Food fraud is not new. Indeed, laws against food adulteration can be found as far back as ancient Greece and Rome, where sellers of fake corn seeds or impure spices could be mutilated or burned at the stake. Yet, today, food fraud has major economic consequences for food retailers, who lose as much as $15 billion (USD) annually due to lost sales and product recalls. In this article, we’ll discuss the impact of food fraud, and identify steps that retailers can take to mitigate its effects.
What is food fraud?
Food fraud is generally defined as the deliberate or intentional substitution, addition, tampering or misrepresentation of food, food ingredients or food packaging, or making false or misleading statements about a food product, for the purposes of economic gain. The most common type of food fraud is adulteration, in which a specific named ingredient is substituted with another ingredient, often one of lesser quality. However, food fraud can take other forms as well, including:
- Tampering — Using a legitimate food product or packaging in a fraudulent manner, such as changing the food expiration date.
- Over-Run — Producing legitimate food products in excess of production agreements, which leads to underreporting of actual production.
- Theft — Passing off stolen food products as legitimately procured, resulting in the co-mingling of legitimate and stolen food products.
- Diversion — Selling legitimate food products outside of intended markets, such as when food products intended for relief purposes are diverted for commercial sale.
- Simulation — Selling illegitimate food products designed to look like legitimate food products, such as “knock-off” versions of popular foods.
- Counterfeiting — Violating the intellectual property rights of legitimate food producers by copying all aspects in a fraudulent product.
Reasons for the increase in food fraud
The increase in incidents of food fraud worldwide can be attributed to several factors. Perhaps the most important factor is the expanded global marketplace for food and food products. Retailers worldwide are now able to leverage global supply chains to source food products from around the world, allowing them to provide their customers with access to the widest possible array of food choices. But global supply chains are difficult to manage and even more difficult to monitor, increasing the likelihood of fraudulent practices.
The rise of commercial activities via the Internet has also helped to foster the increase in food fraud. Internet-based food suppliers can more easily mask their identity or their location, and pass off counterfeit food products with little fear of the potential consequences. And enforcement against food fraud is more complicated across jurisdictional borders.
A silent global food crisis is also a contributing cause to the rise of food fraud. The world population is expected to double by 2050, yet farm production is not projected to keep pace with global food demand, especially in developing countries. The combination of poor economic conditions, the increased demand for food and rising food shortages present ideal conditions for fraudulent activity, including food fraud.
Finally, some have linked the rise in food fraud to organised crime syndicates. Law enforcement and food safety officials are seeing increased instances of food fraud perpetrated by crime cartels, who prefer the relative safety in trafficking in counterfeit foods over drugs and narcotics, or who may use the proceeds from adulterated food operations to fund other illegal activities.
The consequences of food fraud
The impact on public health is probably the most visible consequence of food fraud. In one incident alone, the melamine adulteration of milk powder in China in 2008, nearly 300,000 infants suffered health consequences, with more than 50,000 hospitalisations and six deaths.
But the consequences of food fraud extend beyond the obvious risk to public health. They include:
- Increased costs — As noted earlier, according to some estimates, the annual cost associated with food fraud is nearly $15 billion annually, which includes the cost associated with product recalls and lost sales.
- Failed businesses — The cost of just one food fraud incident averages between two and 15 percent of a company’s annual revenues. While some large food producers can absorb a financial impact of this magnitude, the economic viability of smaller companies could be placed at significant risk, especially in cases where multiple products are affected.
- Damaged brands — Food brands that have been linked to fraudulent activities will also surely experience a loss of market share. Even if they eventually recover, damaged brands can take years to gain back consumer confidence. Comparable products from other producers can also suffer lost sales as consumers seek out alternative products.
Steps retailers can take to address food fraud
As the front line of defence against food fraud, retailers have a critical role to play in reducing the incidence of food fraud in the market place. At a minimum, food retailers can take the following actions to help fight food fraud:
- Rigorous procurement practices — Food retailers should deal exclusively with reputable manufacturers and suppliers who share their commitment to the sale of safe food. Some examples of rigorous vendor procurement practices can include evidence of certification to key food safety standards, and submission of reports from vendors and suppliers regarding the purity of raw food ingredients.
- Supply chain monitoring and testing — Regular, periodic testing by an independent third-party of products from supply chain partners can be an effective method of detecting potential food fraud. In many cases, the mere presence of a formal monitoring and testing programme signals to suppliers and supply chain partners an organisation’s commitment to fraud-free food products.
- An established product recall process — Having an established product recall process in place can save valuable time when it comes to alerting consumers and removing fraudulent or unsafe food products from store shelves.
- Reporting food fraud — The U.S. Pharmacopeial Convention administers a comprehensive food fraud database (available here) that serves as a repository for food ingredient fraud reports. The database also allows retailers and consumers to report on instances of food fraud they encounter.
Working together with manufacturers, producers, supply chain partners and consumers, food retailers can take these and other steps to effectively reduce the overall incidence of food fraud. In doing so, they can help to ensure the safety of food and food products that they market to consumers.