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The growing challenge of food crime

Food crime is Big Business, with annual revenues estimated to be in the neighbourhood of 50 billion US dollars (over 42 billion Euros). The business is also growing, potentially much faster than its legitimate counterpart. Nevertheless, new market forces after the financial crisis are likely to exacerbate the problem further. Among them are declining brand loyalty, the internationalization of supply chains and the emergence of online shopping.

 

Scandals underline global scale
Olive oil: top target for fraud


Wide range of opportunities



Fraud is accompanied by counterfeiting, the burgeoning but less sensational side of food crime.
The counterfeit food business is especially vulnerable to a fall in brand loyalty, accompanied by the growth of private label, lack of transparency in supply chains, and the growth of online shopping. For some, it is ironic that rather than the threat to Coca Cola from brands like Coca Colla in Bolivia or to Diageo from Johnny Worker whisky in India, the problem with food and beverages counterfeiting has moved to the heart of industrialized countries.

Young consumers and food crime


Low brand loyalty in sector

The picture is somewhat different in Europe.


Price can swing choice

In June 2015, a report by European brand consultancy Europanel reported that brand trust and price were not uniformly correlated across Europe. High price brands were generally more trusted in France, Germany, Italy and the UK. The situation was reversed in the Netherlands and Spain, where expensive brands were less trusted, while in Scandinavia, low price brands obtained the maximum trust.

The supply chain, cost control and food crime risk
As a result of the financial crisis (and changes in consumer behaviour), the food industry is also seeking to lower shelf prices by reducing cost. This pressure has transferred down the supply chain, with a search for alternative new sources.
Smaller downstream suppliers (e.g. of primary or semi-processed farm products), who are already at the low margin end of the business, see cutting corners as an element of survival. Several food fraud scandals cited at the beginning of this article have been the result of precisely such pressures. For counterfeiters, too, a search for new suppliers by the food industry offer multiple, untraceable opportunities to undercut traditional partners and make their goods enter the supply chain (often in the form of raw or semi-processed farm products, additives and ingredients).


Retailers versus the food industry
The need for price- and cost-control have impacted directly upon retailers and food companies.
Last year, British retailer Tesco and Unilever settled a bitter public dispute over wholesale prices. Unilever, which makes several food products outside the UK, demanded a 10% rise in prices to compensate for a drop in the value of the pound. Tesco retaliated by dropping some Unilever brands. Eventually, the two resolved their differences.



Counterfeits and the Internet
Indeed, the Internet has become a major facilitator for trade in counterfeit food and beverages, by permitting marketing and sales around the world. 

Stand-alone websites too offer their own set of challenges, given the lack of control on domain names and trademark infringements, and the mimicking of marketing techniques from legitimate websites. Cross-border efforts at control such as the joint INTERPOL-Europol Operation IOS VI in 2015 led to the closure of just 1,000 sites trafficking fake goods, in spite of participation by counterfeit hotspots such as Hong Kong, China, Panama and Thailand.
Currently, one of the biggest areas for attention is social media. Counterfeiters have begun to set up profiles to lure users out of social media and into online marketplaces in the Internet to sell counterfeit food and beverages. One of their means to attract victims has been advice on areas like health and organic foods.

Health risks range from poisoning to death
The above developments underline the challenges of counterfeit and fraudulent food products.
In addition, there is another consideration - namely health risks to consumers from counterfeit products. These can range from poisoning to death. For example, more than 40 people were killed after drinking methanol-contaminated vodka and rum in the Czech Republic in 2012.


Operation Opsen
Ellis made these comments after the conclusion of Operation Opsen, an annual Europol-INTERPOL initiative launched in 2011, targeting counterfeit and adulterated food and drink.
In April of this year, Opsen VI (to mark its sixth year of operation) reported seizure of 9,800 tonnes, over 26.4 million litres and 13 million units/items of potentially harmful food and beverages. The goods, worth an estimated 230 million euros, ranged from every day products such as alcohol, mineral water, seasoning cubes, seafood and olive oil, to luxury goods such as caviar. In total, more than 50,000 checks were undertaken at shops, markets, airports, seaports and industrial estates.
The results of Opsen are diverse. In 2017, they ranged from seasoning cubes in France and peanut-contaminated hazel nuts in Germany, counterfeit mineral water bottles and wine in Italy to canned sardines nearing expiry date which were repackaged in Portugal. Goods seized during Opsen V the previous year included meat from monkeys, olives painted with copper sulphate and sugar laced with fertilizer.
One of the most interesting aspects of Olsen is the growing number of participants. It involved 61 countries in 2017, up from 57 last year and 47 in 2015.

The menace of transnational, organized crime



Machinery availability and food crime
This kind of migration up the counterfeit value chain is accompanied by the diffusion of high-quality packing and labelling machinery, in many cases sold online. Opsen III in 2014, for example,  discovered such equipment to be central to an organized crime network in Italy producing fake champagne. Evidence of such practices however go back several years.
In the mid-2000s, for example, US energy drinks vendor Living Essentials found that lower cost Spanish-labelled version of its products from Mexico were being relabelled with English-language labels and sold to US retailers at a deep discount.

From food to medicines
Food and beverages counterfeits are already close to medicines. However, the nearly unregulated area of performance enhancers is becoming a major area of concern. One example is the peptide hormone, GW1516. This  candidate drug for metabolic and cardiovascular disease was associated with serious toxicities during clinical trials. It was abandoned by its developers, GlaxoSmithKline and Ligand in 2007, after animal tests showed that the drug caused cancer to develop rapidly in several organs. GW1516 (also known as GW501516) is available for purchase on several websites as a tablet, liquid and in powder form, for performance enhancement. Another such product are weight loss pills, such as DNP, which have been linked to the deaths of several young women.

On its part, industry has not been idle. Top global food brand owners have joined forces to form a Food Fraud Think Tank at Michigan State University. Founders include Cargill, Danone, Hershey, Mars, Mondelez, and supermarket chain Wegmans. The aim of the project is to develop best practices for managing risks related to food fraud and counterfeit.
MSU says that its think-tank is unique in focusing on the root cause as well as the resource-allocation decision-making needs when it comes to food fraud, which include a broad range of adulteration, misbranding, tampering and overruns or licensee fraud, to theft, diversion, simulation, and counterfeiting. The decision-making coming out of its research could be for individual companies, entire industries, specific agencies, or even entire governments, it adds.


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