It was 15th January 2013 and the horsemeat scandal had just broken. The outrage across the UK and Ireland was palpable, with the question of how this had happened at the forefront of discussions. What had transpired was a systematic attempt to defraud suppliers and consumers – one that impacted over 29 products, from supermarket pasta sauces to fast food burgers.
While an outraged response was understandable from both religious and health perspectives, it also signalled a wider concern that, somewhat alarmingly, food packaging labels were no longer to be trusted. Given the big brand names and retailers involved, it also showed that no-one was infallible. The scandal shone a spotlight on the complexity of supply chains in the industry, with most suppliers and retailers conceding that they had no knowledge of the tampering that had occurred before the meat was sent to them for use.
But the lack of knowledge didn’t just affect retailers. It shook confidence in the industry overall, with the sales of red meat dropping and retailers shifting to more local suppliers.
In a bid to understand the cause of the scandal origins and prevent further incidents, a number of measures were put in place, including:
While these measures have had varying degrees of success, the practice of food fraud doesn’t seem to be going anywhere. The meat and wholesale market is particularly vulnerable due to its larger profit margins and what we’re seeing is fraudulent activities being orchestrated not just by individual ‘rogue’ companies, but a steady rise in the involvement of organised crime syndicates.
When you think of organised crime, food fraud probably isn’t the first unlawful activity that springs to mind. But, when you consider the vulnerabilities and potential for profit there is in the sector, it starts to make a bit more sense, especially given that other typically criminal activities, such drug trafficking and arms smuggling, are much more high-risk and carry much stricter criminal sentences. This emerging trend, as you can imagine, is not good news for the meat industry. Organised crime brings with it, well, organisation – more sophisticated technologies for defrauding the industry, as well as more money and networks dedicated to pulling off larger scale activities across multiple countries.
In terms of the types of fraud taking place, there are a number of examples. The mislabelling of species, as with the horsemeat scandal, sees cheaper cuts of meat being sold as something it isn’t. Think of something being categorised as lamb, but actually being a much cheaper meat such as goat.
Another issue is the misrepresentation of origin, where cheaply cultivated meat is labelled as organic and/or locally sourced to attract a higher premium. There is also the fraud of selling meat from animals that have been stolen, illegally slaughtered or illegally poached. Whilst there isn’t an official measure of how much this is costing the UK, studies have suggested that this figure could be as high as £1.17billion.
A recent example of just how wide-reaching the effects of food fraud can be is the collapse of meat supplier Russell Hume and the loss of up to 300 jobs. An unannounced inspection revealed issues with use-by-date labelling, which led to a product recall. Large losses and the subsequent halting of operations hit hard and its directors were forced to place the company in administration.
Mislabelling isn’t just bad news for business, either. For consumers, the health implications of eating meat that is wrongly labelled, such as higher fat content, or the risk of exposure to disease if meat hasn’t been through the proper quality checks, is cause for concern. The impact on purse strings can be felt too, with the effects of lost earnings from illegal activity being passed on to consumers through price increases.
When trust in an industry is worn away, the level of work required to restore faith can be monumental. If we look at the Financial Services sector following the 2008 crash, not only can trust represent an emotive issue for consumers, but it can impact all elements of the supply chain, bringing with it stricter sanctions and regulations.
The financial repercussions are vast too, with consumers looking to alternatives such a non-meat options or local butchers. Retailers may also look to smaller suppliers to provide products in order to keep their level of trust with their consumers, further impacting the supply chain.
KFC’s recent supply issue showed how supply chain issues can have much wider-reaching impact when a change in their logistics provider led to stock issues and temporary store closures. With a hefty marketing budget and a sturdy bottom line, KFC should be able to come out of this relatively unscathed, but considering other recent scandals, it doesn’t do the food industry any favours.
A continued dialogue between private companies and authorities will be paramount in catching and bringing to justice those who are looking to defraud the system.
One outcome has been a worldwide approach to food fraud, with 47 countries now involved in co-ordinating their investigations under the operational name ‘Opson’ - a Greek word for food.
The food industry also needs to become more open in its reporting of problems. This will put pressure on agencies such as the Food Crime Unit and the police to define the types of fraud happening and encourage a joined-up approach in the reporting of these issues.
Continued efforts to increase transparency within supply chains and decrease complexity will also play an important role. Asking suppliers for information and understanding contracts will be key to this, as will embracing new technologies and a continued focus on culture within the supply chain.
While these measures are there to protect the industry, we may, at least for a while, see them impacting suppliers in terms of additional cost, whether through a slow-down in productivity while the focus is on implementation, or due to purchase of new equipment to enable these changes. Depending on the financial hit to suppliers, this too could ultimately work its way down to consumers.
Both of these approaches, along with additional food regulations and the impact it’s having on the market will be the theme of our final article in this series.