As protecting intellectual property becomes increasingly important, labels containing security features will be in higher demand.
By Michelle Sartor
Creating labels with measures to deter counterfeiting and authenticate products is a growing segment of the converting industry. Recent news stories like the one about potentially harmful counterfeit toothpaste bring the topic to both brand owners’ and consumers’ attention. Ensuring that the proper items make it to store shelves and consumer homes is important to brand owners whose businesses can suffer greatly with a decrease in consumer confidence.
A label for the suntan product Maui Chic containing a variety of security measures from members of the Brand Protection Alliance. Photo courtesy of Gallus.
One organization dedicated to providing security solutions is the Brand Protection Alliance (BPA). Lynn Crutchfield, president of Acucote Inc., a company that provides papers and films for self-adhesive labeling applications in Graham, NC, USA, came up with the idea for the BPA and is currently its chairman. He saw the issue of brand protection as complex and that it was difficult for a single company to bring a viable solution to brand owners. “I stepped out to friends of mine in the industry who were engaged in small amounts of brand protection offerings and started banding together a group to take a variety of options to brand owners,” Crutchfield explains. He put the corporation together two and a half years ago.
The BPA currently has 13 members and accepts new members as appropriate. Crutchfield says, “We tend to look across our spectrum of products and services and find missing pieces. We go out and solicit companies that can fill those voids. We try to eliminate duplication of effort wherever possible. We’re not a trade association in a traditional sense. We don’t need 15 ink suppliers or five pressure sensitive suppliers. We want the best in class in every category.”
For now, the BPA is mainly involved in education. Crutchfield says, “We’re invited to a lot of conferences and industry meetings. Our job is to increase knowledge of intellectual property theft. Eighty percent of our work is still done in the educational/awareness arena.”
Types of security
There are a variety of ways to help brand owners protect their products. Three general categories of security are overt, covert and forensic. Overt refers to those measures that can be seen by consumers, such as holograms. Covert features are not easily detected by those who don’t know what to look for, but they can usually be found with readily available devices (for example, taggants). Forensic measures are the most complex and include methods like DNA that often require sophisticated verification systems. A combination of two or more security features is often recommended for maximum brand protection.
A variety of security labeling measures are available today. Which are most common? Robert Sherwood, VP of security programs management for Sekuworks, a company involved with brand protection and product authentication in Harrison, OH, USA, says, “I believe holograms are most widely used due to their early adoption about 25 years ago and now the public’s feeling that they do the job. Taggants, as a general category, may be second because there are many choices and they are covert. Companies can tag their products in many ways and not have to alter the look of the package.”
Gregg Metcalf, industry market manager for Nosco Security Protection and Nosco RFID Package Integration at Nosco Printing Group, a converter in Gurnee, IL, USA, sees color shifting ink and taggants as the most popular measures. Nosco has manufactured these the most, and Metcalf says the features can be simple or sophisticated, depending on the application.
Crutchfield believes tamper evident materials are the most widely use. “These technologies have been around the longest and they’ve been used a lot because they’ve been around a while. They have critical mass over other, emerging technologies,” he explains.
Sean Skelly, director of marketing for EFI/Jetrion, a provider of printing technology and member of the BPA located in Ypsilanti, MI, USA, sees “an explosion in overt marks that can be seen with the human eye. A lot of them are 1 and 2D bar codes.”
According to Joe Posusney, marketing manager for Gallus Inc., a press manufacturer and BPA member in Philadelphia, PA, USA, “What we see is that the simplest thing to pick up and add to the press is ink security measures, which could be color shifting inks or photo-luminescent inks.”
Although many security techniques have already been established, new technologies are on the horizon. Michael Bectel, director of business development at Grand Rapids Label Company, a converter in Grand Rapids, MI, USA, says, “The security holographic hot stamp films seem very promising. They can be applied in-line and are costly to counterfeit. The most intriguing security feature has to be the plant DNA markers, which can be added to products through the label.”
Metcalf sees nanotechnology as having great potential. He says, “There are quite a few providers working with nanoparticle technology, which is smaller and harder to distinguish. The use of that technology makes it much more difficult to reverse engineer.”
This magnified image shows a pattern with a hidden “S” produced with an intaglio printer from Sekuworks.
Posusney says, “Forensically undetectable features are picking up steam. The counterfeiter has no idea that marker is in there.” He sees some other emerging technologies as well. “3D effects that you’re seeing from various screening effects combine beauty and functionality, such as Braille or ergonomic grip. Another area is the variable data printing arena — making each label a unique code. It becomes traceable, like an RFID tag.”
Skelly sees overt techniques emerging. “As time goes on, we’ll see more advanced ink formulations such as changing colors. Combinations will be big.”
Scott Xue, director of Asian business development for LGInternational, a converter in Portland, OR, USA, will be watching RFID. “We have heard RFID for so long as an emerging technology. It’s still not widely used. How that will pan out will be interesting to me, not only to security labels, but as a whole,” he says.
As with any new proposal, converters are often met with the question “How much will it cost?” when offering security measures to their customers. With security, cost can be somewhat tricky. Although initial cost may seem high, the value provided can be worth it. That value needs to be communicated to brand owners.
There are times, however, when cost is seen as a barrier. Sherwood says, “Any cost addition is always hard for a brand to swallow unless you can show the ROI. Unfortunately, calculating this up front is very hard. Brands are reluctant to share data about their problems.”
“Cost is always one of the first considerations people look at,” says Metcalf, but he finds differences between brand owners’ willingness to spend when it comes to security labeling. When brand owners have experienced counterfeiting, they are more likely to accept increased cost. “It’s difficult to ask people for money if there’s no perceived risk,” he says. How can converters deal with that? One way may be to incorporate lower level security features that can be less expensive. At Nosco, Metcalf says, “Depending on what they’re trying to do, we sit down with customers and develop strategies to come up with the best fit for their packaging.”
Conveying the value of security features can be a challenge. Terry Trexler, product manager for Gallus, says, “I think manufacturers of these products don’t understand the gravity of the situation. Right now they’re just looking at the cost. The cost of packaging is getting higher. The cost of security measures is expensive.”
However, Posusney points out, “The barrier is only an initial barrier. Right now, value is not perceived. That’s part of the whole problem. It has to do with the brand owner perceiving the need for protection. That relies on security effects showing customer complaints. As they perceive value from it and can do a cost analysis, it will be worth it. It’s a barrier until ROI is realized.”
Shane Lauterbach, president of the Lauterbach Group, a converting company in Waukesha, WI, USA, says, “It takes a long time to educate people. I think it’s a basic return on investment — what value we’re providing and what they get back. When the numbers work, it makes sense. But having people sit down and do that is hard.”
Bectel agrees that security cost can be an obstacle for brand owners, but says in some cases they are more willing to accept higher costs. “The more costly the product and the more liability it carries, the more the customer is willing to spend on security labels.”
Perceived risk is another area that can dictate brand owners’ willingness to increase their costs. According to Xue, “In Asia, it’s going to be easier for brand owners to accept than in the US because they are more accessible to the problem. In the US, some brand owners deny the problem, don’t realize the severity of the problem or don’t want to acknowledge the problem for brand image. In Asia, area brand owners acknowledge problems and want to solve them.”
Brand owners aren’t the only ones that can be reluctant to add security features. Crutchfield says, “If you’re working with a converter, you see a whole other set of obstacles than with a brand owner. The package converter seems to be extraordinarily focused on the cost. The label converter understands the market price for blank thermal transfer or four-color process. They’re very comfortable in that arena. If you take them a product with a base material cost that is maybe 10 times the cost of what they use on a regular basis, they get lockjaw. The price per thousand labels becomes some big number they’re not accustomed to seeing.”
Crutchfield believes that this mentality will change over time. “As time goes on and more people begin doing this type of work, they’ll realize it’s a customized sale. If it’s a solution to the problem you’re trying to solve, who knows what that’s worth. Converters have to get in front of the brand owner and start the discussion of what the features and benefits are, and ultimately what the cost of the solution is. Price shouldn’t be on the front end of the discussion. I frequently tell brand owners, ‘If you’re approaching your problem in terms of ROI, you’re going to fail.’ You typically won’t see ROI in the first 18 to 24 months.”
An increasing segment
Counterfeiters aren’t going away, so brand protection will continue to be an area that brand owners and converters need to pay attention to and work together to find viable solutions. Sherwood says, “Security labeling is certainly an increasing segment of the industry. But it’s not just adding a taggant. It’s a complete program. Most label printers don’t understand the support a customer will need for a successful solution. There will be many programs that fail due to lack of follow-through.”
Bectel sees this segment as a good opportunity for converters. “I do agree that the security labeling market is one of the only bright spots on the horizon. Labels tend to be more of a commodity every day with shrinking margins. Security label printing can help the converter regain some ground in profitability.”
Skelly agrees that the opportunity for profits will drive converters toward security labeling. “It’s a bit of a commodity market if you’re just doing labels. Any time there’s a new, higher margin market like this, I think you’ll see people move toward it as a way to increase their own profitability and margins.”
He also sees increased consumer awareness as a driver. As consumers hear more stories about counterfeits and the dangers, Skelly says, “When they go buy a product, people will want to feel confident that the supply chain isn’t compromised. They’ll say, ‘I want to know that what I’m buying is safe and proven.’ ” As demand for this accountability increases on the consumer side, brand owners will react.
When used correctly and with the proper infrastructure, companies have seen great success with security labels. Lauterbach points out, “How they’re designed and implemented at the customer level is critical to success. Something used correctly will be successful. But the best technology won’t be successful if it isn’t used properly.”
Production of the Maui Chic label with the Jetrion 3025 inkjet system.
According to Metcalf, Nosco’s customers have benefited from security measures. “We’ve helped stop counterfeiting, helped products from being diverted and helped find counterfeits in the supply chain. Those companies that are proactive, those that choose to engage in security labeling, have found out in a moderate amount of time that labels do offer a benefit. They can help get counterfeits off the streets or potentially out of the supply chain.” He admits, “You’re never 100 percent going to stop someone from going after your product, but certainly with the addition of anti-counterfeiting features, it makes it harder to be done and we’ve seen that in several instances.”
Posusney sees security labels as a deterrent to counterfeiters because they will choose the easiest products to copy. He says a secondary benefit is consumer confidence since most consumers want to buy genuine product. He adds that to remain an effective measure, companies need to constantly be changing their strategies. “When the counterfeiter catches up with you, you have to move on to the next level of security. You have to always be on watch. That’s the nature of security.”
What the future holds
No one knows for sure what security techniques will be implemented in the years to come, but predictions are optimistic that innovation in this area will continue. Lauterbach says, “There are always segments of the industry that are going well and I think this is a segment of the industry that isn’t going away.”
He adds that while the security measures themselves need to be in place, the processes are critical. “The technology is important, but it’s all the processes behind it that you have to work on. For us, it takes a lot of time working on and refining the processes. We’re not just putting something on a marking,” Lauterbach explains.
Bectel says, “I think security labeling will continue to grow and become even more sophisticated. Criminals will continue to target different products and markets, which will in turn create more markets for the label printer. Brand managers and loss prevention departments will be the catalyst for the increase in security label printing. I really think DNA footprints will be the wave of the future.”
Skelly believes a range of technology is in store in the future. “You will see an explosion of new features — taggants, DNA, all types of components. They will have security functionality as well as product appeal.”
Xue sees the market growing with tremendous potential. “I think there are two parts: one, brand owners will finally accept that they have a problem; two, converters will need to give them a cost effective, compelling solution.”
According to Metcalf, “With the advent of conducting inks and RFID and serialization, labels are probably going to get smarter and potentially be able to do more things as far as storing data and giving back data. I see track-and-trace and anti-counterfeiting merging together.”
Trexler says the trend is toward overt technology that can offer brand owners ways to enhance their packaging. He says, “As overt technology becomes more and more like a decoration, companies will marry it to the decoration process. It still has to look pretty to sell the product.”
Crutchfield sums it up this way: “Intellectual property theft is growing at exponential rates. At the end of the day, there is no more effective deterrent than the package itself. The package is going to have a relatively low cost in relation to what else can be done. As the converting industry realizes what role they play and as the brand owners come to grips with their issues, the two ends are going to converge in the middle and a huge amount of activity will be going on shortly down the road. We see nothing but growth in this area.”