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- The Code Battle: how digital labeling can displace illegal trafficking of consumer goods
The Code Battle: how digital labeling can displace illegal trafficking of consumer goods
Russia continues to implement a large-scale digital labeling system for goods, which is becoming one of the key factors in displacing shadow turnover from food markets. From 2026, mandatory labeling for groceries is expected to be expanded, which should significantly increase the level of legality and transparency. Experts see both challenges and advantages for the market and the consumer in this process. Details can be found in the Izvestia article.
Why do we need digital labeling and control?
Starting from March 1 in Russia, at the initiative of the Ministry of Industry and Trade, it is planned to introduce mandatory labeling of an expanded list of groceries. The draft of the relevant government decree is posted on the portal of draft regulatory legal acts. The document proposes labeling products in this product category: cereals, cereals, legumes, instant potatoes and breakfast cereals (including those that do not require heat treatment), honey and products based on it.
CRPT, the operator of the Honest Mark labeling system, notes that the system should ensure full traceability of products along the entire chain — from the manufacturer to the buyer, reducing the volume of illegal turnover of goods.
— Today, 940 thousand companies work in the system, all cash desks of the country are connected to it, — they say in the CRPT. — This made it possible to reduce the share of illegal trafficking to 8.9% in 2023, almost three times less than in 2018, when it was 25.9%. A particularly significant reduction is observed in perfumes (minus 81.8%), water (minus 60%) and tobacco products (minus 56%).
Rospotrebnadzor emphasizes the importance of digital control to improve food safety.
"State control over groceries will reduce the volume of shadow turnover and increase security," says a representative of Rospotrebnadzor. — Based on labeling data, models are being developed to identify illegal products, including dangerous ones, and control covers the entire retail industry, preventing unmarked goods from entering stores.
A separate area is automated control, when cash registers block the sale of prohibited or expired goods.
"Since the introduction of the permissive regime, sales of expired dairy products have decreased by 122 times," the CRPT notes. — Violations in packaged water decreased by 95%, in beer — by 78%, in tobacco — by 79%. In total, more than 2.5 billion units of illegal and dangerous goods have already been blocked.
Labeling brings hundreds of manufacturers out of the "shadow" in various categories, including groceries, children's toys and motor oils.
Izvestia sent a request to the Ministry of Industry and Trade.
Costs and benefits of labeling
Natalia Shagaida, Director of the IPEI Agri—Food Policy Center, warns that labeling is a complex and multi-layered process.
"This is not only a control tool, but also a big business for developers and hardware manufacturers," she says. — Labeling by itself does not guarantee the complete absence of adulteration, as can be seen in the example of the dairy segment. In addition, manufacturers' costs inevitably affect the final price of the product, which makes the expansion of labeling a controversial issue in the context of rising taxes and prices.
However, Artem Suvorov, project manager at Strategy Partners, believes that the introduction of grocery labeling will help bring the market out of the "shadow" and improve the quality of products.
"This is really important for cereals, honey and cereals, where there are many small producers operating without quality control," he says. — In the short term, the costs will be borne by manufacturers, but the market adapts quickly, and a significant price increase should not be expected. For consumers, labeling means more transparency and reducing the risk of buying counterfeit goods.
Vladimir Poklad, Director of the Consulting Department of the Business Profile Group, confirms the minimal impact of labeling on the cost.
— Labeling costs amount to 0.1–4 kopecks per unit of goods, not exceeding 1% of the cost, — he says. — The experience of dairy and other segments shows the stabilization of prices, rather than their growth, due to the displacement of counterfeit goods.
Consumers and retail: transparency and workload
Head of the "Popular Front. Analytics" Olga Pozdnyakova highlights the main advantages for buyers.
"Labeling controls products that affect health and significantly reduces the sale of expired products," she notes. — If earlier it was possible to accidentally buy a damaged product, now the cashier will not allow you to make a purchase of expired goods. This is already a real positive effect.
However, warehouse conditions and compliance with storage regulations remain outside the labeling control area.
— The consumer gets the opportunity to verify the legality and date of production through scanning, — adds Vladimir Poklad. — It takes seconds and requires no special knowledge. Retail, of course, incurs additional costs for equipment and training, but the load is minimal for the end user.
Associate Professor of the Russian University of Economics. Plekhanova Svetlana Ilyashenko agrees that labeling increases transparency, but does not completely exclude the appearance of fraud.
—Scanning the code gives you detailed information," she says. — However, for full success, it is necessary to constantly improve the protection system and expand control throughout the chain — from small manufacturers to retailers.
Opportunities and risks
Alexey Koitov, Chairman of the SPRF, points out the existing problems in the system.
"The Honest Sign system has not yet prevented the spread of illegal products," he says. — In 2024, 6.6 million counterfeit items were identified, and in the perfume industry, a quarter of the goods on store shelves are unlabeled or counterfeit. Now the system serves the interests of the operator more than the consumer.
— The introduction of labeling leads to an increase in the cost of goods: 50 kopecks plus VAT for each brand and infrastructure costs, — says Koitov. — For the benefit of the consumer, modernization of the system and effective control on the ground are needed.
Nevertheless, experts see the potential of the system for both the state and business.
"The Central Bank and the state have received a tool for accurate analysis and targeted control," Artyom Suvorov emphasizes. — For honest producers, this is a release from the pressure of the "gray" sector and food for development.
— Customers are already changing their attitude towards products: they check the origin and composition through digital services, — says Olga Pozdnyakova. — Labeling is a tool of the future that cannot be stopped, it will change the food market forever.
Thus, the Russian digital labeling system is becoming an integral part of the modern economy, raising the level of safety and quality of goods, changing the rules of the game and forming new standards for business and consumers.
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