Illicit liquor: What you see is not what you get

World-wide the high demand for cheap alcohol has fuelled an illegal liquor industry that is hugely problematic for governments and legitimate stakeholders in the liquor industry.

“This stuff will make you blind”, warned a British shopkeeper when he sold a bottle of cheap vodka to a student from Sheffield, last December. True to his prophecy, after partying on the vodka, she woke up with blurred vision the next morning. Months later she was still suffering from impaired vision. World-wide the high demand for cheap alcohol has fuelled an illegal liquor industry that is hugely problematic for governments and legitimate stakeholders in the liquor industry. Loraine Stander tried to get the facts behind the illegal liquor trade, loss of revenue, the eroding of brand names and the associated health risks. What is illicit liquor? It is a trade that goes by many names: counterfeit liquor, illegal liquor, fake alcohol, moonshine, bootleg, etc. It is liquor that is produced, for sale, under unlicensed and unregulated circumstances. This can be produced in small backyard operations or on an industrial scale by internationally organised syndicates. The latter are often also involved in drugs and other forms of organised crime. Illegal manufacturers produce counterfeits of well-known brands; produce their own brands; dilute spirits and wines and produce all sorts of concoctions laced with alcohol. These products can be sold privately or land up in retail outlets or taverns where it is sold to unsuspecting consumers. It is also often the case that customers are aware that they are drinking illegal liquor. These products are cheaper because unregulated production is lower and excise duties and import tariffs are not paid. Brand protection It is all about the brand. Luxury liquor brands, for example certain Scotch whiskies, have with effort and money built up over time reputations as quality products. This combined with innovative advertising that link the products to sought-after lifestyles have created covetable products. These brands are valued by connoisseurs in the poshest drinking holes in the world or in private homes, but also in lowly taverns by those that aspire to the associated lifestyle. These brands have huge monetary value. Johnnie Walker whisky is the top drinks brand for 2012 with a brand value of $2,432m. To protect these brands against a counterfeit product is paramount. It is for this purpose that the spirits industry founded in 1993 the International Federation of Spirits Producers (IFSP). Its membership comprises nine of the world’s leading spirit groups and they are involved in 30 countries. According to the IFSP: “Counterfeit poses a growing threat to everyone involved with spirits … Retailers and bar owners lose business when counterfeit spirits are uncovered. Forgeries seriously erode a premium brand’s credentials, endangering the livelihood of those who make and market it and the investment of their shareholders.” They claim that in 2011 more than 420 counterfeit-production and -distribution facilities were closed down. “If these facilities had continued to operate, they would have produced around 730,000 cases of counterfeit spirits during the year, diverting well over a $100m of revenue away from the spirits industry and tax authorities into criminal hands.” Inexplicably the IFSP does not operate in Africa. Enquiries by How we made it in Africa received no response. How we made it in Africa approached one of the leading alcohol beverage companies in South Africa, who has many of the luxury labels in their stable, to get more information on brand protection. We quickly realised that no concrete information on anti-counterfeit operations would be forthcoming. Luxury brands are extremely reluctant to admit or make public that the brand that they have so carefully built up can be fraudulent. Talking to the media can put the lives of brand protection agents under serious risk and also jeopardize possible breakthrough by the police or their agents. Health risks Last December 170 people died in West Bengal (India) after drinking alcohol that had been mixed with toxic methanol. In the unregulated world of illegal alcohol, toxic ingredients like methanol, ethylene glycol, acetone and additives like colourants and flavourants are used to make products. Production often occurs under unhygienic conditions – filthy floors, dirty drums, unwashed bottles, etc. have been reported. Carine Marks, director of the Tygerberg Poison Information Centre of the University of Stellenbosch in South Africa, particularly warns against methanol and ethylene glycol. Methanol is a flammable liquid with a distinctive odour very similar to, but slightly sweeter than, ethanol (drinking alcohol). It is commonly used as fuel, solvent or antifreeze). Depending on the concentrate, it can cause comas, abdominal pain, nausea, vomiting, and headache and tremors. Visual impairment may develop, which may range from blurry/hazy vision to colour vision defects to "snowfield" vision to total blindness. High doses can be lethal. Ethylene glycol is an odourless, colourless, syrupy, sweet-tasting liquid. It is widely used as automotive antifreeze. It is toxic, and ingestion can result in seizures, renal failure and death. Marks also suspects that incidents of methanol and ethylene glycol poisoning are largely unreported due to the fear of prosecution by all parties concerned. Economic impact of illegal liquor Alcohol fraud is costing countries huge losses in revenue and also threatens the livelihood of honest and legitimate liquor businesses. According to Riaan Kruger, CEO of the South African Liquor Brandowners’ Association (SALBA), the illicit liquor trade in spirits alone, accounts for a loss of R472m ($58m) in value added tax (VAT) in South Africa. The UK has recently reported that alcohol fraud accounts for up to £1.2bn ($1.9bn) per annum in lost tax revenues. The accusation is often made that governments are to be blamed because excise and import duties on alcohol stimulate the illicit liquor trade. Studies have shown that it may to a certain extent apply to developed markets where cheaper alternatives would be sought. But the same studies established that in developing countries, where consumers have often less disposable income, taxes have little or no impact. To combat the illegal trade, various government and private agencies work in combination with the police and revenue services. They try to track down the origin of base products, production and distribution points and outlets. Smuggling goods across porous borders is another problem that seems uncontrollable. Adrian Lackay, spokesperson for the South African Revenue Services, says that the source for cane spirits, often used as a base for fake brandy, are countries that grow sugar cane like Swaziland and Mozambique. Namibia has recently accused South Africa, Angola and the DRC as the countries of origin of illegal brandy and whisky. But calling culprits is futile as the illegal trade is widespread. It seems as if it is impossible to stop the illegal alcohol trade. According to SALBA the profits made from illicit sales by far outweigh punitive measures. Fines, seizures and arrests are only temporary hiccups for the illegal trade. To quote Kruger: “It is a never-ending cycle and we (and the authorities) never actually get it (the illegal trade) under control.”

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How to detect fake liquor 1. The price of a bottle of spirits According to SALBA, the cost of producing a bottle of brandy, that includes the raw materials, packaging, excise duty and VAT amounts to almost R50 ($6.12). Vodka and cane is slightly less at about R45 ($5.50). So spirits for sale below R50 a bottle is suspect. The adage: "if it is too ‘cheap’ to be true, it probably is", is applicable. 2. The quality of the bottle Luxury bottles of spirits normally have an appearance of quality and have distinct shapes and characteristics. When How we made it in Africa was shown two bottles of vodka, of which one was counterfeit, we were unable to point out the fake one. A brand protection agent pointed out discrepancies in the contours of the bottle and duller and less accurate paint work. Bottle tops are often made of inferior material and tend to bend or crumble on opening. Also, loose bottle tops and broken seals indicate a tampered with or inferior product. 3. Labeling This is one of the most obvious places to detect a suspicious product. Since many counterfeit products are made in non-English speaking countries, spelling mistakes is a sure give away. Labels that are not straight and glue marks indicate that it has been stuck on by hand. Counterfeit alcohol will often not indicate the name or address of the manufacturer, or the country of origin. The absence of revenue stamps and government health warnings are also telltale signs. 4. Bottles filled to different levels Since small-time illegal operations often fill bottles by hand, the levels are not always accurate. 5. Smell One of the most obvious indications of a fake product is the smell. Fake vodka apparently smells like nail varnish or acetone. The absence of the distinct aroma that is associated with certain brands of vodka, or whisky, etc. or the presence of “funny” smells should alert the consumer.