Certified Fraudulent

As consumers, we are often concerned with how safe our food is (consider the 2010 scandal where melamine laced baby formula killed six infants and hospitalized 54,000 babies in China, or the recent strawberry needle scandal back home in Australia), yet a growing concern for farmers, producers and consumers is that of food fraud — the substitution or misrepresentation of food.

While food fraud is not new, the motivation to tamper, substitute or dilute food and food products for financial gain is growing and is estimated to cost the global food industry US$30 to $40 billion every year. The intricate and complex nature of food supply chains, with multiple participants and cross chain activity, leaves them ripe for fraud and adulteration. Traditionally, supply chains lack upstream visibility, with many participants taking a ‘one up, one down’ approach to traceability, which does not cover the full spectrum of suppliers working to produce one specific food item.

We take a look at just a few of the latest food fraud cases below.

Organic vs. Non Organic

In a recent landmark case in Iowa, USA a number of grain producers and farmers have been sentenced to more than 10 years prison after fraudulently selling over a hundred million dollars of non organic grain as organic grain. The effects of this case have rippled through the supply chain, managing to dupe multiple players at different points in the chain. The scam was led by a Missouri farmer who colluded with other grain farmers and purchased grain that had been both sprayed with unauthorized chemicals and mixed with non organic grain. The grain was then onsold as organic animal feed for cattle and chickens which, when finished, were sold at a premium price to end consumers as organic meat.

 

null

 

Wine

The name Rudy Kurniawan is famous in the wine industry, but now for all the wrong reasons; Kurniawan is currently serving a 10 year sentence in prison having been the first person convicted of wine fraud. His name was once trusted in the wine industry, selling rare vintages at sky high prices to collectors around the world but in 2013, his luck changed. Kurniawan was found guilty of filling bottles with cheap wine and corking and sealing them before affixing replica premium labels on them and taking them to auction. Manufacturing up to 12,000 bottles a year from his kitchen at home, it is estimated Kurniawan is responsible for around $550 million of counterfeit wine in the auction market.

 

null

 

Honey

In 2018 Australia’s own Capilano Honey was accused of selling ‘fake’ honey. Despite being labelled ‘pure’ and ‘100% honey’, expert testing found samples of Capilano’s ‘Allowrie’ honey — a brand that blends local and imported honey had been ‘bulked up’ — mixed with rice or beet syrup. While China is now the world’s largest producer of honey, it is also gaining a reputation for adulterating and blending honey for export in an attempt to keep up with demand. While Capilano stated they were confident in their supply chain and the suppliers they sourced honey, retailers and consumers were not, with Coles and Woolworths removing the brand from their shelves. In January 2019, Capilano retired their Allowrie branded honey — the product at the centre of the scandal, stating they would no longer import any honey and would transition across to a 100% Australian product only.

null

 

Solving for Trust & Transparency

Food fraud is an age-old issue; people have been diluting wine with water, adding ash to pepper and packing flour with chalk all the way back to the 13th century and no doubt before that too. And whilst we have imposed audits, certification processes and government regulations to deter counterfeiters, there is still a long way to go in improving the integrity and transparency of supply chains, and ultimately, the trust between participants.

Blockchain and distributed ledger technology, when coupled with supporting digital technologies and physical monitoring devices, hardware and smart infrastructure, embody the essential properties required to bring traceability, security, and anonymity to the food supply chains. The World Bee Project, in conjunction with Oracle is introducing blockchain technology to improve the honey supply chain by improving traceability of honey from hive to store and helping to prevent adulterated honey from finding its way into stores. Participants use Oracle’s blockchain platform to capture, store, and share information across the supply chain providing an immutable ledger of all data and transactions that act to validate the exact origin of honey products at the point of sale.

 

null

 

With the help of scientists, a verification process that includes obtaining and storing a pollen ‘signature’ from the hives’ surrounding plants is part of the data stored on the blockchain. Honey cannot be certified as a single source or unadulterated if other pollen signatures are found in the product. Additionally, blockchain technology verifies the origin of the honey at the point of sale, enabling beekeepers to sell their products at a higher price, and reassuring end consumers that the honey products they are buying are pure.

In the wine space, Australian led blockchain company Everledger a digital ledger that specialises in tracking and protecting valuable assets such as diamonds launched the Chai Wine Vault , a joint collaboration with fine wine expert and authenticator, Maureen Downey.

The Chai Wine Vault authenticates wine through a process that captures 90+ data points, including the bottle’s ownership, storage history, bottle glass, cork, label, and even the glue used on each label. Once this data is captured and high resolution photos are taken, a digital thumbprint is created. This thumbprint is then stored on a counterfeit resistant tag that is attached to the bottle top or capsule, and a permanent record on the blockchain is created. Deactivation alarms also mean the system will be alerted if the wine has been broken into or opened, working to eliminate fraud via refilling and resealing bottles labelled with expensive names and vineyards.

Each time the wine is sold to new owners the digital proof is updated, adding a layer of transparency to every stage of the bottle’s journey through the supply chain. Blockchain has meant a digital turning point for the wine industry — preserving the provenance of fine wine and fundamentally changing the way luxury goods are exchanged. While wine producers and traders are assured the digital timestamps are accurate and record keeping by previous owners has not been tampered with, wine buyers and collectors can feel confident in the digital verification, authenticity and value of their asset for years to come.

At AgriDigital, our vision is for simple, easy, and secure supply chains from farmer to consumer and we believe blockchain is crucial to unlocking this. In a 2017 pilot project, we worked with CBH Group, Australia’s largest exporter of grain. One of the primary objectives of this project was to verify a batch of organic oats on the blockchain by tracing the movement of organic oats from the farmgate, through processing and milling to a retail customer. In the pilot, AgriDigital’s commodity management platform in conjunction with Geora (the blockchain protocol developed by AgriDigital and now being open-sourced to the broader community as Geora), were used to record essential data on the provenance, storage, transport and batch treatment of the oats. These data points were bundled into various assertions, with each assertion representing an event or claim critical to proving the oats were indeed organic all the way through supply chain from farm to shelf. The assertions were then hashed and recorded on the blockchain layer. Using a complex analytics model, scanning a QR code at the point of sale produced a report either confirming or denying the organic status of the oats.

Whilst blockchain is still in its infancy, particularly in the grains and cotton industries, at AgriDigital we are dedicated to digitizing the supply chain and future proofing through the implementation of blockchain and complementary technologies thereby improving the traceability and transparency of food and fibre. Blockchain can also be used to drive back-office efficiencies through smart contract driven workflows and reducing risk for financiers and sellers. Stay tuned for how we are using blockchain as part of our inventory supply chain finance products enabling previously under or unbanked sectors of the grains and cotton industries to access flexible working capital. We are passionate about building digital trust between supply chain participants and see this as key to increasing efficiency across markets, eliminating food fraud and improving food safety for consumers.

You can read more about our blockchain pilot projects here: https://www.agridigital.io/reports/blockchain-pilot-report

For further information on the AgriDigital platform, contact us: hello@agridigital.io