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The Grapes of Wrath: The Brand Protection Conference Offers a Sobering Look at Wine Counterfeiting

At the Brand Protection Conference, the hands-on demonstration of wine label counterfeiting draws some sobering conclusions about brand protection, fraud prevention, and digital printing.

By Richard Romano
Published: March 1, 2010

The new-fallen snow blanketed the ground outside the diner as The Ne’er-do-Well (Richard Warner) nursed his coffee and waited for his partner in crime—The Counterfeiter (Frank Kanonik)—to arrive. The Ne’er-do-Well had a special project for The Counterfeiter: he had a lot of cheap, bad, in all likelihood poisonous, wine he wanted to bottle, label with a known “boutique” wine brand, and, via his network of dealers and distributors, get them into stores and make a bundle. “Sure, some people might get sick and die,” said The Ne’er-do-Well, “but the birth rate is higher than the death rate.” The Counterfeiter’s mission: to create exact duplicates of the label of a known and respected wine, in this case a 2007 North Fork Syrah from a winery on Long Island. Mission impossible? Not at all, said The Counterfeiter.

A tad melodramatic? Perhaps, but this video dramatization introduced this year’s Hands-On Demonstration at the Brand Protection Conference on Friday, February 26, always one of the most compelling, fascinating, and often quite disturbing, sessions at Graphics of the Americas. Richard Warner is a renowned security printing consultant and advisor to the brand protection and document verification and authentication industries. Frank Kanonik is a principal at DigitalPrintInfo, a consulting company for the graphic communications industry, as well as a member of PIA’s consulting staff. The two “partners in virtual crime” stage a “shocking demonstration” of counterfeiting—and how to thwart counterfeiting—at each year’s conference.

After the video laid out the mission, Kanonik explained how he went about forging the label. To his expert eye, it appeared the wine label was printed on a flexo press, but also had very small decorative color specks scattered all over the label. His initial thought was that it would be easy to reproduce. However, he first needed to recruit other partners in crime, namely commercial printers. Contrary to what you may think, “it was easy to find unethical printers,” said Kanonik. “It took about 15 seconds.”

Like any business—be it shady or legit—the counterfeiter has to consider the ROI of a given project. After all, someone could painstakingly use the highest quality inks and papers and skills to counterfeit $20 bills, but if the unit cost for each bill ends up costing more than $20, it hardly seems worth it. Likewise, The Counterfeiter had considered also using flexo, which would yield the most accurate reproduction of the wine labels, but it turned out that that process would be too costly. And, “I couldn’t find a dishonest flexo printer,” added Kanonik.

So The Counterfeiter decided to look to digital printing, for several reasons. The first was that he could tweak the settings from sheet to sheet, which gave him greater flexibility in improving accuracy; he could print shorter runs of the labels, then print more on demand when The Ne’er-do-Well had more bad wine he wanted to unload; and, perhaps less obviously, digital printing equipment is usually kept in a smaller, more private room than a large offset pressroom, with production managers and sometimes customers wandering through. Illicit activities are typically best performed covertly.

The actual counterfeiting would involve first scanning the original label, removing the colored specks using Photoshop (which took about 20 minutes), then saving a high-res print-ready version of just the black plate—which was everything on the label but the color specks.

The color specks. Those almost spelled the end of the project. They were slightly raised above the surface of the label, and the 3D effect seemed so difficult to reproduce effectively that the project was nearly abandoned. But then, Kanonik explained, he had a brainstorm. Or, that is, a hairstorm. As a child of the 1970s, he remembered the “hair band” era of the 1970s and 1980s, when heavy metal rock groups like Poison, Mötley Crüe, Quiet Riot, and others of that ilk adopted some of the festoonery of glam—including colored glitter, the stuff of grammar school art projects and Halloween costumes. So Kanonik bought some glitter, applied it to the labels with an adhesive coating, then added a protective coating on top of it and, voilà! It worked beautifully. As Kanonik said, “Bring a problem to a commercial printer, and he’ll come up with a solution. Bring a problem to a counterfeiter, and he’ll come up with a better solution.”

The Counterfeiter delivered the labels to The Ne’er-do-Well and, in a second video dramatization, The Ne’er-do-Well was pleased with the results and paid The Counterfeiter—in counterfeit notes.

Kanonik summed up the experiment with what could perhaps be the dark side of digital printing: “We reproduced these labels for next to nothing thanks to digital printing and inexpensive coatings.” And a little inspiration from a dubious musical genre. The ability to play with settings on the fly gives the counterfeiter greater flexibility, and the wine label demonstration had, ironically, a sobering conclusion: “The quality of digital printing is getting better for counterfeiting.”

This isn’t a purely academic issue. Wine fraud has been around for centuries; Thomas Jefferson was aware enough of the problem in the 18th century to keep tabs on where his own Bordeaux was bottled. Trouble is, according to a 2008 story in Wine Enthusiast, no one keeps reliable statistics on wine fraud and counterfeit wine—if anyone keeps them at all. The occasional case (as it were) that comes to court or is seized by authorities are all anyone really has to go on. In one case, Ronald Wallace of Rare LLC made $11 million by “purporting to sell older bottled wines that he did not own, by purporting to sell wine futures he did not own, and by diverting and misusing money that his clients had entrusted to him.” The European Union has estimated that between 1% and 9% of bottles sold are counterfeit. Fake wines can damage a winery’s reputation and erode brand equity, as well as cost the winery revenues. And, as The Ne’er-do-Well’s cavalier comments about people getting sick off counterfeit wine indicate, it’s not just a money issue. There can be public health and safety concerns—as well as potential liability and criminal litigation.

But there can be serious money to be made. When you consider, as was pointed out by the following speaker (about whom more shortly), a Screaming Eagle 1992 Cabernet went for $500,000 at auction in 2001 (the highest amount ever paid for a bottle of wine—what do you serve that with? Gold?), there can be some highly compelling reasons to counterfeit a wine label, aside from just infiltrating the consumer sales chain.

All is not lost, however. It wouldn’t be the Brand Protection Conference if there weren’t a solution on hand. And that solution was presented by Dr. James A. Hayward, a molecular biologist and Chairman, President, and CEO of Applied DNA Sciences a Stony Brook, NY-based biotechnology company that develops anti-counterfeiting measures using encrypted botanical DNA for use in a wide variety of applications, from applying DNA to cotton fibers so as to easily identify where those fibers came from, to using DNA to track various types of wool through a supply chain. DNA is one of the most effective and reliable anti-counterfeiting preventions available. Dr. Hayward mentioned that an entertainment company had begun releasing DVDs with as many as 12 security features. Within nine months, 11 of them had been broken. The only one that remained secure was the DNA-based measure.

How this works—in the smallest of nutshells—is that a small amount of a particular strand of DNA is applied to a carrier; that is, whatever it is that needs to be secured. In the case of the wine label—remember those colored specks that were so hard to counterfeit? They were actually bits of a glitter-like material, but they also had DNA tags applied to them. Without knowing which was which, Applied DNA Sciences analyzed both labels. They took a small amount of material from the colored specks on both the real and fake labels, did a DNA analysis (just like they do in CSI), and found no trace of their signature DNA in the fake label, but they did in the real label. Q.E.D.

Applied DNA Sciences is taking these technologies even further. New labels for wine (or other products) utilize a secure DNA Magneto-Optical Fingerprint applied to a wine bottle, which can be read using a handheld BlueTooth-based reader that can transmit to a BlackBerry and, in turn, over the Internet to a central server that can detect the fingerprint and verify that, yes, it’s what the label says it is.

There was more to the two-day Brand Protection Conference than the Hands-On demo. Other big topics at this year’s conference included pharmaceutical counterfeiting, label and packaging security, biometric brand protection, and more.

One piece of news that came out of this year’s Graphics of the Americas was that next year, Graphics of the Americas 2011 moves 200 miles north from Miami Beach to Orlando. Said Graphics of the Americas President George Ryan in a press release, “We expect that this exciting new Orlando venue will attract an even greater number of attendees from the U.S., along with traditional strong attendance from Latin American countries. Orlando is now rated the number one destination for conventions and trade shows held annually, and is an easily accessible venue.”

In preparation for Graphics of the Americas 2011, this writer headed a brainstorming session for how to incorporate the topic of environmentally sustainable printing into next year’s program. Representatives from, among others, Finch Paper, Recognition Systems/Dotworks, MGI, and the Orlando/Orange County Convention and Visitors Bureau, participated in the enlightening and engaging conversation. Gail Nickel-Kailing, doyenne of WhatTheyThink’s Going Green blog, also helped shape the agenda for this session.

In all, it was a low-key but no less educational and exciting show—and a welcome respite from Phase Two of the Northeast “Snowpocalpyse.”

Please offer your feedback to Richard. He can be reached at richard@whattheythink.com.



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