Why anti-counterfeiting spend for food is set to skyrocket

Datamatrix code on tomatoIn 2008, in one of the world's worst recent food scandals, the Chinese government  seized 76 tons of infant formula laced with melamine.  The chemical apparently was added to make the formula appear higher in protein.  It can also be a deadly poison. 

The milk sickened 300,000 people, and six infant deaths were reported.

The apparent aim: to squeeze more revenue in an industry where margins are razor thin.

Since that time, a lot has happened. Spending on anti-counterfeit, anti-fraud packaging for food has crept up to $26.3bn.  Nothing to sneeze at.  But that amount is about to jump, in spectacular fashion, according to a May report by Allied Market Research. In an alarming red flag, spending will nearly triple, to $62.9bn by 2020, according to Allied’s researchers.

Some of the reasons for the big spike in spending are fairly clear: incidents of adulterated foods, like the milk in the 2008 China incident have steadily increased, joining food-borne diseases, and cheap food and beverage imitations as threats to consumers and the food industry.  About 10 per cent of the food we now buy is likely adulterated, and 7 per cent may have fraudulent ingredients.   According to the US Center for Disease Control, 3,000 people die from food poisoning annually.

"Higher health risk, and economic damage to manufacturers" will result, sums up Allied.

But other motivating factors lie deeper, and may be surprising. For one thing, keeping track of food items in a world where supply has become globalized, and extremely fragmented, is not easy - or cheap.

In the US, over half of the fruits and a quarter of the vegetables consumed are imported from abroad.  One country alone, Chile, is the source of 8 per cent of produce.

At the same time, points out food standards organization NSF International, the diversity of foods - and therefore of suppliers - is astronomically higher than decades past.  Fifty years back, the typical grocery store carried 200 food items, grown or produced within a 100 mile radius.  Today, a shopper in a modern supermarket typically chooses among 39,000 offerings, originating from points 1400 miles distant on average.

Result: the industry is faced with tracking individual items through a world-wide maze of suppliers.

And then there is the drought. Or more specifically, the worldwide drought conditions which threaten to inflate already volatile food prices. 

Globally, starting in the year 2000, food prices have been in turmoil with periodic highs, and reaching crisis proportions in the summer of 2012. All those factors which have driven prices higher are still in place.

Meanwhile, some of the world's most fertile growing regions, like California, Mexico, Brazil and West Africa, have been drained by a years-long drought, and are struggling to find enough water to sustain crop volumes.  Last month, for example, a group of large California growers agreed with the state to take significant lands out of production for lack of water.  Fruit, vegetable, and meat prices all could be pushed much higher.

So if the law of supply and demand holds up, food prices are in for even more of the same.  As the magazine Mother Jones puts it, the era of $7 broccoli may be upon us. And with high prices comes opportunity for counterfeiters.

New anti-counterfeiting food packaging technologies offer to address the problem.  Track and trace systems seem to be in the plans of many in the industry: the Allied report sees RFID and barcoding as taking the lion's share of the anti-counterfeiting market.  At the same time, new authentication technologies, layered solutions and hybrids have become available just in the last few years.

Whatever technology becomes dominant, it better keep its costs down.  Currently, it is the smaller players who cannot afford the expense of track and trace or authentication solutions.  And these gaps are fatal to true "soup to nuts" protection for the industry.

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