Honest businesses or shadow players? Who is behind the criticism of digital labeling for water and beverages?

What is the actual situation, and what interests might be hidden behind critical publications? We explore this in our article.

Digital Labeling and Aggregation: What Is It and Why Is It Necessary?

Digital labeling is a system where each packaging is assigned a unique code that allows tracking its journey from the factory to the consumer. This code is applied by the manufacturer on the packaging and is also entered into a centralized database.

The operator of the digital labeling system Asl Belgisi in Uzbekistan is the company CRPT TURON. It ensures the operation and development of the system, from where all information is transmitted to the Tax Committee.

Currently, the system processes information on more than 67,000 product names, coming from 385 manufacturers and 1,570 importers. The system monitors the movement of over 7 billion units of goods.

Aggregation, in turn, represents the consolidation of goods into group packaging with its own unique code. This code retains information about the relationship between the identification codes of each nested packaging (consumer packaging) and the code of the created packaging (group packaging). This allows for precise tracking of the location of each batch of a single type of product and each unit of goods within it without the need for unpacking. At retail points, consumers can purchase goods either in consumer packaging or as a complete group packaging (block).

However, not all market participants find such control beneficial. Some manufacturers and distributors complain about the exorbitant costs and technical complexities. Is this really the case?

Myths and Reality

Critics of digital labeling and aggregation argue that the costs of equipment and consumables lead to price increases and losses for manufacturers. However, statistics from CRPT TURON present a different picture. In segments where digital labeling has already been implemented, there is a noticeable increase in production, legalization of the shadow turnover, and growth in legal imports.

For instance, from January to October 2024, the market volume for tobacco products increased by 25.6%: production rose by 17.1%, and legal imports increased by 2.7 times.

During the same period, the market for alcoholic beverages grew by 16.1%: production increased by 15.2%, and legal imports rose by 1.6 times.

In the pharmaceutical segment, from March 2023 to February 2024, the market volume increased by 18%. More than 600 manufacturers, including international companies, have successfully implemented digital labeling.

This data indicates that digital labeling not only stimulates market development but also contributes to its legalization. In the long run, it may offset the costs associated with the implementation of the system.

Additionally, it is worth noting that until June 1, 2027, companies are exempt from customs duties on the import of labeling equipment. This is stipulated in the decree of the President of Uzbekistan "On Additional Measures to Accelerate the Processes of Mandatory Digital Labeling" dated May 30, 2024.

There is also an opinion that the implementation of labeling and aggregation hinders production processes. However, the experience of manufacturers such as UzCarlsberg and the Russian company "Ochakovo" confirms the successful implementation of digital labeling even on the fastest lines. Modern technical solutions allow for maintaining high production rates and minimizing the risk of defects.

For example, at the "Ochakovo" facility, labeling and aggregation for glass containers have been successfully implemented, achieving a capacity of up to 40,000 bottles per hour, while for aluminum cans, this figure is even higher – up to 72,000 cans per hour.

The local beer producer UzCarlsberg has also implemented aggregation for various types of packaging: PET containers (up to 35,000 bottles per hour), glass bottles (up to 43,000 bottles per hour), and aluminum cans (up to 44,000 cans per hour).

The successful implementation of digital labeling in the pharmaceuticals, beer, and alcoholic beverage industries demonstrates that Uzbekistan is ready for digitalization. Moreover, government incentives for purchasing equipment, including the elimination of customs duties, make this process even more attractive.

Here lies the answer to the question of the complexities of labeling various containers. The system operator has solutions for both returnable glass bottles and aluminum cans.

Since December 2021, digital labeling of beer in aluminum containers has been successfully implemented. Major producers such as UzCarlsberg and Inter-Rohat use stickers to label their products. In addition, laser printing technologies are actively used: the labeling is burned by laser onto the key of the aluminum can. This technology is utilized by foreign beverage manufacturers, including those supplying to the local market.

Critics also point to additional expenses for digital labeling due to the inability to use defective codes. However, independent experts assert that the real issue lies not with the codes themselves but with errors during the installation and commissioning of equipment. The arising difficulties can be resolved by properly setting up the process. These issues fall within the responsibility of manufacturers, and all production defects can be eliminated with effective collaboration with competent contractors.

Another important question is potential problems with internet access and power supply. The Asl Belgisi labeling system has been designed with possible interruptions in mind: the presence of backup internet channels and additional generators ensures stable power supply and uninterrupted operation of the equipment.

The autonomous operation of production lines is ensured through preloading data: manufacturers can order codes for one day or several days in advance, and the necessary reports can be registered in the digital labeling system after communication is restored.

The digital labeling operator provides APIs and instructions that simplify integration with the system. A support service is also available for the prompt resolution of any arising issues.

Another problem highlighted by critics is the advance payment made by manufacturers for the issuance and traceability of digital labeling codes.

However, CRPT TURON notes that the advance payment system is key to healthy competition, as those manufacturers who understand their production volumes pay for and receive codes. A post-payment system would allow all manufacturers, including dubious entrepreneurs who might abuse such opportunities, to access codes.

What About Other Countries?

Let’s refer to international experience. Digital labeling systems are successfully operating in many countries.

For example, China has implemented the PIATS (Product Identification, Authentication and Tracking System). It covers more than 69 product categories, including household appliances, cosmetics, personal protective equipment, as well as food products, beverages, and dairy products.

Turkey has introduced the BUIS digital labeling system for medicines, tobacco products, and alcoholic beverages. As a result, the volume of counterfeits in these segments has decreased by 20%, while legal sales have increased by 15%. Thanks to the labeling system, the country saves 1 billion dollars annually on medicines.

In Russia, since 2019, the "Honest Sign" system has been in operation, covering over 20 product categories. Thanks to digital labeling, it was discovered that about 550 manufacturers of water, beverages, and juice products had previously not provided reports to the authorities. Due to the implementation of the system, the legal market has increased by 30%.

In Kazakhstan, a similar digital labeling system Naqty Onim has been implemented for medicines, alcohol, and light industry goods. This has led to an 18% increase in tax revenues.

In the European Union, the EMVS (European Medicines Verification System) is in place, which prevents the infiltration of counterfeit medicines into European supply channels. The manufacturer applies a unique identifier on each package and ensures the presence of tamper-evident packaging. The originality of each package of medicine is confirmed by the DataMatrix code. When dispensed to a patient, the unique identifier is deactivated.

What Lies Behind the Criticism?

Many arguments from opponents of digital labeling do not withstand factual scrutiny. The problem may not lie in technical nuances or costs but in the unwillingness to lose hidden revenues. Indeed, digital labeling and aggregation enable control over the entire product movement cycle, eliminating the possibility of concealing production and turnover volumes.

According to data from the Statistics Agency published in August 2024, the total volume of gross added value concealed from official authorities in 2023 amounted to 422.9 trillion sums. The annual damage to the state budget of Uzbekistan from the shadow economy is estimated at 30 trillion sums.

The digital labeling of water and beverages in Uzbekistan has already been postponed for two years to give businesses time to prepare. However, even today there are companies opposing such a step and sabotaging the government's decision. This raises the question: who are these critics, and whose interests do they represent?

Our investigation has shown that digital labeling is not only a means of combating counterfeiting but also a serious challenge for those accustomed to operating in the shadows. The question is not whether digital labeling is beneficial for business, but who is ready to play by fair rules.