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March, 2018

Survey: More than 30% of Chinese consumers admit to buying fake alcohol

Original article: Southern Metropolis Daily

More than 30% of Chinese consumers responding to a recent survey by Southern Metropolis Daily admitted to buying counterfeit alcohol. About 38% said they had purchased fake sorghum liquor (baijiu) and 32% said they had bought fake wine. For beer, roughly 17% of consumers confessed to buying bogus products, and 18% for imported spirits, the newspaper said.

Analysis:

Fake alcohol used to be primarily a problem for Western brands in China. In early editions of this newsletter, we wrote about how eminent French winemakers have been battling trademark squatters for years. The squatters sometimes register the winemaker's name in China first, exploiting a legal loophole, forcing years of protracted litigation. And of course, there are still plenty of authentic wine bottles in China, which once consumed, are refilled with counterfeit product.  


In recent years, China's top baijiu makers, who are among the country's preeminent consumer brands, have found themselves the target of prolific trademark infringement. Maotai (China's no. 1 baijiu maker) executives say that counterfeiting costs them hundreds of millions of RMB in losses and legal fees every year. 


Sometimes fake liquor is poisonous. O2O Brand Protection can attest to that. At a hotel bar in Zhejiang Province several years ago, we ordered a bottle of "Jack Daniels" with a group of colleagues. Despite our low consumption - we recognized it was fake at the first sip and proceeded cautiously - the ensuing headache was astonishingly painful, as if the sinus cavities were gripped in a vice. 


In November, 22 Chinese citizens were poisoned by counterfeit whiskey. Four required extended hospital stays in the intensive care unit, according to the Chinese-language Beijing Daily. Chinese authorities discovered that the counterfeiters made the whiskey with methanol - rubbing alcohol - which is poisonous and highly flammable. However, it smells similar to ethanol - the alcohol we drink. The counterfeiters infringed on the mark of Yantai Weiyade Wine Company, which denied producing the toxic spirits. 


Brand-protection experts say that blockchain technology has many applications in food and drink. O2O Brand Protection managing director Dean Arnold says that blockchain technology could be more effective in the fight against trademark infringement than QR codes, which some brand owners have begun using. "Not only can QR codes be cracked, but local markets sustain vendors who do this service as a full-time job," he says. He points out that a high-quality cracked QR code may return a real message from the brand to a user's smartphone. Sometimes that message will show up directly on the brand owner's website. Other times, an exact copy of the brand’s website is hosted using an arbitrary domain name created specifically for the job. "Subsequently, the consumer may be none the wiser," he says. 


In contrast, blockchain technology could reduce counterfeiting by creating a secure and auditable record - a distributed public ledger - of a product's journey in the supply chain that we all could view, Arnold said in a recent interview with CKGSB Knowledge magazine. 


Shanghai-based blockchain startup Walimai guarantees transaction authenticity through its "trustless system," according to Tower Research. Both merchants (point of origin) and consumers (point of sale) can use Walimai’s app to scan a product's anti-counterfeiting RFID smart label. The company says that the blockchain guarantees product safety and authenticity for both parties. This will help consumers to "regain confidence in the market," Tower Research says. 

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