Cracking down on fraud in China's food industry

Global food retailers turning to companies which use technology to track food supply chains

BEIJING •A bowl of ice cream on a hot day in Shanghai gave American Mitchell Weinberg the worst bout of food poisoning he could recall. It also inspired the then trade consultant to set up Inscatech - a global network of food spies.

In demand by multinational retailers and food producers, Inscatech and its agents scour supply chains around the world hunting for evidence of food industry fraud and malpractice.

In the eight years since he founded the New York-based firm, Mr Weinberg, 52, said China continues to be a key growth area for fraudsters as well as those developing technologies trying to counter them.

"Statistically, we are uncovering fraud about 70 per cent of the time; but in China, it is very close to 100 per cent," he said. "It is pervasive, it is across food groups, and it is anything you can possibly imagine."

Mr Weinberg's company is developing molecular markers and genetic fingerprints to help authenticate natural products and sort genuine foodstuffs from the fakes. Another approach companies are pursuing uses digital technology to track and record the provenance of food from farm to plate.

Mr Shaun Rein, managing director of Shanghai-based China Market Research Group, said: "Consumers want to know where products are from."

He added that services which help companies mitigate the reputational risk that food fraud poses is a "big growth area".

Some of the biggest food firms are backing blockchain technology, essentially a shared, cryptographically secure ledger of transactions.

Wal-Mart Stores, the world's largest retailer, was one of the first to get on board. It has completed a trial using blockchain technology to track pork in China, where it has more than 400 stores.

Mr Frank Yiannas, Wal-Mart's vice-president for food safety, said the time taken to track the meat's supply chain was cut from 26 hours to just seconds using blockchain, and the scope of the project is being widened to include other products.

Alibaba Group Holding, too, sees the potential for the eight-year-old technology to provide greater product integrity across its platforms, which accounted for more then 75 per cent of China's online retail sales in 2015. The planned blockchain project will involve the Chinese e-commerce behemoth working with food suppliers in Australia and New Zealand.

Fraud costs the global food industry as much as US$40 billion (S$54.4 billion) annually, according to Mr John Spink, director of Michigan State University's Food Fraud Initiative.

The wiliness of fraudsters is what makes Inscatech's Mr Weinberg less hopeful about blockchain.

His firm mainly uses informants on the ground to sniff out where in the production process food fraud is taking place, and most of his work in China is with Western companies that manufacture or source products there.

"The problem is the data is only as reliable as the person providing it," said Mr Weinberg. "In most supply chains, there is one or more 'unreliable' data provider. This means blockchain is likely useless for protecting against food fraud unless every piece of data is scrutinised to be accurate."

But blockchain, Wal-Mart's Mr Yiannas said, is "light years" away from the system used by the global food industry today, which relies heavily on paper records. By recording the identity of those who input data into the chain, the technology removes the anonymity that has helped food fraud to thrive, he said.

The role of humans in recording the supply chain will also diminish, said Mr Yiannas. "More and more of these documents will eventually be captured in an automated way."

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A version of this article appeared in the print edition of The Straits Times on August 09, 2017, with the headline 'Cracking down on fraud in China's food industry'. Print Edition | Subscribe