New Ways to Fight Counterfeiters
Overt or covert? That is the question producers must ponder when considering their options for product authentication and brand protection in the globalized age of wine consumption. That is, if they perceive a threat.
Although there is scant concrete evidence that counterfeit wine is on the rise, several high-profile cases--William Koch's suit of Hardy Rodenstock over the Jefferson bottles; the 1990 vintage of Penfolds Grange revealed as counterfeit; the seizure, in Italy during 2000, of 16,000 cases of counterfeit Sassicaia--have, with the extensive media coverage they have garnered over the years, fanned the flames about the issue.
Add to that unverified anecdotes about the containers headed to China full of California exports that have shown up in Asia long before they even left the port of Los Angeles. Or Gunter Schamel's white paper for the American Association of Wine Economists proposing that the preponderance of empty super-premium bottles available for sale on a German eBay site is an indicator of a thriving trade in fraudulent refills--and you've got a full-blown conspiracy theory.
"Why else would someone pay 100 euros for an empty bottle of 1982 Château Lafite-Rothschild rated with 100 Parker Points?" asked Schamel, who presented his paper in June at the organization's third annual conference in Reims, France. His answer? "Presumably, because it is worth a lot more once it is filled-up again."
The cost of counterfeiting
Though wine directors at auction houses are loath to discuss the topic--and U.S. Customs and Border Protection does not even currently collect statistics on counterfeit wine seizures--the Coalition Against Counterfeiting and Piracy estimates the cost of intellectual property theft overall (including counterfeiting, piracy, patent infringement and copyright theft) at $650 billion worldwide.
The loss in sales for U.S.-based businesses as a result of these same activities hovers around $250 million annually, according to Chris Connelly, spokesman for the Global Intellectual Property Center, an affiliate of the U.S. Chamber of Commerce. Experts who study wine counterfeiting estimate it at 5% of bottles sold.
Whether the danger is real or perceived, however, anti-counterfeiting technology companies are betting big money on their solutions to the problem.
Prooftag is the Montauban, France-based producer of an overt counterfeiting deterrent. Now zeroing in on California wine country, the company's Vinitag division is dedicated exclusively to the sector. Its unique "bubble seal" is affixed to an individual bottle along with a distinctive numeric code that, when plugged into a website, yields authentic product statistics about the wine, and a link back to the winery's website.
The proprietary "bubble seal" comes about through a process in which a polymer is subjected to heat, producing a one-of-a-kind, air-pocket pattern as unique as a fingerprint or a snowflake. The random, three-dimensional pattern cannot be replicated, thus reducing the likelihood of counterfeiting. The tag shows evidence of tampering, signaling to the end-user that the wine should be authenticated before it is consumed. A patent is pending.
Tom Day of Savoye Packaging of California is the Sonoma-based marketing representative for Prooftag in the U.S. and Canada. He said the company has more than 20 winery clients in Europe, and he estimated it will grow its U.S. client base from the current four to 10 by the end of this year.
"What's unique about Prooftag is that it's an open system," Day said. "Anyone encountering a bottle with our seal can go to our website and confirm that bottle's authenticity. Most of the other (anti-counterfeiting) technologies are closed--only available to the winery, and maybe the seller."
One of Day's clients is Chateau Montelena, which began bottling Chardonnay and Cabernet Sauvignon using the Prooftag bubble seal at the end of July.
"We don't look at Prooftag as a deterrent, we view it as an additional layer of authenticity for the consumer," said Jeff Adams, marketing director for the Calistoga, Calif., winery. "Montelena's victory in the 1976 Paris tasting shows that it is world-class wine. Whatever the industry can do to protect the consumer is worthwhile."
Though announcing Prooftag to Montelena consumers is a long way off--the first bottles coming off the line will not be released until 2010 or 2011--Adams was quick to point out that the winery worked with the purveyor not to "junk up the package," opting to affix the tag to the rear of the capsule.
Scenario A, in which the vintner is merely equipping bottles with unique identification tags, is priced at roughly 1% of the cost of the bottle, meaning each bubble tag costs between 40 and 50 cents per bottle, assuming production volume in the range of 10,000 to 50,000 cases. The raw material is delivered in a reel, and the seals are applied on the winery's existing bottling line.
If a winery wants to track its bottles through the distribution chain (Scenario B, if you will), it must purchase customized software and readers, which can cost anywhere from $10,000 to $100,000 to implement, depending on the scale of the operation, according to Franck Bourri eres, one of Prooftag's founders.
A covert approach is one proposed by Jim Hayward, president and CEO of Applied DNA Sciences Inc. (ADNAS), based in Stony Brook, N.Y. Hayward, a molecular biologist by training, runs the company that devised a way to extract a DNA molecule from a botanical source (a grape, a leaf, a blade of grass), heat it, separate, scramble and reassemble it; stabilize it and replicate it using a process called Polymerase Chain Reaction (PCR). The new code is imbedded into the ink or the paper used in the wine label, or into the capsule, cork or screwcap. The method is called SigNature DNA, and it is patented.
"Counterfeiters can't ever use this mark," said Hayward, who added that the DNA marker he creates lasts for hundreds of years. "DNA is the absolute and recognized standard data for identification in every port around the world."
He has been marketing his system commercially for two years, protecting, among other things, billions of dollars of cash-in-transit in the United Kingdom and hair-care products globally, and is convinced that extending the science to protect wine makes sense.
"Like art, wine is a product with a value that evolves over time," he said. "DNA is a way to affordably ensure the future value of that wine up front; it allows a marketer to follow the wine's provenance."
Technology at work
Once wine bottles are released on the market, ADNAS offers three methods for detecting the DNA markers. The first is a rapid scanner that determines the presence of a material that has been bound to the DNA; the second is an in-field kit, usable by non-scientists, that also tests for the material bound to the DNA; and the third is a forensic laboratory tool that deciphers the specific code of the DNA.
Hayward said his program can be tailored to the needs of each vintner. A producer turning out 120,000 cases, for example, might pay a licensing fee that nets out to as little as a few cents per bottle. The detectors used to determine either the presence of the DNA-bound material, or, in the case of the more sophisticated option, what the DNA actually looks like, cost between $25 and $1,000.
ADNAS is currently providing SigNature DNA on a trial basis to two Long Island, N.Y., wineries: Paumanok Vineyards in Aquebogue and Martha Clara in Riverhead.
"You have to think like a counterfeiter," said Bob Kern, Martha Clara's general manager. He said the ease of digital printing has facilitated the job of the would-be knock-off artist.
"If I'm a counterfeiter, I can see what's selling in the store, and then just go to the digital press and knock it off," he said, citing the double-digit growth in wine consumption in new markets around the world and the prestige carried by labels originating from New York and California.
Kern should know. Several years ago, the winery was tipped off to a wine label that bore an uncanny resemblance to one of the 26 varietals in the Martha Clara line. The product appeared on the market just six months after an entourage of graphic designers visited the winery.
Kern plans to communicate the winery's use of SigNature DNA anti-counterfeiting via Twitter, Facebook and through winemaker videos.
Another under-the-radar anti-counterfeiting option that will soon resume its marketing efforts to U.S. producers through the industry's suppliers--including label converters, foil makers and packaging board manufacturers--is Authentic8, a product owned by Cheshire, England-based Nautilus Security. (In October the company will have completed a self-imposed 90-day ban on marketing activities designed to expedite the resolution of a lawsuit leveled by a U.S.-based competitor.)
Retrofitted into the existing printing press, Authentic8 technology is a graphics-based solution that employs hidden imagery, either by nano-embossing an invisible mark directly onto the substrate material such as paper, foil or board--or into plastics via injection mold. To identify the mark, retailers and customers must use a special lens calibrated to pick up the image. The lenses cost between 10 cents and $2.
"If you can see it, you can probably try to fake it," said Lori Frederick, Nautilus's commercial director for the U.S. and Canada.
Skeptical about brand protection solutions that involve codes, she asked, "How do you make sure the code related to the DNA is not a duplicate? We don't want the bad guys to know what we're doing, to figure out how to overcome this solution."
During the past several years, the wine industry has not invested a lot in brand protection, Frederick said, because it has not had a substantial problem with counterfeiting. The cost of implementing Authentic8 is between one-tenth and three-tenths of a cent per bottle.
If the rise of online auctions, digital printing for the masses, and the globalization of the wine trade does indeed portend a spike in counterfeiting. Therese Randazzo, director of the intellectual property rights policy and programs at U.S. Customs and Border Protection, said there is a simple step wineries can take to protect themselves: Register their trademarks with the U.S. Patent and Trademark Office, and then record them with U.S. Customs and Border Protection.
"Even if we encounter a suspicious shipment, if the trademark is not registered and recorded, there's nothing Customs can do about it," Randazzo said.
Based in New York, Suzanne Gannon writes on travel, culture, food and wine. She has reported on a variety of topics for Wines & Vines. Reach her through email@example.com.