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How the industry is tackling fake alcohol

Illegal alcohol production is a major problem worldwide, and often brands remain tight-lipped about what they are doing about the issue. But much is being done behind the scenes to bring fraudsters to justice.

Ilicit alcohol
Up to 26% of alcohol consumed worldwide is estimated to be illicit, according to Euromonitor

Counterfeit alcohol is a worldwide problem and has long had a negative impact on businesses, creating unfair competition, and presenting significant health risks for consumers.

According to Euromonitor, up to 26% of alcohol consumed worldwide is estimated to be illicit, causing fiscal revenue losses of around US$8.9 billion every year. Alcohol bans, such as those in South Africa, have further increased the illicit trade activity by boosting the demand for fake bottles and dry goods.

Meanwhile, a recent report from the Fraud Advisory Panel revealed fake wine, beer and spirits cost the European Union (EU) €3bn (US$3.2bn) in lost sales annually. In the UK, the report said fraudulent wine, beer and spirits costs businesses more than £200 million (US$242m) in lost sales every year, and results in almost 3,000 lost jobs.

The report stems from an expert discussion held by the Fraud Advisory Panel in October 2022. Contributors included: Maureen Downey, founder of Chai Consulting and; Isabel Graham‐Yooll, auction and private‐client director at Whisky.Auction; Kerri McGuigan, associate in the business‐crime team at law firm Peters & Peters; and David Richardson, regulatory and commercial affairs director of the Wine & Spirit Trade Association (WSTA).

Graham‐Yooll is a director and fraud specialist a Whisky.Auction, where every bottle is authenticated by experts before being accepted for sale. “Most whisky counterfeits do contain whisky but not of the quality, age or provenance that the bottle, label and cap promise,” she said in the report. “Pyramid‐style investment frauds are also a problem – fuelled by online chatter and hype. Ordinary casks, of little or no investment value, are being traded at highly inflated prices.”

While convenience stores can often be victims of selling counterfeits, Downey warns that supermarkets are not immune, citing a recent purchase she made of a bottle of premium gin that froze when kept in a hotel icebox.

“We see everything from part‐pallets swapped on the dockside to individual employees switching single bottles as they box the wine on the bottling line,” Downey said. “My frozen gin probably sneaked onto the shelves of a supermarket when someone told a plausible story about spare capacity or a cancelled order and offered the buyer a great price.”

Counterfeit alcohol occasionally hits the headlines. When HMRC investigators raided an illegal distillery in Glasgow in 2021, they seized 400 litres of fake vodka and 12,000 litres of industrial spirit. In 2018, a huge explosion that claimed the lives of five people in Leicester was thought to have been caused by an illegal distillery.

Richardson said many businesses do not take fraud prevention seriously until it’s too late: “People with experience of fraud know how draining it is to deal with the regulators and repair a damaged reputation. Everyone else is more focused on the bottom line and can’t see fraud prevention as material, until HMRC seizes their illicit stock, that is.”

Isabel Graham-Yooll of Whisky.Auction

In 2021, Graham‐Yooll helped the police catch a prolific fraudster who had been selling fakes for 10 years. It attracted a lot of media attention. “It became a big news story mainly because we chose to go public,” she said.

But the question remains about whether the industry is doing enough to root out fakes? Graham‐Yooll said brands “get a bad rap” as the public perception is that they are not doing anything about it. But she noted the industry was “doing a lot behind the scenes” despite a lack of acknowledgement because they want to “protect their brand”.

Graham‐Yooll said some of the hauls found by customs and excise departments around the world were sometimes “tipped off” by the brands doing the investigations, with no brand names mentioned. “These things are happening all the time; sometimes it hits the press and sometimes it’s done much more discreetly,” she added. In the UK, she noted counterfeiting was “genuinely not a problem”, due to the “many legal loops in the chain that people have to jump through”, from the producer to the warehouse to HMRC and the premises’ alcohol licences.

The rise of the internet has also helped fraudsters conduct their businesses with ease, as they can “exploit slick global supply chains to source the materials they need, and all the while remaining anonymous and remote from their victims”, the report noted.

Last June, The World Spirits Alliance, which represents spirits producers globally, launched its Global Roadmap on Illicit Trade. The report offered three recommendations for action: support and improve framework conditions for legal alcohol; punish and prevent illicit trade through robust controls and enforcement; and inform and educate about the forms and dangers of illicit trade.

Graham‐Yooll offered a number of suggestions to help people spot fake whisky, including analysing the bottle’s fill level to determine if it looks ‘suspiciously’ high or low.

Other things to look out for, Graham‐Yooll recommended, were whether the cap or cover has been tampered with, and spelling mistakes on the bottle. Graham‐Yooll also said consumers should think hard about buying from any auction house that doesn’t have a fraud policy.

Hard to replicate

However, new technology is also helping to combat illicit alcohol, as brands and agencies work to create packaging solutions and marks that distinguish them and make them harder to replicate. Portuguese closures maker Amorim uses near‐field technology for its Tap series of stoppers, which embeds a microchip loaded with data such as a serial number, production date and a link to the brand’s website into the closure.

Meanwhile, Dictador rum created the ‘world’s most protected bottle’, featuring 11 layers of protection including guillochés (gold paint with UV glowing protection), micro‐text, and typographical numbering. The brand’s label was produced by an undisclosed company that makes bank notes in Europe, and owns 150 patents for the protection of official documents.

However, Graham‐Yooll is cautious about technological solutions. “It’s always been an arm’s race between the forger and the brand,” she said.

“You put in a tamper‐proof closure, how many days until someone replicates the tamper‐proof? This is why the brands don’t talk. Brands have all sorts of features on their bottles that they don’t talk about and draw attention to. The best thing to do is look at a bottle next time you’re buying it and look at all the detail. Looking at a bottle is like looking at a banknote.”

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