The global food industry is worth trillions of dollars.
Unfortunately, where there are opportunities, there will be those quick to take advantage. Not only does fraud in the food industry have economic costs, it can lead to public health and brand reputation risks. Unfortunately, the current approach to prevent fraud in the food industry is failing.
The systems built were originally made to ensure food quality but didn’t foresee sophisticated fraud practices in the supply chain. Criminals are therefore outsmarting the current procedures in place.
Blockchain technology, however, can trace long and complicated supply chains. Its transparency, speed, security and user collaborations allow quick and easy traceability of products. Global brands such as Nestle and Walmart are therefore testing blockchain technology with great success, according to Reuters. Blockchain technology has great potential to fight the billion dollar fraud issue and transform the food industry.
THE GLOBAL PROBLEM OF FOOD FRAUD
Food fraud is a collective term that encompasses the act of purposely altering, misrepresenting, mislabelling, substituting or tampering with any food product at any point along the farm to table food supply chain. Fraud can occur in the raw material, in an ingredient, in the final product, or the food’s packaging.
Food fraud costs consumers $30 to $40 billion a year worldwide, according to PwC analysis. Key examples include the Chinese milk scandal in 2008 where baby milk powder contained toxic industrial compound melamine, killing six babies. In 2013, England faced a scandal where its beef burgers contained pork and horse meat instead.
With a long and complicated supply chain involving layers of management including wholesalers, distributors and retailers and rising food prices, it’s not surprising to see these long supply chains compromised. Food fraud in the last decade has steadily increased as organized criminals who have long trafficked drugs are diversifying into food. Criminals can easily intercept the supply chain and substitute, add, dilute, tamper or misrepresent food, food ingredients or food packaging. Food fraud often occurs when the potential for gains is high, and the risk of getting caught is low.
WHY CURRENT CONTROL MEASURES FAIL
Current control measures include food and safety management, quality control system as well as food safety managers and staff. External controls include food safety agencies, anti-fraud regulations, and law enforcement agencies.
Unfortunately, quality control systems were initially used to ensure food quality and not originally designed to prevent fraud.
Large companies currently test for food fraud by testing specific known adulterant substances that have been susceptible to food fraud in the past. Unfortunately, criminals will always be searching for new substances or methods that cannot be detected by the current system.
Not only does management need to take into account deceptive criminal behavior and their economic incentives, but they need to allocate a significant budget to continuously monitor incidents and market conditions to test for likely adulterant substances.
BLOCKCHAIN ADDS TRACEABILITY TO FOOD SUPPLY
The blockchain represents significant potential to trace long and complicated supply chains. Unlike current food safety and quality management approaches, the blockchain does not require third-party authorization. Instead, participants must obey a set of rules. The system is therefore valuable in the supply chain where compliance is difficult to assess, and trust is low.
With blockchain, food producers can easily identify attempts to alter a product and notify the necessary parties or authorities. This prevents the same incident from passing onto the retailer. If the product did make it into retail shelves, retailers could easily recall any tampered products. The traceability of blockchain removes the need for costly batch recalls days, or even months, after contamination. For consumers, the transparency and openness provided heightens consumer trust and reassures them that the food they eat is what the label says.
CURRENT BLOCKCHAIN PROJECTS IN THE FOOD INDUSTRY
Although blockchain technology is fairly young, food giants including Nestle, Unilever, Walmart, Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Company and Tyson Foods have started to integrate blockchain technology on their supply chain.
In 2016, Walmart studied the feasibility of blockchain technology, testing the supply chain of pork in China. The team announced in June 2017 that it took only a few minutes to retrace the origin of their products. The data also contained product origin, batch number, original factory, processing methods, expiration date, storage temperature, and distribution details. Without blockchain technology, this data would have taken several days to collect.
Evan Fraser, Canada’s Research Chair in global food security and director of the Arrell Food Institute at the University of Guelph, believes that Canada should adopt Blockchain technology and become a key player in the agricultural industrial revolution.
Private enterprise blockchains will, therefore, have a significant impact on the supply chain in the food industry. Although criminals will brainstorm new ways to cheat the system, blockchain technology can quickly detect tampering. In the future, it may become predictive, identifying attempts to tamper before they happen.
Although Satoshi Nakamoto created blockchain technology for financial purposes, it has significant ramifications for every industry, including the food industry and the continuous fight against food fraud.