Rise in Food Industry Fraud and Malpractices

With the potential to impact consumer trust, finance and brand value, fraud is the biggest challenge in consumer goods industry. Fraud in the food industry is also rising, with the involvement of third-party service providers. This has resulted in the significant rise in the frauds that are difficult to track. Moreover, with the emergence of new distribution channels such as e-commerce, the supply chain has become a source of new fraud. Counterfeiting and economic adulteration of food products are also on the rise.

China emerges as key growth area for food fraudsters and malpractices

According to Inscatech, the global food fraud detection firm, China continues to be the biggest market for food fraudsters and even for the companies developing technologies to counter them. According to Mitchell Weinberg, President and CEO of Inscatech, the food fraud in China is close to 100%, it’s across the food groups and is pervasive. Scandals in China are also on a rise over the past decade, from rat-meat dressed as lamb to melamine-laced baby formula. Meanwhile, the world’s largest food consuming and producing nation has emerged as the home for contaminated, counterfeit and corrupted food.

Inscatech is also developing genetic fingerprints and molecular markers to help differentiate and authenticate natural products for fake once. While other companies are also using various approaches such as the use of digital technology to track and record each movement of food throughout the supply chain from farm to plate. As consumers are interested to know where the food they are consuming is coming from.

With Chinese food companies becoming part of global supply chain, it is becoming important to establish services that help mitigate the risk of food fraud. However, some companies have started using the technology known as blockchain, a cryptographically secure ledger of transactions. For instance, Wal-Mart used blockchain technology in China, in more than 400 stores. This reduced the time took to track meat supply chain from 26 hours to just a few seconds. Hence, it is also planning to use the technology across other products.

According to the director of Michigan State University’s Food Fraud Initiative, the annual fraud cost in the global food industry is as much as $40 billion. A study by Pew Research Center in 2016 found that 40% of people in China view food safety as the biggest issue.

Meanwhile, with the development in technology, fake food producers are also updating their technology to elude inspection. Weinberg also pointed out that the presence of unreliable data in the supply chain is also impacting protection against food-fraud and even blockchain can be useless unless each and every data in the supply chain is examined carefully to be true.

By Shambhu Nath Jha

Shambhu Nath Jha with an experience nearing a decade, has helped over 50 large and medium to small business enterprise to foray into new markets, increase footprint in the existing bucket and understand the nature of the beast. These beasts are the companies that have been primarily engaged in chemicals, material or packaging activities, and encountering challenge either in maintain P&L or staying ahead of their competitors. He has authored over 300 industry research papers consisting critical information such as market growth, total addressable market, serviceable addressable market, market size, forecast, player strategies, market share estimates and winning imperatives along with recommendations. He is also the pioneer of “three slope distributor/off-taker evaluation model” used by several multinational companies to track the performance of channel partners. A consultant by profession, writer by mood and explorer by desire, Shambhu Nath is currently employed with a London based market research and consulting firm as a full time consultant. A few of the industry verticals where he demonstrated his skill includes water and wastewater treatment chemicals, high purity alumina, water purifiers, activated carbon, chloramine filters, bio-based bioplastics, water purifiers, textile chemicals etc.

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