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Food Fraud: More Than Just Economic Injury
“Do you really know what kind of fish you’re eating?” And why that’s such an important question?
As recently reported in Food Safety News, food fraud (by way of species substitution) presents more than a risk of ripping off consumers. Pregnant women may be unwittingly exposed to toxins, gastric distress, and allergens from consuming seafood that is not what it purports to be. Honest employees of fishing companies, distributors, and retailers that sell genuine products can lose sales and their jobs.
U.S. Senator Barbara Boxer (D-CA) recently asked the FDA to increase its efforts to reduce seafood mislabeling. For bad actors, increased “traceability and enforcement . . . from bait to plate” presents risks of criminal prosecution and civil damages from class action litigation. However, for seafood companies that adopt best practices, it also provides promotional and marketing opportunities.
Country of Origin Labeling (COOL) Fraud: A Worldwide Problem
Today’s edition of Dairyreporter.com reports that numerous Chinese infant formula manufacturers are allegedly falsely claiming that their products were manufactured in New Zealand. At least one company, Abid, allegedly falsely claimed a product endorsement from Prime Minister John Key.
Why is this Happening?
Chinese consumers are willing to pay a premium price for NZ baby formula due to its perceived safety and quality advantages over Chinese-made products. Chinese consumer confidence in the safety of domestically-produced food has declined over the last year, and dairy products are the number one imported food in the country. In just June and July 2012, Chinese firms recalled infant formula and milk products contaminated with mercury, aflatoxin, and lye. These recent problems demonstrate that the country still needs to improve its food safety and quality after the 2008 melamine-contaminated infant formula disaster that implicated 22 companies.
Why should my Company Care about COOL Fraud?
Companies should consider proactively addressing country-of-origin labeling (COOL) fraud to reduce the risk of brand dilution, lost sales, and injuries to their customers. New Zealand has a top-three country brand name. Some of its manufacturers are specifically marketing their products as being “safe” or “tamper proof,” based on the country’s strong food safety and environmental standards. Higher Western food safety standards present an opportunity to boost sales to Chinese consumers. COOL fraud also may present risks of civil and criminal liability as well as conviction in the court of public opinion.
Customers are (Still) Willing to Pay More for Safer Food
Today’s top story on Marler Clark’s Food Safety News site discusses a study (re-)confirming that people are willing to pay more for safer food. (The March 2011 Deloitte Consumer Food Safety Survey reached a similar conclusion.) However, as with most risk management plans, this recent study confirms consumers consider a cost/benefit analysis and will not pay an unlimited amount for minor safety improvements.
The bottom line for manufacturers, grocers, and restauranteurs: your customers will pay more to avoid food-borne illness (although they will not pay unlimited sums for minor food safety improvements), and a comprehensive food safety risk management plan may also reduce the costs and risks of litigation and lost brand value.
Food Processing Companies: Are You Prepared for a Recall?
Please see my new article in FoodProcessing.com regarding the lessons Renfro Foods learned from conducting a recall.
Customers Will Pay More for Safer Food
The March 2011 Deloitte Consumer Food Safety Survey confirms that customers are aware of food safety issues, and they are willing to pay more for safer food products. Food processors, distributors, and retailers may all benefit from this trend by developing and implementing food safety risk management plans.
Customers are Aware of Food Safety Issues
According to the Deloitte survey, 73 percent of consumers are “more concerned than they were five years ago about the food [they] eat,” an increase of eight percentage points over 2010 figures. The top five food safety concerns include ingredient safety, toxins and chemicals in packaging materials, and contracting a food-borne illness. About 91 percent of consumers think the number of food recalls has stayed the same or increased since the prior year.
Consumers Concerned about Safety of Fresh and Imported Foods
Consumers generally reported the greatest safety concerns about fresh foods, such as meat, fish and seafood, and fruits and vegetables. Fresh food producers, distributors, and retailers may benefit from developing, implementing, and regularly updating their cold chain risk management and HACCP plans to maintain and improve food safety to minimize the risk of food-borne illness and food recalls (as well as the risks of litigation and lost brand value).
Consumers Hold Manufacturers and Retailers Accountable for Food Recalls
More than three-fourths of those surveyed told Deloitte that they hold manufacturers responsible for communicating food recall information. A majority expect that retailers will also notify them about food recalls. Critically, almost 20 percent of consumers reported they would buy “somewhat more expensive” products that included traceability information, compared to lower-priced products without it. These data highlight the need for food growers and manufacturers, distributors, and retailers to adopt and implement food recall risk management plans before a problem arises to meet your customers’ rising food safety demands. (You will be able to read more about food recall risk management plans in my upcoming July 2011 publication).
“Gluten Free” Update: Baker Behind Bars
Paul Seelig, the owner of Great Specialty Products, has been sentenced to 9-11 years in prison for falsely representing to his customers that his bread was gluten free. According to testimony from one of his former employees, Mr. Seelig also told customers that his products were “homemade,” even though he apparently just repackaged baked goods he bought at various stores.
The takeaway message (other than the obvious: follow the law) is that customers rely on a company’s representations, so it is important for those representations to be correct, documented, and verifiable. Even if Seelig had truthfully represented that he tested his products weekly, he failed to produce any records confirming this at trial. “Get it in writing” is as true now as it ever was; do you think your customers expect (and pay for) any less?
