Food fraud: the $71 billion dollar question

In 2008, Fonterra alone lost $140 million as a result of the melamine poisoning scandal in China through its 43%-owned Sanlu brand. In 2013, it caused an international scare when milk-products, incorrectly thought to be contaminated with Botulism, were pulled off shelves.

The reputational damage – both to Fonterra and to New Zealand - is unquantifiable and China continues to focus on heightened food security in its own supply chain, and in products imported from all over the world, including New Zealand.

Dunedin-based Oritain's CEO Grant Cochrane says that an unsecured supply chain is high-risk. "We've had issues with deliberate tampering in this country and it's the kind of nefarious act that threatens the entire industry, as well as New Zealand's reputation overseas.

"Last year, food fraud affected an estimated 10% of global food supply and cost New Zealand companies millions. We're talking about the deliberate and intentional substitution, addition, or tampering of food or ingredients, counterfeiting of food packaging or false claims about a product for economic gain."

Cochrane says that not all food fraud poses a public health risk, but every incident does impact New Zealand's standing as a 'clean green' and trustworthy export partner.

PwC's Sally Bernstein (Boston) says that food fraud is more damaging to a company's brand and revenues than unsafe food.

"While the latter is close to a worst-case scenario for any business in the food industry, the cause can usually be pinpointed, and addressed ... the organisation's reputation can be salvaged.

"Food fraud, however, means that someone somewhere is motivated to adulterate or counterfeit the food for financial gain. It suggests greed for easy money at the expense ... of the consumer.

Bernstein goes on to say that well-known international food fraud incidents, such as horsemeat being passed off as minced beef and melamine being added to dairy products, have motivated the food industry to take a hard look at their vulnerabilities to food fraud, and do something about it.

Grant Cochrane says that Oritain was established with that in mind. "We exist to prove food origin and protect company reputation," he says.

Verification of origin

"One of our clients, Lewis Road Creamery, became a household name almost overnight. The demand for their chocolate milk quickly grew beyond their capacity to supply, leaving an opportunity for fraudsters to pass off second-rate (fake) 'Lewis Road Creamery' products.

"Lewis Road Creamery came to us to help ensure that the reputation of their brand and the integrity of their products remained rock solid," says Cochrane.