Fighting food fraud

With more cases of fake foods being uncovered, grocery retailers need to ensure they’re getting the real deal

In the years since the highly publicized U.K. horsemeat scandal in 2013, food fraud has continued to make headlines: criminal gangs in Italy are exporting fake extra-virgin olive oil; less expensive honey is being sold as Manuka honey; and ground coffee is being tested by researchers in Brazil for fillers like corn, soybeans and starch syrup. It’s no wonder consumers are waking up to food fraud.

A recent study from Dalhousie University in Halifax found 63% of Canadians are concerned about food fraud—food products that have been deliberately mislabelled, adulterated or are otherwise counterfeit. The study, Food Fraud and Risk Perception, also found nearly 43% of respondents believe they have purchased a counterfeit food item at some point. When asked to identify where they purchased a fraudulent food product, two-thirds of respondents said at a regular grocery store.

“The seed of doubt has been planted,” says Sylvain Charlebois, dean of the faculty of management at Dalhousie. He doesn’t think there’s more food fraud today—it’s been around for thousands of years—but we now have the technology to track and trace it. “Most importantly, expectations have changed,” he says. “People know food fraud is out there; they’re starting to ask questions and they’re expecting the supply chain to become transparent.”

How concerned are Canadian grocery retailers about food fraud? David Wilkes, senior vice-president of government relations and grocery division at Retail Council of Canada, says there are a variety of regulations and checks and balances in place to guard against fraud. “For the most part, we have not seen the challenge around food fraud increasing,” he says. “We do have the expectation from our suppliers that the products we’re purchasing are properly labelled and identified, and we’re seeing good compliance with that.”

Art Smith, CEO of supply chain standards organization GS1 Canada, agrees that, though food fraud isn’t a huge issue in Canada compared to other countries, “it’s one of the issues that we have to pay attention to.” He goes on to say that, as supply chains get longer and become increasingly global, they become more complex. “One weak link can destroy the brand at the end of the chain.”

Smith adds that consumers are demanding more transparency about the food they buy. “They’re holding the retailer accountable for what’s listed in stores.” On top of that, Charlebois says many retailers have private label brands, which makes them highly vulnerable. “If they don’t defend their private labels, they may actually make their own labels more vulnerable.”

While there’s no hard data on food fraud in Canada, the Grocery Manufacturers Association estimates fraud costs the global food industry between US$10 billion and US$15 billion a year, affecting approximately 10% of all commercially sold food products. Other estimates peg it as high as US$49 billion. The costs are due to factors such as lost revenue, increased costs for recalls, decreased market share and damage to brand reputation.

“The risks are huge,” says John Keogh, founder and president at Toronto-based Shantalla, which provides advisory services in areas such as supply chain and product and consumer safety. “Obviously, you have the financial risks and brand equity.” He points out that the horsemeat scandal devalued Tesco’s stocks by £300 million (about CDN$530 million). “That can be quite significant to a brand.”

While the horsemeat wasn’t a health hazard for consumers, the scandal brought to light a serious issue. “It pointed to the fact that retailers risk not being in control of their supply chains, and when you’re not in control of your supply chain, you have more vulnerabilities,” says Keogh.

Another big risk of food fraud is public health. In cases of economically motivated adulteration (EMA), products are diluted with lesser-value ingredients. “If there is an ingredient in there that is not specified, and someone is allergic to that ingredient, it becomes a problem,” says Charlebois.

Not surprisingly, the Dalhousie University study found consumers with food allergies (as well as older, more educated consumers) are more likely to be more concerned about food fraud. In addition, those who experienced food fraud firsthand said they are far more likely to trust themselves and other consumers to manage the risks than they are to turn to government or industry. However, those who had not experienced food fraud suggested that industry and regulators could help mitigate risks.

So, what can retailers do to guard against food fraud? “For retailers, it’s not business as usual,” says Shantalla’s Keogh. “There are counter measures that they need to put in place. Number one starts with having a shared understanding through their supply chain of the standards, so that all of their trading partners use the same standards.” He adds that some retailers will use internal codes, but that doesn’t work with a multi-party supply chain.

With GS1 standards—the best known is the barcode—retailers can track products at every stage of the supply chain. “GS1 standards are like a shared language, but they’re also interoperable,” says Keogh. “So, regardless of which technology the company is using, they can still talk to each other.”

Another key tool is supply chain mapping, which Keogh says is starting to grow. “There are technology companies that help facilitate global mapping of supply chains. When you map your supply chain, you can look at the different nodes on the chain and then look at vulnerabilities you may have. You have to look at the different countries and even regions within the country that you’re sourcing products or ingredients from.”

Retailers can also undergo food safety audits to help mitigate the risk of food fraud. SGS Canada, for example, has a new program called Food Safety Program Optimization (FSPO). Victor Muliyill, food technical program manager at SGS North America, says the program functions within regular Global Food Safety Initiative (GFSI) certification, but offers better risk protection to retailers. This is achieved “by auditing vendors through a rigorous, risk-focused approach to veriable food-safety control by deep diving into key aspects that could increase risk,” says Muliyill. “One of these key risks is food fraud.”

The FSPO approach researches hazards, quantifies risk using a risk-builder tool kit, and provides training on how to rebuild risk-focused food safety management systems. “The comments SGS has received on the FSPO approach is that it’s refreshing in its focus and results,” says Muliyill.

One technology that’s emerging is blockchain, which can be particularly useful to guard against counterfeit products and food safety issues. Blockchain technology is essentially a shared digital leger where all financial transactions are recorded, providing transparency and a way to trace transactions.

Walmart is currently testing blockchain’s capabilities to improve food safety. Last October, the U.S. retail giant launched a pilot project with IBM and Beijing’s Tsinghua University to improve the way food is tracked, transported and sold to consumers across China. In a press release, IBM noted that with blockchain, food products can be tracked from an ecosystem of suppliers to store shelves and, ultimately, to consumers.

“When applied to the food supply chain, digital product information such as farm origination details, batch numbers, factory and processing data, expiration dates, storage temperatures and shipping details are digitally connected to food items and the information is entered into the blockchain along every step of the process,” the release stated. “Each piece of information provides critical data points that could potentially reveal food safety issues with the product.”

While not yet in the retail realm, DNA testing is also an important tool to detect food fraud. The Biodiversity Institute of Ontario at the University of Guelph, a pioneer in this field, revealed widespread seafood fraud in 2007, and has done ongoing work in this area. A 2011 study, for example, looked at seafood samples from five Canadian cities and found 41% of fish was mislabelled, and the majority was sold as species of a higher market value. The institute is currently collaborating with the Canadian Food Inspection Agency to conduct investigations on items such as ground meats, spices, dairy, oils and honey.

In 2015, German grocery retailer Metro launched PRO trace, a smartphone app that displays the origins of fresh fish and meat. Using a double-layered barcode developed by GS1, consumers can see information on where the fish was caught, when the fish was harvested, and where and when it was processed. For a number of meat products, the app provides details on the origin, process, quality and sustainability of the items.

“Fish is a tricky category because it’s hard to understand what type of species you’re dealing with; there’s lots of obscurity in that field,” says Charlebois. “Transparency through data offered to consumers in real time is always very powerful, and I suspect that more grocers will do that in the future.”

This article appeared in the June 2017 issue of Canadian Grocer.

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