The high cost of food fraud, and how to stop it
Food fraud can have a devastating impact on consumers and companies alike. All cases involve defrauding consumers, and in the worst case scenarios, people can get sick or die. This article will review some recent high-profile cases of food fraud and the effect they’ve had on consumer trust. It will then identify several technology solutions companies can use to prevent food fraud along their supply chains.
Food fraud is a growing problem worldwide. Also known as economically motivated adulteration (EMA, cf. intentional adulteration), food fraud occurs when the ingredients in the product don’t match the ingredients on the label. Typically, it takes the form of less expensive products being substituted for or marketed as more expensive ones. According to a commonly cited estimate, food fraud is a $50 billion industry. To put that in perspective, in 2017, the U.S. organic food market was $45 billion.
Food fraud can have a devastating impact on consumers and companies alike. All cases involve defrauding consumers, and in the worst case scenarios, people can get sick or die.
But even instances that don’t pose health risks can have wide-ranging negative effects on the food industry. A recent study found that a single case of food fraud can diminish the perceived value of all products in the category, and a 2014 UK report found that reducing the cost of fraud in the commercial sector could boost profits by 34%.
This article will review some recent high-profile cases of food fraud and the effect they’ve had on consumer trust. It will then identify several technology solutions companies can use to prevent food fraud along their supply chains.
To test how cases like this impact consumer perceptions of value, researchers at the University of Nebraska-Lincoln had consumers read an article about fraud involving specific brands of EVOO and then assign a value to different brands. The results shows that incidents of fraud negatively impact the perceived value of the entire category, not just the specific brands implicated.
In that case, the main damage to consumers was paying premium prices for a non-premium product. But it wasn’t the first time olive oil fraud has been in the news. In 1981, more than 20,000 people were sickened and 300 died when a Spanish producer labeled rapeseed oil intended for industrial use as olive oil.
A decade later, the impact of this scandal is still rippling throughout the food industry in the form of lost trust. A 2017 McKinsey survey found that 53% of Chinese parents preferred foreign brands of infant formula.
Melamine has also been found in pet food and wheat gluten. The FDA has suggested that the compound was added to artificially inflate the products’ protein levels.
According to food safety specialist Chris Elliott, this case put food fraud on the EU’s radar in a way it had never been before. “There’s now much more effort from people to understand their supply chains, where they’re trying to get their materials from and what the risks from fraudulent activity might be,” he told The Guardian.
It also put food fraud on consumers’ radars. A 2016 study found that the incident damaged consumer confidence in the industry, and that shoppers changed their purchasing habits as a result, buying fewer processed meat products and opting for locally sourced products.
Here are 5 tools to help you ensure the integrity of your supply chain.
Food fraud can have a devastating impact on consumers and companies alike. All cases involve defrauding consumers, and in the worst case scenarios, people can get sick or die.
But even instances that don’t pose health risks can have wide-ranging negative effects on the food industry. A recent study found that a single case of food fraud can diminish the perceived value of all products in the category, and a 2014 UK report found that reducing the cost of fraud in the commercial sector could boost profits by 34%.
This article will review some recent high-profile cases of food fraud and the effect they’ve had on consumer trust. It will then identify several technology solutions companies can use to prevent food fraud along their supply chains.
Food fraud: 3 high-profile incidents
Extra virgin olive oil that isn’t really extra virgin
Olive oil is one of the most commonly counterfeited foods. This fact came to the public’s attention in 2015, when the National Consumers League (NCL) issued a report suggesting that a significant amount of extra virgin olive oil (EVOO) in the United States wasn’t extra virgin at all. The NCL tested 11 types of olive oil and found that only five of them met the criteria for EVOO. They concluded that either the producers were deliberately trying to pass a cheaper product off as EVOO or that they were “careless” about setting “best by” dates (EVOO degrades over time).To test how cases like this impact consumer perceptions of value, researchers at the University of Nebraska-Lincoln had consumers read an article about fraud involving specific brands of EVOO and then assign a value to different brands. The results shows that incidents of fraud negatively impact the perceived value of the entire category, not just the specific brands implicated.
In that case, the main damage to consumers was paying premium prices for a non-premium product. But it wasn’t the first time olive oil fraud has been in the news. In 1981, more than 20,000 people were sickened and 300 died when a Spanish producer labeled rapeseed oil intended for industrial use as olive oil.
Melamine-laced infant formula
Ten years ago, in what is known as the Chinese milk scandal, an estimated 300,000 infants in China drank formula laced with melamine, a compound used in plastics — 54,000 infants were hospitalized and six died of kidney problems. A total of 22 companies were involved in the scandal (Melamine was found in infant formula in the United States as well, though the amount was below the permissible level.)A decade later, the impact of this scandal is still rippling throughout the food industry in the form of lost trust. A 2017 McKinsey survey found that 53% of Chinese parents preferred foreign brands of infant formula.
Melamine has also been found in pet food and wheat gluten. The FDA has suggested that the compound was added to artificially inflate the products’ protein levels.
European horsemeat scandal
In 2013, processed beef products, including frozen burgers and ready meals, made by companies in the UK and exported across Europe were found to contain horsemeat. Some were 100% horsemeat. Three men from two different companies were later convicted of conspiracy to defraud.According to food safety specialist Chris Elliott, this case put food fraud on the EU’s radar in a way it had never been before. “There’s now much more effort from people to understand their supply chains, where they’re trying to get their materials from and what the risks from fraudulent activity might be,” he told The Guardian.
It also put food fraud on consumers’ radars. A 2016 study found that the incident damaged consumer confidence in the industry, and that shoppers changed their purchasing habits as a result, buying fewer processed meat products and opting for locally sourced products.
Tools to help battle food fraud...and gain back consumer trust
Although food recalls get much more press, food fraud incidents can be just as damaging for processors and manufacturers. Like recalls, these incidents diminish consumer trust, which in turn leads to changes in buying behavior. Many of the strategies used to protect against recalls — like increased transparency and supplier verification — are also effective ways to combat food fraud.Here are 5 tools to help you ensure the integrity of your supply chain.
Food Protection and Defense Institute
The Food Protection and Defense Institute (FPDI) provides a number of resources to help combat both economically motivated and intentional adulteration. These include training courses, consulting services, communication and coordination tools, and more. The FDPI also has a Food Adulteration Incidents Registry, which you can find here.Decernis’ Food Fraud Database
This database, originally developed by U.S. Pharmacopeia and now owned by risk management solutions company Decernis, is “a continuously updated collection of thousands of ingredients and related records gathered from scientific literature, media publications, regulatory reports, judicial records, and trade associations from around the world.” It’s not cheap (~$100/month), but a subscription will get you access to not only the database, but also a tool to help you identify potential EMA hazards in your own supply chain.EU Food Fraud Network
The EU Food Fraud Network was established in the wake of the horsemeat scandal to facilitate cross-border collaboration when incidents arise. The EU has also set up a Rapid Alert System for Food and Feed (RASFF) to get the word out as soon as possible.Food Fraud Vulnerability Assessment and Mitigation
PwC and SSAFE collaborated to create a food fraud vulnerability tool to help companies identify their risks. This free tool supports the Consumer Goods Forum's Global Food Safety Initiative (GFSI) guidelines. Download your copy here.Third-party software
Several companies offer software to help you identify possible risks:- FoodLogiQ Connect supplier management software will give you greater visibility into your supply chain.
- EMAlert is a vulnerability assessment tool developed by the Grocery Manufacturers Association (GMA) and Battelle.
- Optel provides traceability solutions to verify the authenticity of your products.
- SpecPage product lifecycle management (PLM) solution provides a single source of truth for data across a product’s entire lifecycle.
To learn about more tools to combat food fraud, as well as the approaches other organizations are taking, join us at the American Food Sure Summit next February.
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