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Giving groceries the stamp of approval through blockchain

Written by Steven Skinner, SVP, retail and consumer goods consulting, Cognizant
23/06/2017

When you think about counterfeit goods, often your mind goes straight to high-end clothing or accessories. Low cost, yet seemingly high quality and genuine products are mass produced, often fooling even the die-hard fashionistas. The word ‘fake’ does not necessarily resonate with food though, despite the horsemeat scandal from a few years ago.

However, food fraud is a growing concern. A recent investigation by the Washington Post found that £36 million of ordinary soybeans were intentionally labelled as ‘organic’ for the counterfeiters to turn a quick profit. And Interpol announced that a joint operation with Europol saw them seize €230 million worth of counterfeit products, including sub-standard alcohol with faked government stamps, between December 2016 and March this year.

Through these revelations, consumers are looking for more transparency around where their groceries come from, as well as assurance on their quality. They want to confirm that food and drink are what they say they are, whether that is branded, organic, truly Fairtrade or locally sourced. Trust and transparency have become key qualities and selling points for food suppliers, forcing companies to look at ways to establish the authenticity of their products, beyond traditional symbols or supply chain invoices. This is where blockchain can help, especially with negating worries over counterfeit and contaminated goods.

Maintaining brand reputation
Blockchain’s capacity to increase shoppers’ trust in food suppliers is not going unnoticed. Alibaba Australia is just one of the companies that has announced it is launching a framework based on blockchain to improve the traceability of products, curb food fraud and keep consumers safe. The technology is also already being used by organic and luxury brands in particular, to prove their sustainability credentials and compliance with social, ethical and environmental areas. By demonstrating the authenticity of their goods through blockchain stamps, they can prove their ‘honesty’ to consumers and really increase their market share and competitiveness.

Proving goods’ authenticity
The supply chain is broad and complex, with many players, and often with potentially inefficient, manual records. Blockchain ‘stamps’ can provide proof of quality and authenticity: the secure (encrypted) digital ledger provides a level of transparency that most record systems cannot support. The blocks of information are secured by complex algorithms that are really hard to hack and cannot be erased or manipulated. The authenticity and quality can therefore be proven through the blockchain, especially if you tie that authenticity ‘stamp’ to a smart tag for quick reference.

Driving food quality
Combine the technology with the Internet of Things (IoT) and brands can also track the provenance of goods. For example, a consignment of mange-tout originating from a Kenyan farm bound for the UK may get ‘bumped’ from a direct flight from Nairobi to Heathrow and go via Dubai, where it spends time on the tarmac during the transition between flights. It may hit Heathrow at 10°C and then spend four hours in a blast chiller getting it back down to 4°C, which will still allow it to pass supermarket quality control. Blockchain, combined with IoT, has the capability to track temperature throughout the chill chain, with each set of readings linked to each other in chronological order and with non-editable timestamps. This helps improve the quality of goods hitting the shop shelves.

Cutting costs in the supply chain
Another of the major benefits of blockchain for food suppliers is not having a need for a third party payment authentication across the supply chain. It creates a frictionless and faster process upstream and downstream, lowers costs and significantly reduces fraudulent interactions. For suppliers in the grocery sector, such as farmers, this means they can directly trade with brands, which will help cut down supplier difficulty. It also removes unnecessary costs paid to banks, making the end cost to brands and consumers more palatable in a typically low-margin industry.

The building blocks to blockchain
As blockchain is a relatively new technology, there will naturally be some initial teething problems. While a global standardisation for the technology is under way, it would still need to be cleared by the International Organization for Standardization (ISO). Once in effect, it would likely impact long-term trade agreements. At a company level, implementation costs, filling the talent gap internally and externally, and conflict management among business partners (as blockchain demands full transparency and smart contracts), may also be challenges that arise.

For food suppliers, the long-term benefits of proving the authenticity of products, improving the quality of food and cutting down costs along the supply chain, should outweigh the obstacles. Businesses should be exploring blockchain options now, calling on expert help to see how it can fit into supply chain operations. To accelerate adoption, they will also need to establish internal blockchain champions and identify immediate opportunities that boost confidence in the technology and show quick results. With consumer expectation for quality and authenticity only set to rise, building a blockchain strategy will be key for maintaining brand reputation and fighting fraud, as well as boosting margins.



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