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LRF

Current challenges in the food and beverage industry.

In his second part of the article, Vincent Doumeizel, our voice on food, beverage and sustainability addressed challenges faced in the food and beverage industry, and what can we do about them?

Food fraud - a global issue on a global scale

Both food fraud and lack of traceability are direct consequences of the production issue. As there's such a strong demand compunded by a lack of supply, inevitably - and regrettably - there's a major growth in food fraud cases.

The statistics alone give significant cause for concern; as an example, every year:

  • There are ten times more olive oil from Italy than the country could actually produce.
  • We know that 30% of the fish is incorrectly labelled and you are not getting what is on the packaging

To illustrate the concerning creativity of food fraud, I always like to remember the story of a big retailer in China. I was working with them some years ago and they realised that in order to boost the protein level of the soya sauce, the supplier was fermenting the soya sauce with human hair! This example is just one of some of the fraudulent creativity which is affecting the supply chain.

Lack of traceability

Global and fragmented supply chains can result in a lack of traceability; multiple small stakeholders – often with no barriers to entry - mean that in some networks, anybody can produce food.

So this fragmented market can result in very low levels of visibility; any big food brand will have a pretty good understanding of their tier one suppliers. However, when it comes to tier two it's more complicated and tier three's can have up to 18 or 20 different layers. This results in a lack of transparency across the entire food supply chain. So that's a big problem as well and it's global and it's international.

Environmental and social responsibility

Perhaps the biggest responsibility for all of us is our environmental impact and social responsibility. We are the first generation to truly recognise these issues, to know that our food production system is one of the biggest contributors of greenhouse gas (GHG) emissions. We need to consider alternative energy and food sources to mitigate the depletion of natural resources, land erosion, deforestation, massive pollution of the land and the ocean and water scarcity - to name but a few.

We need to recognise that our food system has a degree of responsibility for an explosion of non-communicable disease including obesity, diabeties, autism and cancer. We’re the first ones to acknowledge that our food system is partly responsible for this explosion of modern slavery, yes - modern slavery. There are 25 million people in a state of modern slavery today; 25 million that is twice more than over the 300 years of human traffic between Africa and America. We’re talking about child labour, forced labour, human trafficking and so forth.

So what can we do about it, what is the point? At LR, we deliver audits on responsible sourcing to make sure that organisations are doing what it takes to slavery free products. We should all be curious, look at what's behind the brand, look at what this label means because you've got the power to change it. You are the driver of the change. In the food system clearly you are the driver; each time you eat and drink you vote for the world you want.

Affordability

Another issue is low income and margins; food needs to be affordable. In France and Western Europe, average share of revenue per household dedicated to food moved from 25% to 8% within 40 years. This in turn creates the problem of investment in the food supply chain and the balance in the revenue from food production. To put this into context, out of the 800 million people that are starving to death today, 700 million of them are farmers. So those who can and who should produce the food are the ones who are starving; that's a problem.

Social media and brand reputation

There is no doubt that a significant issue is social media exposure but for me it's an issue and an opportunity.

  • An issue because there is a lot of information on social media and it's a big risk for the food brands and sector as a whole. As an example, let me remind you that back in 2011, there was an E.coli outbreak in north Germany. The German health authorities, without results of ongoing tests, incorrectly linked the O104 serotype to cucumbers imported from Spain. Later, they recognised that Spanish greenhouses were not the source of the E. coli and cucumber samples did not contain the specific E. coli variant causing the outbreak. Spain consequently expressed anger about having its produce linked with the deadly E. coli outbreak, which cost Spanish exporters US$200 million per week. Russia banned the import of all fresh vegetables from the European Union from early June until 22 June 2011. This example illustrates the viral nature of social media and the impact it can have with companies often going bankrupt, simply because of what was a one-week rumour on the internet.
  • Many forward thinking organisations serving the food sector see social media as an opportunity. Let's take Nestlé as an example; they have 600 people dedicated to monitoring and influencing discussions on social media. They recognise that it's their responsibility to be able to define what is true or fake in these online discussions and help to ensure that they keep their brand - and consumers - safe. It's a huge opportunity for all of us because we have direct access to these organisations; we have a direct access to the food industry and our voices can be heard.

I will be releasing the final part of "Bringing food safety, supply and sustainability to life through the Lloyd's Register Group", where we will be focusing on future proofing the food supply chain.

Interested in finding out how we can help your organisation?

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