Revaz Yusupov, “Honest Sign”: “With labeling, people begin to truly influence what is sold to them”
The labeling system is expanding its scope. A special marking appears on new products and covers more and more industries. What does this mean for the budget, business and citizens? And most importantly, how does labeling affect prices? He spoke about this in the Komsomolskaya Pravda studio at VEF-2023 Revaz YusupovDeputy General Director of the Center for the Development of Advanced Technologies (CRPT), operator of the “Honest Sign” system.
– I think many buyers already know about the marking and have seen this square icon on various products. Let’s tell you why it is needed and what it gives?
– Digital marking was introduced primarily to whiten the market. This is a concept that includes the quality and safety of products for consumers, and the protection of the interests of legal businesses, which, while working honestly and conscientiously, cannot fully compete with those who work differently. Their “gray colleagues” lower prices and skimp on everything, including quality. Due to labeling, the state reduces the costs of legal business, and receives new opportunities for government administration online.
– How can this help the state?
– A simple example: during the pandemic, when it was necessary to distribute vaccines, we saw online how they reached each vaccination point, because each package had a unique code. Thus, each product has its own digital passport, which can be tracked and understood where a surplus or shortage is created, who is trying to manipulate prices, and much more.
– Roughly speaking, when I scan this square at the checkout, somewhere, so to speak, some kind of light comes on or a one is put…
– Yes, information appears that in this store the product with this square has been sold, which indicates the end of the journey of this product on the market. It reached the consumer. Secondly, this code is canceled in the system and no other product can appear with this code. Nowhere. Accordingly, if a product appears with an attempt to copy such a code, we immediately receive a signal that someone is trying to sell counterfeit and illegal products.
– How does this affect the whitening of the market?
– Directly. We see a reduction in the gray market in all industries where labeling is already in place. Let me remind you that about 15% of the country’s non-commodity GDP is already labeled. These are medicines, dairy products, water, fur coats, shoes, photographic equipment, perfumes, tires, light industry and more. This year we began labeling the first beer category, that is, beer in kegs. And then at the end of the year we will introduce beer labeling in plastic and glass bottles, then in aluminum cans – and thus the entire beer market and low-alcohol drinks will also be labeled. In addition, from September 1, there was another expansion of product categories: dietary supplements, medical products, antiseptics, wheelchairs, sweet drinks, juices and baby water were added. There is a tendency to expand the system, because both legal business and the state see real effects – a decrease in illegal turnover and an increase in the turnover of legal business. There are many such examples. And what is important is that people become the force that begins to truly influence what is sold to them. This is due to public control through the Honest Sign application, which has already been downloaded by more than 11 million people.
– It turns out that even if some entrepreneur, a store owner, wants to save money and take some kind of left-wing lot, the cash register itself won’t even let him through?
– Absolutely right. First, unlabeled products are now illegal. If there should be a marking on one or another type of product, but there is none, that’s all, the very fact that there is no code indicates the illegality of the product. Then you can carry out all the necessary actions for the control and supervisory authorities. And the cash register itself can block an attempt to sell goods with violations.
By the way, an experiment is currently underway to block expired products at the cash register. As a result, the sale of expired dairy products decreased by a quarter. And this is good. Because, firstly, this is not always the malicious intent of the stores, but a situation simply arises from time to time when a sales floor employee did not have time to remove some goods in time. The labeling system allows this accounting system within the store to be improved – that is, a person understands that there is some product there that has either already expired or is about to expire. And even if he didn’t control it somewhere, the cash register itself will block the sale of such a product. The cashier will be required by law to remove the item from you and replace it with something else. That is, the protection of the buyer’s interests occurs almost without the participation of the consumer, at an automatic level. We currently have 600 thousand legal entities and companies working in our system: these are all stores, a huge number of manufacturers, importers and distributors in all industries that are labeled.
– You have already said that the list is expanding. As I understand it, the caviar will also have to get into it at some point?
– Yes. The estimated share of the illegal caviar market is at least 20-30%. And for those regions that focus on caviar, we understand that this is a rather serious source of income for the regional budget; in addition, it is also the image and brand of the country. Caviar is a product that we mostly buy for the holidays. Therefore, the regions that produce this caviar are very interested in ensuring that it is of high quality and good. The caviar marking experiment has now been launched and will continue in the first quarter of next year. And then, probably, the state will make a decision on mandatory labeling – fortunately, both the regional authorities, the federal authorities, and business itself are interested in this.
– What are your plans to increase the share of labeled goods?
– It’s difficult for me to talk about this, because the government always makes decisions based on a number of criteria. The main criterion is still the level of illegal trafficking. In addition, the state always looks at the interest and openness of legal businesses in this sense, to what extent this initiative is supported. We now see that a fairly significant proportion of companies from different industries initiate labeling themselves. And for us, this is an indicator that the technology works, it is understandable to legal companies, and we are happy to implement it fairly quickly in every industry. Important criteria are also the potential harm (not even to the budget, but to people), so that labeling does not affect the price.
– Yes, by the way, an important aspect. Doesn’t this make the products more expensive?
– This criterion is always analyzed before labeling is introduced. Now we see: wherever labeling has been introduced, it has not led to an increase in prices. And he can’t bring it. The influence of labeling, for example, in caviar, is in the region of one to one and a half rubles. With the price of a can of caviar at 5.5 thousand, we understand that, naturally, there is no influence. And this has been proven in all other industries – in medicines, in milk, in water.
– As I understand it, over time, these expenses, in principle, are eroded, because you don’t need to buy new equipment every time…
– The total effect of labeling by the end of 2022 was estimated at an additional 435 billion rubles. This is what the budget collected and what additional legal companies earned. Beyond what might be required as an investment in labeling. What do we actually see? I’ll take the dairy industry as an example: factories produced some kind of dairy products and did not purchase any raw materials. That is, tens or hundreds of tons of products were produced from thin air. Now this is impossible. The level of counterfeiting has decreased, literally from January 2022 to the present day, from 30 to 4%. Almost ten times. This is on the one hand. On the other hand, we see that the dairy industry paid record taxes to the budget. This means that she earned much more than in previous years.
That is, they earned more and paid more to the budget, and thus illegal competitors left the market, and those legal companies that work conscientiously occupied an additional niche and earn more from their products. To summarize: the quality has become better for people, the budget has received more money, these companies have sold more. Everyone wins in the end.
– Can you give another example, from another sphere?
– Let’s take the tobacco industry. It is excise tax – it is always examined under a magnifying glass. Before the introduction of labeling, the level of illegal trafficking doubled for five years in a row. It grew from 1 to 15% in a few years. Labeling was introduced, and in the first year this illegal level was reduced by a quarter. And now only thanks to labeling is it possible to keep the growth of the gray market at bay. Otherwise, according to experts and market participants, it could have been much higher. Moreover, we suddenly have 18 new factories, and another 26 illegal ones were found and closed. Moreover, there were only about 30 legal factories on the tobacco market, as was believed before labeling. Approximately the same number, it turns out, were nearby, in the shadows. Someone whitewashed, someone left the market. Regarding water: at the time the marking was introduced, it was believed that we had 1,200 producers. However, in the first year, another 450 appeared. Some joke that this is an investment boom, but it is absolutely clear that those companies that were working fully, just in the gray zone, realized that with the advent of the digital marking “Honest Sign” they could no longer continue to work like this, they decide to whitewash themselves. And water is what we drink all the time, and it is very important that it be of high quality. And finally, a very relevant industry is dietary supplements. A lot of them are produced in the Far East. Registration of companies in the system, that is, the beginning of labeling, occurred on September 1. It’s not even physically applied to the packaging yet; this should happen from October 1, but we are already seeing a 2.8-fold increase in the number of importers. Previously it was believed that there were 200 of them, but it turned out that we are already seeing about 600. And with the application of physical markings, we are confident that these numbers will continue to grow, as in all other industries.
– How big is the illegal market in dietary supplements? Any ratings?
– Experts from the Higher School of Economics estimate the illegal market at approximately 45%. But the fact that our number of importers has tripled suggests that even these estimates may be clearly underestimated.
– It turns out that this mark can only be applied to the products of those companies that have passed some kind of quality test?
– It is very important. Different industries have different specifics and a different set of documents, but any product must receive permission from regulatory authorities for production and supply to the market. In medicines, these are laboratory tests, random control, certification according to certain standards. In shoes, this is a declaration of conformity, safety certificates and more. In dietary supplements – state registration, which I spoke about. So, in order to issue a code to some company, we check all these documents. Only after verification can the company receive the code. This is the guarantee that we are recording a situation in which only the company that legally establishes its activities has the opportunity to receive codes. That is, those who try to ignore these mandatory requirements simply cannot obtain any code. In conditions where there is administrative liability for the lack of labeling or violations of the labeling and even criminal liability in some places (for repeated violations), of course, any company will make a decision for itself: whether it is further willing to take such risks or not.
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The Eighth Eastern Economic Forum is taking place in Vladivostok from September 10 to 13, 2023. The motto of the forum is “Towards cooperation, peace and prosperity.” The organizer of the event is the Roscongress Foundation. Komsomolskaya Pravda is the official information partner of EEF 2023.
