Getting what you’ve ordered

By James Pomeroy

In Canada the food manufacturing supply chain is becoming more and more complex. Higher costs and competition have pressured companies to find less expensive suppliers with the hopes of increasing their profitability. But as food manufacturers extend their supply chain globally and to more diverse suppliers, their exposure to potential food fraud increases substantially.

It’s estimated that food fraud costs the global food industry US$30 billion to US$40 billion a year. Food manufacturers in particular are at risk from fraudulent activities related to the quality of the products they source. Examples of fraudulent activities include:

• Substitution: Passing off one ingredient for another.
• Concealment: Hiding the real quality of a product.
• Dilution: Mixing a lower-quality ingredient into a higher-quality ingredient.

If exposed, some fraudulent activities may simply erode customer trust in the quality of a product. But other activities can cause serious food safety issues, such as transmission of foodborne illness, or consumers having allergic reactions to unlisted ingredients.

For a food manufacturer, the consequences of food fraud, regardless of where it occurs in their supply chain, can be catastrophic. And with the prevalence of social media today, a company’s reputation can dissolve in minutes. Companies can also face harsh regulatory and legal penalties if found to be at fault or negligent.

So what can food manufacturers do to lessen exposure to food fraud? As a starting point, companies need to think more proactively about food quality and safety. To do this, food manufacturers should:

• Take responsibility: Given the complex regulatory environment globally, companies should take responsibility for the quality and safety of the products they source and introduce controls to confirm products are as expected.

• Conduct a self-assessment: Companies should regularly evaluate their organization’s exposure to potential food fraud. Identifying gaps and introducing risk mitigation activities are important parts of this evaluation.
• Understand stakeholder requirements: Food manufacturers should identify the food quality and safety requirements of upstream stakeholders to make sure processes are in place to manage compliance.
• Identify and incorporate best practices: The Government of Canada provides guidance on importing food products, including recommended controls that can help protect organizations from food fraud. Companies should identify and incorporate these controls and other industry best practices within their operations.
• Use prevention and detection technologies: Companies that are at a high risk of food fraud should consider identifying and implementing technologies to improve the traceability of their products, thus decreasing fraud at all stages of the product life cycle.

Incidences of food fraud may be on the rise, but food manufacturers which understand and manage food fraud risks will be well positioned to guarantee the quality and safety of their products. The trust of their customers, retailers and end consumers depends on it.

Use our free food fraud assessment tool at www.pwc.com/foodfraud to help identify potential risks to your organization.

James Pomeroy is a director in PwC Canada’s Forensic Services group. He is based in Halifax, Nova Scotia. Contact him at james.a.pomeroy@pwc.com