Food fraud is big business

Fraud in the food and beverage sector is big business – for both bad and good reasons.

The obvious bad reasons are that globally, the cost of food fraud is estimated at over A$50B each year, and ranks among other illicit trades, including illegal timber, drug and people smuggling, in terms of scale and profitability.

Australia’s global reputation as a supplier of high quality and safe food and wine makes it a target for counterfeit products.

In general terms food fraud is the passing off of an inferior product for a more valuable one. Such activities can provide big profits for those involved in counterfeiting. But one of the key problems is that customers don’t get what they are expecting and this can massively devalue a brand that is the target of counterfeiting. Even a single food fraud incident can be devastating, and can cost companies 2-15% of annual revenue.

Australia’s global reputation as a supplier of high quality and safe food and wine makes it a target for counterfeit products. Some estimates place substitution rates of Australian wine in Asia at 50% or higher, particularly for more expensive brands. Recently 14,000 bottles of fake Penfolds wine were seized by Chinese customs officials.

Other counterfeit products can cause human health concerns, for example the colouring of inferior quality oranges with potentially poisonous dyes to make them more orange. And some counterfeiting can be fatal – we all remember the adulteration of infant formula milk in China. In this case melamine, a plastic precursor, was used as a cheap white replacement and resulted in the hospitalization of 54,000 babies, and death of six.

What’s more the impact of fraud on Australian products is set to increase, due to increasing international trade, globalisation of value chains, Australia’s reputation for  producing high-value, premium food and wine products, and growing economic importance of IP rights.

The good news is that due to demand to combat food fraud, there are now a plethora of technologies available to help identify food origins. But a number of these technologies are in the early stages of application and adoption, and some may not continue into broader scale uptake, except maybe in niche markets.

If I were to make a comparison, I would say we are at the early stage of video player technology – we are evaluating the equivalent of VHS, BetaMax and Philips for food fraud verification technologies. And as we all know, it’s not necessarily the best product which comes to dominate a market – BetaMax and Philips were widely considered to be superior technologies, but VHS won out though marketing.

The same technologies developed and using DNA to track trade in illegal logging are now being applied to a wide range of food an fibre products. Photo credits: Double Helix Tracking Technologies

So what do we need to look out for with food fraud busting technologies?

Digital blockchain and remote surveillance technologies – the technology behind bitcoin allows products, and particularly packaging, to be tracked along supply chains. The problem is that manipulations and substitutions of the product within packaging is difficult to detect. However, if a product enters a country or region which is well known for counterfeiting, this can be traced and used to check supply chain integrity. Block chain is being applied in some fibre markets, and Fonterra and Nestle now have an operational block chain system for their dairy and oil products. Another interesting remote tracing technology is satellite surveillance, which has been used successfully to monitor overfishing and illegal harvest activities of boats operating in and around Australian waters. Ships displaying questionable behaviour – spending time in conservation reserves or meeting up with large amounts of other boats (likely to be exchanging products) – can now be tracked in realtime and targeted by coast guards or fishing authorities.

External tracers and edible inks – a traceable marker can be applied to a product whether it be seafood, steaks or vegetables, which can then be tracked along supply chains. A range of technologies are at play in this space, including microdots which can be read under a microscope or handheld scanning devise, edible inks which can change if temperature profiles are not maintained, and inert chemical or immunological sprays which can be easily detected even if highly diluted in solid or liquid food products. Once the safety of these products is verified, they can be easily applied and detected. But fraudulent application of tracers remains a relatively simple and real issue.

Biomarkers – the inherent and unique DNA, chemical, carbohydrates or proteins of a food product can be used to determine the species of animal or plant in a product (e.g. tuna not dolphin), the origin (Australia not China) and also food safety status (e.g. good to eat for another 10 days). These technologies (e.g. stable isotopes and DNA) are being applied to verify a range of food and fibre products in Europe and America. But one of the problems is that validation still needs to be done in a lab, and so there is a time delay for analysis, typically several days. Miniaturising and developing field tests for these technologies are perhaps some of the most promising applications of anti-fraud technologies, particularly if they can be put in the hands of customers.

So we are in interesting territory with anti-fraud technologies, and we will have to see which one becomes the VHS of food fraud. My prediction is that a combination of these techniques will end up being applied, particularly for higher value products, as several of the methods offer complementary benefits.

This blog post is adapted from an article originally written by Prof Andy Lowe for The Australian Financial Review and appeared 10 August 2018.

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