Kosmik Brands was targeted by counterfeiters who sold knockoffs of the company’s packaging in areas the company’s products are not for sale.
For the folks at Kosmik Brands in Oklahoma, keeping quality control as the brand expands into new states is a key focus for building customer loyalty. Which is why it was so disturbing to start getting messages about Kosmik products being found in places where the company was not operating.
“We are finding them in Australia, Serbia, Spain, Canada,” chief marketing officer Cari Carmona told Marijuana Venture earlier this year.
Some research showed that the bags — which looked just like the ones the company was using for products like its best-selling, high-dose Black Hole gummy — were available online for pennies each, but there was no way to tell who was putting what out for sale under the company’s branding.
“I don’t know what they’re putting in there,” Carmona says, noting that counterfeit Kosmik packaging was found alongside fake CBD, and numerous other suspect brands at a deli in New York City. “It’s absolutely insane.”
The issue, affecting brands all across the country, has become a focus for the National Cannabis Industry Association Packaging and Labeling Committee.
“Anti-counterfeiting is a big topic of discussion, because some of these bigger brands are getting knocked off,” says Nick McCormick, who chairs the committee and works for the Taylor Packaging Corporation, which does packaging for the Cookies brand.
“Cookies has been knocked off left and right in California and New York,” McCormick says, noting that the thriving illicit market in both of those states means that he can find “Cookies” packaging available from black market sellers in Central Park or Times Square. “And it’s a Cookies pouch that — guess what — I didn’t produce; some random company and the illegal producer bought it off of [a website] or whatever.”
PROTECTIONS
The NCIA’s packaging and labeling committee’s anti-counterfeit efforts are being spearheaded in part by committee member Lilly Blum of Inland Packaging. Blum says Inland and other packaging companies have dealt with counterfeit issues before in other high-margin industries, like nutraceuticals and supplements.
“It’s easy or easier for those counterfeiters to swap out products on the inside and sell it as-is, even though it’s not coming directly from the brand,” Blum says.
But protecting brand identity and brand integrity can start with packaging choices.
“There’s lots of things that they can do to help prevent it that are pretty simple,” says Blum. “With the black-market presence being so strong, keeping brand integrity strong as well is very important for cannabis brands.”
Blum says the easiest thing a brand can do is to add a holographic image or watermark to the packaging so consumers can immediately recognize the real thing.
“That is usually really hard for counterfeiters to replicate,” Blum says. “It’s kind of similar to a driver’s licenses or even dollar bills.”
Even something simple like a QR code that will take consumers to a special landing page on the brand’s website can help customers trust the legitimacy of the products and brands they are buying.
Blum says tamper-evident packaging can also help customers ensure they are getting what they pay for, from simple neck bands on beverages or a tear notch on a flexible packaging bag to things like color-changing inks.
“Those can be activated by temperature, sunlight, water, all types of different kinds of indicators there and can help make sure that the contents within the package have remained in the correct, temperature-controlled environment and haven’t had any sort of contamination,” Blum says.
COSTS OF DOING BUSINESS
McCormick and Blum both say anti-counterfeit measures on packaging is a continuing problem within several of the industries for which their companies produce packaging, but in cannabis, the issue can be even more pronounced because the varying regulations from state to state can mean multiple versions of the same packaging can exist. That cannot only make it easier for counterfeiters, but more expensive for larger brands to fight.
McCormick, for example, says he sees phony packaging online that is up to 20 cents cheaper per bag than the legitimate packaging he sells, due to having to meet all of the child-resistant and labeling regulations that some states place on cannabis products.
According to Blum, those varying regulations can mean the additional anti-counterfeit measures often “take a little bit of a backseat” for customers dealing with complicated regulations and higher state and federal taxes already eating into profit margins. It’s one of the reasons the NCIA would like to see national packaging standards developed.
“You can make some modifications to any type of package to help with counterfeiting,” she says. “But just the fact that there’s not a set rules to follow that brands feel like they either have to change packaging state-by-state or make sure they’re hitting all the requirements of all the states in their packaging, and that can be pretty difficult.”
Blum says cannabis companies must be sure to “do their homework” and discuss all of their options with the professionals who design and produce the packaging for their products.
“Really look at what the product you’re selling is and then working with those subject matter experts to make sure you’re picking the [package] that’s going to make sure that your branding and your product stays safe,” she says.