From pharmaceuticals, baby formula, food, and beverages to supplements for seniors and animal feed additives, nutraceutical products have exploded in popularity in recent years.
This growth is fuelled by an increasing awareness of how much food impacts how people live and targets people embracing a healthier lifestyle.
The lucrative landscape of nutraceuticals provides a smorgasbord of opportunities for bad actors in the supply chain who want to capitalise on the sector’s money making potential. Sreedhar Patnala (pictured), Vice President of Digital Products at Systech reports.
Meanwhile, counterfeit operations are benefiting from the same improvements in technologies that are driving legitimate business. For instance, 3D printing is a game changer for counterfeit operations, enabling the near-exact replication of original items.
Between the threat of counterfeit goods and rampant diversion — in addition to the rise of e-commerce creating an easy, accessible global marketplace for counterfeit and diverted nutraceuticals — brands are having to develop strategies that safeguard customers, protect revenue and ensure continued brand loyalty.
Diversion
Diversion, also known as the grey market or parallel import, occurs when products are sold in unauthorised locations without the brand owner’s consent. Price is usually the motivating factor for the deceitful supply chain actors to illicitly divert products from the intended market into another.
The opportunity for diverted goods mostly arises from tiered pricing, whereby one product is sold at varying price levels in different markets or circumstances.
This price gap generates more opportunities for the fraudulent resale of products. Many nutraceutical brands have international distribution chains and regional pricing, making them highly susceptible to diversion.
Diversion occurs in several ways. For example, grey market diverters may stockpile targeted goods to create shortages and price gouging opportunities.
Developing markets often command lower resale price points owing to poorer purchasing power … and there are often distribution contracts with specific registered sellers.
These sellers may order more products than they will sell, obtain a larger discount from the manufacturer because of the higher quantity ordered and offload the products to individuals who will sell them on the Internet or in regions where the product is more expensive.
Once moved outside the intended supply chain, sensitive nutraceutical products are not subject to the same rigour of handling as when they move along their intended path.
Diverted products are typically left in hot warehouses and relabelled to cover expired sell-by dates to fool customers.
When fake, poorly handled or ineffective nutraceuticals find their way to consumers, the results can range from disappointing to deadly. Fake product is often cheaply manufactured in non-hygienic factories and contaminated with bacteria, carcinogens and toxins.
Solving the problem
To combat the issue of counterfeiting and diversion, most nutraceutical manufacturers implement a layered approach to brand protection. Overt mechanisms such as seals and stickers are used but they aren’t enough on their own.
Covert mechanisms are costlier to implement, requiring teams of field inspectors and specialised authentication equipment.
To bring pharmaceutical-like rigour to the product and supply chain, nutraceuticals should consider item-level serialisation. Having each product identified at the item level provides a tangible layer of protection for brands’ products in the supply chain.
Serialisation also affords compelling track-and-trace value, integrating partners for full supply chain visibility and traceability.
Nutraceuticals should also protect their brands by implementing item-level digital identification. This approach ensures that every product is authentic, safe and digitally connected for both brand owners and their consumers, mitigating attempts to create counterfeit products via 3D printing and other methods.
Proactive brand protection
Nutraceutical brands should anticipate a rise in counterfeits and proactively protect their products. The market for anticounterfeit remedies is growing, but counterfeiting is rising in every consumer space. It is, therefore, crucial to implement a digital layer to provide the full range of protection for nutraceutical products.