Food fraud and technology - opportunities and limitations

In brief 7 min read

The high-profile ‘fake honey’ scandal has made food fraud front-page news in Australia in 2018. With the ACCC having now concluded its honey investigation, due to ‘testing uncertainty’, we explore how new technologies like blockchain could potentially assist in preventing food fraud.

What is food fraud?

According to the Codex Alimentarius Commission,¹ food fraud is the intentional adulteration of food for financial gain. This can include deliberate substitution, dilution, counterfeiting; misrepresentations about food, ingredients or packaging; or false and misleading statements about a product.

Food fraud is big business. It has been estimated that it costs the global food industry more than $50 billion each year.

According to the Codex Alimentarius Commission, food fraud is the intentional adulteration of food for financial gain. This can include deliberate substitution, dilution, counterfeiting; misrepresentations about food, ingredients or packaging; or false and misleading statements about a product.

Food fraud is big business. It has been estimated that it costs the global food industry more than $50 billion each year.²

The ‘fake honey’ scandal

Under the Food Standards Code, products sold as honey in Australia must be ‘the natural sweet substance produced by honey bees from the nectar of blossoms …’ This means that products sold as honey cannot be adulterated with sugar syrups that are not honey.

In September 2018, claims emerged in the media that certain honey sold in Australian supermarkets was adulterated. Germany’s Quality Services International Laboratory had been commissioned to conduct two types of tests on 28 samples of honey, each containing a blend of Australian and imported ingredients. One type of test was the official C4 test that the Department of Agriculture in Australia uses, and the other was nuclear magnetic resonance screening (NMR).

The C4 test analyses the plant source of the sugars. Bees most commonly feed on flowers that produce sugars using the C3 pathway. Cane sugar or corn syrup, commonly used to dilute honey, are C4 sugars and will be picked up by the C4 test. The C4 test may be inadequate, however, for picking up newer forms of substitution. 

For example, rice, beet and wheat syrups all come from C3 plants, and could potentially pass the C4 test undetected.

The results of the German NMR testing indicated that 12 out of the 28 samples had been mixed with wheat and beet syrup. All 28 samples passed the C4 test. The most high-profile brand affected by the German testing was Capilano, whose ‘Allowrie’ branded products (of blended Australian and imported honey) were found to be adulterated. 

Following the release of the German results, a study that Macquarie University conducted using NMR purported to show that 18 per cent of 38 samples of Australian-sourced honey showed adulteration.

ACCC honey investigation

In light of the claims in the media, the ACCC launched an urgent investigation into the Australian honey industry. In particular, it sought to investigate allegations that Capilano breached the Australian Consumer Law in relation to representations about its ‘Allowrie’ honey and other products (labelled ‘pure’ and ‘100% honey’). 

On 17 November 2018, the ACCC announced that it had concluded its investigation. Capilano had taken steps to provide assurance, and the ACCC’s investigation did not uncover any other evidence that supported the allegation ‘Allowrie’ honey was adulterated with sugar syrup. Critically, the ACCC had been advised that NMR testing is not yet reliable enough to determine whether honey is adulterated and (consistently with the approach of regulators in the UK, US and EU) should not be used as a basis to support legal action. It was also evident to the ACCC that there is low confidence in the current C4 test method.

Challenges in supply chain management

The ‘fake honey’ scandal nevertheless highlights the difficulties that companies may face when trying in good faith to secure their supply chains, particularly for imports with limited upstream visibility. Food fraud, by its very nature, is designed to be hard to detect. Detection can be further complicated in the case of products like honey, where, as the outcome of the ACCC investigation confirms, testing can produce uncertain results.

Historically, supply chains have been managed through a combination of legal and commercial arrangements, which has resulted in a proliferation of documentation without necessarily providing transparency. Increasingly, businesses are turning to technological solutions to provide additional surety as to the authenticity and provenance of goods moving through their supply chain.

Blockchain

One technology that has been the subject of significant attention is ‘blockchain’, or distributed ledger technology. At its simplest, a blockchain, or distributed ledger, can be described as a shared information record, which records and validates information across the entire network of participants. Unlike centralised databases, each member of the network has an authentic copy of the data that is shared across the network; and that is updated and verified against all other users’ versions of the ledger, to ensure veracity. While there have been many different proposed use cases for the implementation of blockchain technology, it appears to be particularly well suited to assisting with ensuring trusted data exchange between multiple third parties that are invested in the same data set. This is particularly so for business processes that require transparency, or the reconciliation and confirmation of data between different sources.

How can blockchain help the food industry?

In the context of the food industry, the blockchain has the potential to track and trace food products as they move through the relevant parts of the supply chain. The goal of this will be to improve supply chain management, better monitor the provenance and source of food for the purpose of quality and fraud control, and increase consumer confidence in the origin and characteristics of the products they are buying.

Significant players in the food industry are in the process of trialling and implementing blockchain to track and trace food products throughout the supply chain. For example, French retailer Carrefour has implemented blockchain solutions to track and trace chickens, eggs and tomatoes from primary producers, to enable them to better trace the origin of products, identify the source of any potential food hazards, more narrowly manage the fallout of any recalls, and reduce risk to consumers.³ This also plays a key role in combatting food fraud, as with better data, entities are better able to identify and resolve issues of fraud from participants in the supply chain. Carrefour, along with other companies like Walmart, is implementing IBM’s ‘Food Trust’ system, which is a solution for food supply chain management.

However, like many technology solutions to business problems, blockchain is not a silver bullet to solve the issue of food fraud. While it offers potentially significant improvements in information exchange and transparency, ultimately its effectiveness at preventing food fraud depends on the quality of data entered into the system. The technology itself cannot prevent fraudulent information being supplied/entered, and the method of data entry into the system will have a direct impact on its effectiveness. For example, if the data entry is manual, significant opportunity for mischief will remain. As data capture and verification become more automated, these risks will be reduced. However, even when data is directly entered through technical means, such as through the scanning of a barcode on a package, this still relies on the source of data (the barcode) accurately reflecting the contents (the ultimate product).

These outcomes will continue to improve, with the addition of other technologies to better scan and test food products, to either link directly to the product (rather than a package), or even to run forms of qualitative assessment as part of passing through the supply chain. For example, the Australian beef industry is already using edible barcodes applied to Australian meat for export, in an effort to counter fraudulent sales of meat passed off as Australian. Further, the combination of blockchain technology with ‘smart contracts’ that can take a data input from an external measurement or sensor and use the data to assess whether a payment should be made, or title should pass, may result in fraudulent or low-quality food being identified, or even rejected, at a much earlier stage.

Could blockchain have helped honey producers avoid or answer the ‘fake honey’ scandal? The answer is probably ‘not yet’, given the significant testing requirements to identify the issues (although it might be able to assist in pinpointing the source of the alleged adulteration). Over time, as data from testing and measurement systems combines with blockchain and smart contracts, we are likely to see the food industry and consumers have far greater oversight and control over food supply chains than they have at present.