that are being mostly run by the distributor of a specific brand. So they should buy from the agencies.”
“Some of these counterfeiters are doing a very good sales pitch, saying this is the same product manufactured at the same facility, or that they have brought it in from a different country making it cheaper,” he added.
Another trick commonly used by distributors of counterfeit goods is to mix fake products with genuine, in order to better evade detection by customs officials, unsuspecting retailers and consumers, Gohar added.
But there are limits to anti counterfeiting measures, according to Al-Zubeidi. “You cannot eliminate counterfeiting,” he said. “It’s like drugs. Drugs are prohibited everywhere and available everywhere, it’s the same with counterfeit products.
“We formed this company to minimise the problem, by effective research, gathering intelligence in the market, working with the brand owners and authorities to seize and destroy the products. It’s very important to destroy them rather than to just send them to their country of origin.”