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Blockchain in the Foodindustry

by Mattia Stentella

The current state of the food industry could most certainly benefit from increased trace-ability in order to deal with some of its biggest problems regarding food safety and provenance, among others. The effects of increased trace-ability range from small to big placers and reach basically every dimension of the business. Whether a company struggles with recalling not safe for consumption chicken or society suffers with illegal fishing, blockchain applications would be able to solve a lot of the industry’s pain points. Millennials show higher demand for healthy and fresh foods than any other generation, emphasizing the importance of how foods are processed and putting suppliers under close scrutiny whenever things go south. Millennials now represent a majority of the workforce in the United States and as their buying power begins to increase, so does the influence this consumer group have over big food manufacturers. Increased demand from consumers with higher willingness to pay means higher revenues? No, not so fast.

Changes in consumer taste not only affect the products they buy but also how their relationship with the companies whose products they are buying.This means that consumers are very quick to pick up on “hype” products easily handing over their cash to companies, but that also means that opposite cases (i.e. product recalls, faulty or damaging goods) may have disastrous consequences for producers. Additionally, millennials’ trust of big food brand names is at a record low , leaving their reputations especially susceptible to damages. The application of blockchain technologies is mostly concentrated in heavily industrialised and developed countries, however, many of its benefits can be ripped from countries with low trust in institutions.

Picture Brazil, a country with a reputation by corruption in which recently, two food-processing behemoths (including one of the world’s largest producers of meat) have been accused of bribing officials to falsify sanitary permits in order to sell expired and rotten meat . In this case, the immutable nature of transactions recorded in the blockchain would allow consumers and retailers to identify when (through timestamps) the meat processed at every step, allowing consumers to rely less on officials who may or may not have been bribed to falsify information. Still in Brazil, a food retailer named Caipira Express has been using blockchain technologies to verify the precedence of cheese through the entire supply and distribution chains. The cheese sold are typical of the ​Minas Gerais region, making the location of production sites particularly important to consumers. Additionally, buyers can pay in bitcoin and are rewarded with 1000 Caipiracoins for verifying their cheese, which they may accumulate and exchange for other goods.

But what if the geographical origin and methods used to produce food needed to comply with specific regulation? This is the case in Europe, where some types of products receive a stamp called Protection Designation of Origin, which ensures that the products were produced within a certain location and using certain methods of production. This is the very reason why most “Parmesan” cheese in the US are named that way illegally . In practice, that does not mean that the american cheese is bad, it just means that it is not Parmesan cheese. In Italy, the ​Denominazione di Origine Protetta​, or DOP ensures that true Parmesan cheese must be produced within a few specific regions of Italy and using certain methods of production. While one may still be able to profit selling Parmesan-like cheese, true Parmesan DOP cheese usually carries a higher price tag. Producers willing to make a quick (and illegal) buck may try to sell their products as the real deal, not likely with the blockchain. Similar to our Brazilian example, customers, regulators and retailers could potentially be able to tell with precision where, when and who produced their Parmesan cheese. In case producers were trying to tamper with the chain, it would not reach a consensus and reject the transaction, making it harder for sketchy producers to sell their goods,who now need to fake the entire supply chain and not a single step.

The blockchain also increases accountability, still with our Brazilian example, the QR code allows anyone to access who was the person who verified each step and personally accounted for its quality, therefore, giving authorities a clear indication of who committed the fraud. Moving to a different perspective, increase in supply chain transparency may also be able to bring extensive benefits to consumers in terms of safety when products need to be recalled. Let us imagine a situation in which a chicken meat multinational needs to recall one specific lot after it was found that during a small period of time one of chicken farms did not comply with food safety regulation. From one side, it is rather simple for the company to issue a statement informing consumers and call it a day. However, how do we ensure that the consumers who bought from that specific lot have been notified? As the blockchain allows us to immutably track every step of the supply chain, it could also help supermarkets track who is buying what and use the information contained in their membership cards to reach out to them and make sure they get the message. Most supermarkets already offer membership cards and hence tracking what each individual consumer buys would not be a difficult task. Additionally, supermarkets are also able to track what you buy (anonymously) when paying with credit or debit cards, meaning that they gather data from each individual card, even if they don’t know who bought it . In this case, consumers could be notified of a recalled product the next time they come to the store.

How blockchain will affect/solve these problems

According to the mechanism of blockchain, once new data and transactions are verified and recorded into the chain, the new information automatically update and spread to nodes of the network. The blockchain technology can be applied to supply chain management to eliminate any delay and confusion of information recording, help company to identify and solve the potential problems before it becomes too late to rescue. The “transparency” feature allows everyone to access the database anytime and anywhere. Customers, regulators and every other participant in the supply chain could retrieve the same information but no one is able to tamper the data already there. Customer no longer need to trust any big brand or authority to make sure the food on table is safe and follow specific procedure or local law such as DOCG, DOP. In fact, as we mentioned above, they could access the database and track the whole ‘life cycle’ from producers, distributors to the table. In terms of event of massive food recall, for example when food is infected and may threat the life of people. The challenge is to pinpoint where the tainted food originated, where it was distributed, and where and whom it was sold. Based on the current paper based database, the information chain is disrupted and fragmented, it is impossible to immediately identify which shop is selling the food and who bought it. However, timing is critical when deal with this kind of urgent event. Imagine a totally different scenario, where blockchain would be applied to tackle issues with the provision of food within the food industry. Once a food is identified to be tainted, authority could track and find out which steps may be relevant to the problem. The customer would be notified immediately, thanks to the real-time blockchain recording of each transaction carried out from each player within the supply chain.

As we can see, blockchain can play a big role in promising and safeguarding the quality of our food. However, how do we implement the technology, and is it too costly to be afford by a restaurant or a fruit shop? Well, blockchain is an integrated system, it is just like a telephone starting to work until more and more people are using it. Firstly, it is important to clarify that blockchain is not a piece of software to buy and incorporate into your current activity. Actually it is a system and underlying infrastructure to force data to be synchronized and replace the outdated information system. Secondly, each users involving in the supply chain need to standardize the format of data submission to make sure everyone in the network speak the same language and can understand each other. The possible way can be using a global trade identification number to uniquely identify items, as well as global location number to identify facilities. Thirdly, in order to realize a consistent traceability system, all the players must use the system.

Therefore, these are how blockchain technology can effectively answer to the needs of modern commercial needs and fitting the demand of businesses’ supply chain management. Despite, being a relatively new technology with much more adjustments needed to refine the technology to provide an integrated solution in the aspect of logistic management, its benefits are indeed realistic and feasible for businesses.

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