Home BUSINESS Fakes don’t kill brands; they kill businesses

Fakes don’t kill brands; they kill businesses

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There is a saying you don’t kill the goose that lays the golden eggs…

But most of the time people forget this when they start duplicating any product that sells. Obviously products that sell most appear more lucrative to the pirates and counterfeiters.

Counterfeit medicine is one of the least expensive and most profitable business to set up. You don’t need not large infrastructure facilities to produce or market counterfeit drugs. The production costs are low, whereas the demand for medicines and profits are high. The difference in prices of two products having ‘almost’ similar ingredients is the temptation or motive. Counterfeiters don’t have any fear as long as there are corrupt officials willing to oblige. The officials who know what they are up to are in all likelihood getting a share in the profits in the murky business and those who don’t, really don’t matter.

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It is a big and growing global business. Though it is also true that it accounts for more than 100,000 deaths every year. World Health Organization estimates that almost 10 percent of medicines globally and one-third in developing countries are counterfeit. Almost 25-35% of counterfeit drugs are produced in India. One in five medicines sold in major Indian cities is fake. Illegal drugs comprise 20% of the total market share.

Don’t be surprised as not just medicines India is becoming a hub for all kinds of fake and spurious and sub-standard products.

  • Nearly 30% of the automobile components in the market in India are counterfeit
  • About 21% of mobile phone sales in india are unauthorized or counterfeit
  • More than 10% of IT products in the market are counterfeit
  • Fake luxury goods in India are likely to command a market of Rs 6,000 crore in 2016
  • Only 50% of liquor consumed is produced legally in India. This means is that everything else is either spurious, substandard, home liquor or people are just not bothered where it comes from
  • Surprisingly 80% of the consumers do not even realize this at the time of making a purchase. They continue to believe that they have bought the original.
  • Within India, Delhi is the main transit point for a wide range of counterfeit consumer electronics, computer accessories, mobile phones and auto accessories.
  • Gaffar market is one of Asia’s largest markets for counterfeit and smuggled electronic appliances, mobile phones and cosmetic items while Kashmeri gate is one of Asia’s largest auto parts markets.
  • Nehru place leads in fake computer hardware and pirated software.
  • Nearly 75 percent of all the fake goods in India are either produced or transit from Delhi.

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AUTO COMPONENTS

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 Counterfeit auto parts are a US$16bn business worldwide and growing 9-11 % a Year.

 India has the seventh largest automobile industry in the world. The auto components industry –  an integral part of the Indian automotive industry is also poised to take off due to increasing demand for vehicles, low-cost manufacturing and availability of low-cost skilled manpower.

auto components

According to Automotive Component Manufacturers Association, (ACMA) 30-40% of the total parts sold in India, worth close to Rs. 10,500-14,000 crore are fake. Distribution and retailing of fake, recycled or duplicate clutch plates, brake pads, radiators, windscreens, accessories and spares of two-wheelers, cars, trucks and buses is a big business. These fake components are similar looking, but 20-30% cheaper than the genuine parts. This makes it difficult to control their unauthorized sale. Air filters, bearings, spark plugs and brake pads are among the among the hottest selling counterfeit products. Retailers and mechanics prefer them because of the higher margin. Sometimes a consumer knowingly buys a fake that costs half of what a branded, original product would cost.

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Possibly they don’t realize that fake and unverified component can a very big safety hazard both for the persons inside the car or outside. People using counterfeit parts have to spend more on 109 million liters of petrol and 8 million liters of diesel every year – this is an indirect cost that they end up paying. Counterfeit parts were directly or indirectly one of the causes behind  20% of road accidents in India causing 25,400 deaths and more than 93,000 injuries. The U.S. National Highway Traffic Safety Administration warned motorists that counterfeit air bags fitted by many of them may not inflate or fail to inflate in time of need.

 ALCOHOL

 Alcohol and tobacco are among the most illegally traded products in the world.

 According to a study, overall liquor consumption in India may triple in the next three years. It will shoot up to 20,000 million litre from the current 7,000 million litre. This means a revenue of Rs 2 lakh crore from the alcoholic beverage market in the next three years. India already is one of the world’s largest alcoholic beverage market.

alcohol

Over 30 percent of the alcohol consumed worldwide– is unregistered. Counterfeiters typically refill empty bottles of imported wines and spirits from clubs, bars and five-star hotels with cheaper Indian whiskeys and try to pass them sell them off as genuine scotch. There are also instances where industrial alcohol or alcohol that isn’t fit for human consumption has found its way in shops and roadside bars.

Kerala and Punjab are the most heavily drunk states. Andhra Pradesh, Haryana, Himachal Pradesh, Karnataka, Rajasthan, Tamil Nadu and West Bengal account for 40 per cent of all the liquor consumed in India. Chandigarh and Pondicherry too, have a high consumption 6%.

Nearly 15 to 20 percent of the liquor consumed in India that is fond of whiskey– is counterfeit. The basic problem with the liquor industry is that there is no level playing field. On one side are a handful giant multinational corporations who dominate the market with their branded products. These large corporations have deep pockets to buy smaller companies and one another. Their products aim at the upper middle class consumers.

On the other hand, are small bootleggers in the unorganized sector illegally brewing arrack or tari a kind of country liquor with up to 25-45% alcohol content. It is made from sugarcane, rice, palm, coconut or wheat. This country made brew being cheaper than commercial liquor, is popular among the poor. Consumption of this cheap alcohol prepared under non-scientific or hygienic conditions has harmful effects. The people buying them might have seen the gory outcomes of many hooch tragedies, but still drink the substandard alcohol because that is all they can afford.

CIGARETTES

Around 12% of the global cigarette market – 660 billion cigarettes, each year is illicit.

85% of smuggled cigarettes in the UK are counterfeit. Cigarette smuggling continues to be a relatively low-risk, lucrative activity. In the UK, cigarette smuggling has become so common that young women are asked to smuggle cigarettes in return for a free summer holiday. The UK border officials seize about 50 million cigarettes every month from young girls who are given a flight ticket, accommodation and pocket money. Cigarette smuggling is fast becoming one of Europe’s fastest growing organized crime.cigarette

India is the third largest producer of tobacco and the sixth highest consumption of smuggled cigarettes in the world. 17 billion cigarette sticks are smuggled into the country every year.

 High excise duties and taxes are the incentives for cigarette smuggling in India. A smuggled 80 mm cigarettes, which does not pay any taxes might be cheaper than a regular 70 mm filter cigarette which pays huge taxes. High taxes end up making cigarette smuggling and piracy  a profitable business.

 Fake cigarettes are substandard, manufactured in underground factories using contaminated tobacco. Smoking them poses a greater health risk. They contain higher levels of nicotine, lead, cadmium, and arsenic than branded-cigarettes. Fake cigarettes are also transported and stored in unhygienic conditions.

Counterfeiting is a big problem in UP due to heavy taxation on cigarettes. The increasing volume of illicit trade encourages the entry of organized criminals and generation of huge black money.

 COMPUTER HARDWARE

 One in ten IT products sold worldwide is counterfeit or fake as per the Alliance for Gray Market and Counterfeit Abatement. Even branded computers sold legitimately by an authorized dealer might have a counterfeit motherboard. Even if the motherboard is real, the chips and parts might be fake. There is a flourishing gray market for computers, laptops, tablets and their components.

 More than 65% of the software in India is pirated.computer

 Nehru Place shot to fame or ill fame when the US Trade Representative (USTR) listed it as one of the 30 most notorious IT markets in the world thriving hubs of pirated products. Nehru Place accounts for half the Rs 12,000-15,000 crore worth of legal software sold in India every year. But it is one of the largest computer markets in India responsible for almost 60% of the high-end pirated software, operating systems and accessories. Most of the resellers in nearby small towns get their stuff from here.

 To meet the demand for low-cost fake computer parts, some thirty million computers discarded by the users in the US, make their way to India where they are stripped down. Whatever that can be salvaged is taken out and resold as branding, refurbishing or ‘new’ computers and whatever remains is discarded as waste. According to a media the Centre for Science and Environment (CSE) such stripped down Computers are the cause of about 350,000 tonnes of electronic waste every year.

FMCG  &   PACKAGED FOODS

India is one of the world’s biggest producers of FMCG products. The burgeoning USD 13 billion FMCG sector in India — the fourth largest in terms of market size is expected to grow USD 33 billion industry by 2015 and USD 100 billion by the year 2025. Contrary to popular myth, rural India with more than 70% of the Indian population (700 mn consumers) accounts for 50% of the FMCG sales. Food and personal care products together make up two-third of the FMCG sector’s revenue that contributes  nearly 2.5% of the country’s GDP.

 The FMCG market in India is largely fragmented and unorganized. A lot of unbranded and unpackaged products are sold along with the branded ones. Counterfeiters exploit this and try to imitate and replace the original products with inferior substitutes.

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Sonepat, Ghaziabad, Panipat, Meerut and Ballabhgarh in the NCR region have developed as an illegal manufacturing hub for fake FMCG products while Ahmedabad is an important center for the production of counterfeit medicine.

Almost 15 percent of consumer goods worth around Rs 15,000 crore– sold in India are fake. Name any major branded soft drink – chances are that it may be fake. 10% – 30% cosmetics, toiletries and packaged food are duplicates. The bigger the company and fast selling the products, better the chances of its product being copied and counterfeited. Advances in color photocopying, duplication and printing technology have made it possible to make such ‘perfect’ replicas that  even the original manufacturer would not be able to spot the difference. Fake products have the same name, color, pattern or design on the packaging. Even the same name and address as the manufacturer remains the same and in the same font and style.

Apart from these, there are pass-off products incorporating a few deliberate and minor ‘mistakes’ to avoid being called counterfeits. For instance– Pmua instead of Puma. Their packaging, color or design is kept similar to mislead or cheat the uneducated consumers. Some 128 ‘versions’ of Parachute Hair Oil; 113 of Fair & Lovely; 44 of Vicks VapoRub; 38 of Clinic Plus Shampoo; Narima; Lifejoy; Liteboy; College Toothpaste; and Friends & Lovely are available in the market.

According to a survey by AC Nielsen, 80% of the consumers who purchase these products do so with the belief that they are actually buying the original.

Within the FMCG sector, the packaged food sector is most vulnerable to counterfeiting. Cheap duplicates and low-quality food stuff are easy to produce and market, but can cause serious life-threatening complications.

MOBILE PHONES

The manufacture, distribution, and sale of counterfeit and substandard cell phones is a US$6 billion a year problem. As per Mobile Manufacturers Forum (MMF) estimates around 148 million substandard mobile devices in 2013 were sold in the black-market. According to FICCI almost 20 % mobile phones sold in India are substandard or cheap imitations of well-known brands. One out of five counterfeit phones in the world originates in Shenzhen – a flea market in China. These pirated mobiles manufactured in unauthorized small-scale Chinese factories are also called Shanzhai cell phones. They had become so notorious that the term Shanzhai it had come to mean- fake and dirt cheap copies of branded cell phones in a home based, unprofessional setting. Initially, Shanzhai just meant fake. Over time, due to intense competition, the Chinese phone makers became innovative enough to come up with features like dual SIM, loud music and add on telescopic lens for the phone camera.

The cloned, duplicate, pirated or counterfeit mobile handsets may look similar but it is not one and the same things to use a fake or original. Here’s what is different:

  •  IMEI Number- genuine mobiles are supposed to have a unique serial number, this is found to be duplicate or invalid in most duplicate phones.mobile
  • Pirated or counterfeit mobiles are at least 25 % cheaper
  • Cloned mobiles have lower memory than the original.
  • No warranty. Genuine mobile manufacturers offer a warranty on the handset, software and accessories, but black market products don’t.
  • Cheap sub-standard phones may have 40 times higher levels of metals and lead, which can be dangerous. A study conducted by Indian Centre for Materials for Electronics Technology (C-MET) corroborated this. It found that all uncertified mobile handsets in Indian black market contained very high levels of Lead (Pb) – 35-40 times higher than the globally acceptable limits. Exposure to lead can lead a range of adverse health effects and can be harmful to the environment, particularly if it ends up in landfill.
  • Another study by Nokia Institute of Technology in Brazil detected much higher concentrations of hazardous substances lead and cadmium in counterfeit phones. Their levels far exceeded the maximum values permissible international safety standards
  • Genuine mobiles are designed and tested as per international safety standards; fake phones emit higher levels of harmful radiations
  • Cloned and copied handsets using inferior operating systems can be hijacked by criminal gangs to retrieve and collect all sensitive and personal data in the phone memory
  • Phones produced in ill-equipped, low-end factories are not tested for safety and performance standards.
  • Cloned phones have a higher and frequent call dropouts, coverage, call quality and mobile internet speeds.
  • Memory card slots, SIM card slots, batteries and chargers of counterfeit and substandard mobiles are made of hazardous material. This can be dangerous.Cheap substandard and uncertified batteries and chargers can short circuit, overheat and catch fire. Many people all over the world have received burns due to faulty components.

There was a time when the availability of counterfeit versions of the product was indirectly an indication of its popularity. That is why fake Nokia mobiles were popular in Asia or why Apple and Samsung mobiles are frequently being copied today.

As things stand 40 % of people who buy counterfeit goods innocently believe that they are just buying the cheapest handset available. Many people unknowingly end up purchasing these fake or sub-standard mobile phones. They actually just wanted a cheaper price. But possible they don’t realize what the counterfeiters are capable of doing. An estimated 30% of fake products have many additional products which the manufacturers either omitted or did not create like a dual or extra SIM-card port to cater to untapped consumer demands.

MOVIE PIRACY

Have you wondered why India, is unable to  benefit commercially despite being the largest film production centers in the world? What ails India’s Bollywood film industry, having the largest number of film producers, producing over 2000 films in 20 regional languages, over 600 television channels, 100 million pay-TV households and 70,000 newspapers?

The answer is physical and online piracy as Indian media and entertainment (M&E) industry enters the — digital media.movie

 India is a big market for digital videos, music and books. Pirated versions of many books are available on e-book format on the net. Manufacturing, circulation, promotion and display of pirated products is now a big business worth over Rs 500 crore in India alone. Mahesh Bhatt the producer of Aashiqui 2 lost more than 40 percent of revenue due to internet piracy. 90% of  the music available for download online is illegal.

The Motion Pictures Distributors Association feels India has one of the highest rates of audiovisual piracy in the world.

India ranks among the top ten countries in the world with the highest online piracy. India is fourth largest downloader of films. Vishal Bharadwaj’s `Kaminey’ were downloaded 350,000 times in India and abroad. The situation in particular bad for regional language films where 88% of Telugu and 80% of Tamil films are being downloaded from the internet.

India has 120 million– third largest internet users in the world. Imagine what might happen in 2015, when India will have the world’s second largest user base– 330-370 million Internet users?

The piracy is also taking a heavy toll on the US$141.2 million recorded music market in India. Almost 46% of their revenues come from about 16 licensed digital music services. The record companies are losing about Rs 20,000 crore every year due to copyright infringement.

The Indian film industry has started a new initiative called Indian Movie Cop (IMC) to prevent movie piracy. It provides a platform for real-time information sharing  to fight piracy. Officially launched in 2013 by Nancy Powell, the then US ambassador to India iMovieCop app  allows all the stakeholders- movie lovers, authorities and anti-piracy crusaders to stay in touch and raise their voice against film piracy.

PHARMACEUTICALS

According to World Health Organization one out of every five drugs made in India is fake. A counterfeit medicine allegedly led to hundreds of infant deaths at a hospital in Kashmir. Still a popular but sub-standard antibiotic found to be without any active ingredient was allowed to sell over 100,000 pills. Its test report was kept secret.medicines

At least 32 medicines being sold in hospitals and shops had failed the tests conducted by Central Drugs Standard Control Organization (CDSCO). More than 180 drugs have been declared substandard in the last one year.

American Federal drug Authority drug official has taken a serious note of the false drug test results and fake medicines. India, the second-largest exporter of over-the-counter prescription drugs to the US while Indian generic medicines go to more than 200 countries. Ranbaxy, India’s biggest drug manufacturers had to pay $500 million fine last year

Bhagirath palace and Chandni Chowk in Delhi, Bihar, West Bengal, Uttar Pradesh (Ghaziabad, Aligarh, Agra), Haryana (Bahadurgarh, Bhiwadi, Ballabhgarh, Sonepat, Hisar), Punjab and Gujarat are leading centers for counterfeit and spurious drugs. One can get anything from a fake Viagra to an antibiotic, cough syrups, vitamin or painkiller at a price cheaper than the original.

The market for fake drugs, growing at a rate of 25% today will cross US$ 10 billion mark by 2017,  an ASSOCHAM report says.

Surprise checks conducted by the drug controller of India revealed that 17% of the drug being prescribed in Jammu & Kashmir are unacceptable. 7% of drugs in Himachal Pradesh were useless. Dr Harry Lever, a US cardiologist, found that generic heart drugs made in India don’t work the way they should.

Consider the impact of all this, on human health when a patient takes a medicine, assuming that it will save his life but it doesn’t.  A popular, FDA-approved weight-loss drug, contained dangerous levels of sibutramine. In other cases, the fake medicines were found to contain no drugs at all. They simply were no good for the purpose for which they were consumed. Imagine the impact of this on terminally ill patients who seem to have been pushed closer to death. Instead of improving their health—these medicines – might be the cause of their death.

MADE IN INDIA OR FAKED IN CHINA?

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Recently the Nigerian Government Drug Regulatory Authority (NAFDAC) detained a large consignment of fake anti-malarial generic pharmaceuticals containing Maloxine and Amalur tablets for the treatment of Malaria.

This was a big issue as the spurious products were labelled “Made in India”. Initial investigations, however revealed that the two containers of medicines originated in Shanghai and were meant for “Government of Kenya”.

India immediately latched on and put pressure on the Chinese government to teach the rogue companies a lesson. Africa being an important market for the Indian pharmaceuticals — 15% of India’s drug exports worth Rs 30,000 crore every year, India could not afford a bad reputation.

Finally, the Chinese Ministry of Commerce had to admit that the shipments originated from China and promised action against the companies for mischievously shipping fake drugs under ‘Made in India’ tag.

Clearly this was a premeditated economic warfare and planned conspiracy to tarnish India name in the international market and create confusion.

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Taazakhabar News Bureau
Taazakhabar News Bureau
Taazakhabar News Bureau is a team of seasoned journalists led by Neeraj Mahajan. Trusted by millions readers worldwide.

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