Russia's Counterfeit Beer Pilot: Bolstering Supply Chain Security

Russia Serialization Pilot to Combat Counterfeit Beer Set to Begin This Spring

Last October, Russia’s Ministry of Industry and Trade announced a supply chain pilot project to label beer and beer-based mixed drinks. Set to run from April 1, 2021, to February 28, 2022, its goal is to prevent counterfeit beer from entering the market and to protect consumers.

The pilot is part of Russia’s ongoing effort to serialize its entire supply chain. The country’s National Track and Trace Digital System, known as Chestny ZNAK and operated by the Center for Research in Perspective Technologies (CRPT), monitors the supply chains of more than a dozen industries, from pharmaceuticals and footwear to tires and tobacco.

Let’s take a look at the problem of counterfeit beer in Russia and globally, and what the pilot hopes to achieve.

The struggle with counterfeit beer and other alcohol

Counterfeit beer — and counterfeit wine, spirits, and other alcoholic drinks — is a global problem with a hefty monetary cost. For instance, it’s estimated that fake wine and spirts cost the global industry more than $3 billion a year in the EU alone. The illegal trade also decreases sales of legitimate products and has led to losses of industry jobs. For more insight into the problem, check out our two-part blog series about track and trace in the wine industry.

There’s also a human cost. Counterfeit alcohol can contain toxic “ingredients” such as jet fuel, embalming fluid, and methanol. The danger is great enough that governments and industry associations have issued guidance to help consumers spot fakes and stay safe. Last year, for example, the Wine & Spirts Wholesalers of America advised travelers to remember the “4 Ps” — place, product, price, and packaging — when purchasing any kind of alcohol.

Though the problem is global, it’s particularly acute in Russia. In 2014, Russia’s Federal Service for Alcohol Market Regulation said half of beer and beer-based beverages sold in the country were fake. (Beer wasn’t even classified as an alcoholic drink in Russia until 2011. Before then-President Dmitry Medvedev signed the bill making that distinction, anything containing less than 10 percent alcohol was considered a foodstuff.)

Today, the Ministry of Industry and Trade estimates that counterfeit beer accounts for 5–12 percent of the country’s $8.8 billion market, resulting in approximately $1 billion in lost tax revenue. The ministry also estimates that labeling beer and monitoring it via Chestny ZNAK will increase revenue for legal producers by as much as $4 billion. And, of course, mandatory labeling will help ensure counterfeit beer, including potentially harmful knock-offs, never reaches consumers.

Details of Russia’s beer labeling pilot

The Russian government is aware of its counterfeit beer problem. Talking about the pilot after it was announced last October, Minister of Trade and Industry Denis Manturov said, “We think it is important to start with labeling in the alcohol segment in order to protect consumers. This is important as this sector is particularly vulnerable to illegal goods and counterfeiting.”

The CRPT, industry representatives, regulators, retailers, and other stakeholders have been discussing parameters, technical features, and timing. As we noted above, the pilot will last 11 months (April 2021–February 2022). Progress reports are due to the government on October 29 of this year and February 14 next year, and a final decision about when mandatory labeling will begin will be made after a full review of the pilot.

Any company can volunteer to participate; however, it seems the organizers prefer companies that use several packaging form factors and have more than one product line. If you want to participate, you must send a letter of consent on company letterhead to the Beer and Beer Drinks Commodity Group. Visit the Chestny ZNAK website for details or, better yet, contact us directly. We’re an official partner of the CRPT, and our ever-growing team in Moscow is always ready to help.

What products will be labeled?

The pilot will test labeling for beer, beer drinks, and low-alcohol drinks that are not required to be labeled with federal special and excise stamps.

What do manufacturers have to do?

The CRPT will assign a dedicated project manager, technical manager, and business process specialist to every manufacturer in the pilot. These people will work at the manufacturer’s facilities and oversee pilot operations.

Manufacturers’ representatives are expected to attend working group meetings to discuss progress and make recommendations for the regulatory framework, which will be finalized after the pilot is over. Manufacturers are also expected to:

  • Understand the business processes required for digital labeling
  • Choose a technology partner to supply and install labeling and integration systems
  • Determine how to apply the marking codes
  • Determine what technical solution is most suitable for their production line(s)
  • Arrange delivery and perform commissioning/start-up of labeling equipment
  • Integrate the equipment with the Automated Control Systems of the Enterprise and Technological Process (ACSTP)
  • Adapt their inventory systems to work with labeled goods
  • Adapt their business processes to new requirements for digital marking
  • Train key personnel to work with digital marking
  • Ensure their suppliers are sufficiently prepared to work with digital marking

As with the other product categories regulated in Chestny ZNAK, manufacturers must follow a few core steps for labeling and track and trace processes. First, they must register an account with Chestny ZNAK. Next, they must describe their products in Russia’s catalog of marked goods, which is managed by the Government Information System for Marking (GIS MT). Last, they have to order unique codes for each item (or, in some cases, for a group of goods), and put a Data Matrix code on each package, after which the goods may be to put into circulation and transferred for sale to wholesale or retail networks.

What do retailers have to do?

Retailers must scan the Data Matrix codes when they accept goods. This sends the product information to Chestny ZNAK and notifies the system that the products have arrived at the retail location.

When a consumer purchases a product, the cashier scans the code on the packaging using a scanner connected to a point-of-sale cash register. The data is synchronized with the information in the catalog of marked goods and the item is officially removed from circulation. If the data doesn’t match, the product is counterfeit or otherwise illegitimate and cannot be sold.

Final thoughts

Russia wants to complete the transformation of its supply chain by 2024, a scant three years from now. What we’ve talked about today — fighting counterfeit beer and protecting consumers — follows the ultimate goal of Chestny ZNAK, which the government says is “to guarantee the authenticity and declared quality of goods being purchased by customers.”

rfxcel has been prepared for the Russian regulations since 2018, and we’ve established ourselves as the leader in Russian supply chain compliance. Chestny ZNAK compliance is embedded in our Compliance Management and Serialization Processing solutions, which are part of our award-winning rfxcel Traceability System.

We’re also an official software and integration partner of the CRPT, and one of only a few providers with in-country implementations. Our systems use Russian language, currency, and processes, and our customers include major global consumer goods and pharmaceutical companies.

And our qualifications go on and on. Connect with one of our supply chain experts today. If you’re looking to do business in Russia — or even if you’re already working with another provider — you should talk to us.

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