Food Fraud

Many people’s first introduction to food fraud was the 2013 horse meat scandal, where horse meat was found in a significant number of products pretending to be beef. Although perhaps unappealing, from a safety perspective it could have been much worse if other products had been substituted with more dangerous products. It none the less brought food fraud to the top of many people’s minds resulting in a call for greater traceability and scrutiny. The covid pandemic risked food fraud becoming increasingly common as supplies chains become stretched, suppliers had to be replaced and traceability and supplier due diligence weakened. A recent report suggested that counterfeit incidents had risen by 47%, according to the Food Authenticity Network.

So, what is food fraud?

Food fraud can take the form of the following:

• Adulteration: part of the finished product is fraudulent, for example horse meat being included in beef burgers
• Simulation: a product is faked to look like a legitimate product, for example by being repackaged or genuine packaging being reused and refilled with a counterfeit product
• Diversion: a legitimate product is distributed outside of intended markets, often to avoid duties, royalties or commission.
• Tampering: often involving the use of fraudulent packaging or altering information on that packaging, for example best before dates being altered or the list of ingredients being changed.

Examples of food fraud uncovered by Operation OPSON, a joint operation targeting fake and substandard food and beverages by the EU, included:

• Tampered expiry dates on cheese and chicken.
• Products falsely claiming to be organic in order to be sold at higher prices.
• Sunflower oil made to look like extra virgin oil through the addition of chemicals.
• Meat waste, prohibited for human consumption, found in minced beef and oxtail.
• Low-grade coffee fraudulently labelled as 100% Arabica.
• Meat with falsified documentation concerning geographical origin.
• Undeclared peanuts used as a bulking agent in other nut products.
• Counterfeit alcohol - reusing original bottles, fraudulent labelling and the blending of cheaper wines.
• Dietary food supplements containing illegal substances.

What is the impact on suppliers and consumers?

The impact of food fraud can be both a safety and financial issue. Businesses who are involved in food fraud have to deal with the cost of regulatory action and fines along with the cost of reputational damage and the loss of consumer confidence.

Harmful ingredients may end up in the food chain if they are less expensive or more easily to obtain than the legitimate ingredient. With a growing number of allergies, substitution and fraudulent labelling could have significant and fatal consequences.

Even if safe products are used they will not have gone through sufficient checks for quality control and traceability before being released in the market.

As well as the impact on health, food frauds lead to a loss of consumer trust which can result in products and brands being boycotted leading to significant financial implications for the producers and retailers.

Supply chains are becoming increasingly international, often involving several jurisdictions, therefore labelling and traceability become increasingly important to consumers. More people are buying food online which increased significantly during the pandemic due to travel restrictions is particularly vulnerable to food fraud where the origin may be less clear.

With the rising costs of food and the current cost of living crisis there will be more incentive for fraudsters to target food.

So, what are the solutions?

Smart packaging is one of the best solutions and investment into this technology is increasing significantly. Smart packaging is effectively intelligent packaging with the packaging capable of carrying out functions, such as detecting, registering, locating and communicating in order to ease improve safety and quality, provide information and warn of possible problems. Smart tags are used to quantify how much of a commodity was produced and where it came from, staying with the shipment as it goes through a supply chain.

Security codes, such a QR codes, and holograms labels are also useful anti-counterfeiting packaging solutions helping to protect against simulation fraud.

Adulteration could be solved by giving certification to trusted businesses, which might also help reduce red tape and lead to systems and process improvements in the sector.

Another way to reduce food fraud is to ensure sufficient due diligence on suppliers it conducted, especially if you are required to change suppliers. Regular quality and safety audits along with supply chain transparency help to reduce the risk of food fraud, all of which have come under pressure initially from the pandemic and the resulting supply chain issues and now through labour shortages. Using reputable suppliers is key to any business but is particularly important in the food and beverage sector where safety is important.

How can Crowe support you?

Crowe can help you assess your supply chain due diligence and systems via our risk team, help if you become subject to fraud and support your business’ cash flow through Research and Development tax claims for example where packaging is being developed. Our VAT and Customs teams can also help with your compliance to ensure that your products are correctly classified and the correct duty is paid. We can also provide services across our global network to support your business.