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Food Supply Chains

Our system at risk

A system at risk

Australia’s food system is more than 60,000 years old and has grown and evolved over 1,600 generations. It’s a system that’s served Australian’s well and underpinned much of our economic prosperity.

But it’s a system at risk. And nowhere is the threat larger or more real than in the domain of food fraud. Unfortunately, for many, it seems to be a lower-order issue.

Driving this complacency is the fact that, as consumers, we have been relatively immune from many of the scandals that have plagued the industry globally. Save for one or two examples, contaminated food scandals seem to be something that happens elsewhere. But to ignore the issue is to misinterpret the economic danger it poses to a crucial pillar of our economy.

Is Brand Australia in danger?

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Craig Heraghty, Partner at PwC Australia

What’s the cost?

The total value of Australian agriculture and food exports is approximately A$45 billion annually. When you consider that fraud is estimated to cost the global food industry between A$40 to $50 billion every year, the scale of the problem becomes clear.

At the heart of the issue is the globalisation of food supply chains. Australia has benefitted more than many from the liberalisation of markets and access to consumers who are hungry for high-quality grains and proteins. But with the journey from paddock to plate longer than ever, our reputation as a clean, sustainable and safe food producer now mostly sits outside our control.

Take wheat for example. In the the journey from a kernal in Western Australia to a loaf of bread in Egypt, there are approximately 200 individual interventions by a variety of different parties. Each of these represent an opportunity for substitution, addition, and tampering. Or perhaps beef - is it blind trust that lets us believe that an ‘Australian’ steak on the menu in London, Paris or Rome is indeed Australian? If something went wrong, it stands to reason that our cherished ‘made in Australia’ brand would be tarnished.

Selling trust

Australians are unique in their apathy to this issue. Globally, there is a widespread lack of trust in food. It’s estimated that there are around 40,000 ‘daigou’ in Australia making anywhere from $40,000 to $100,000 every year buying vitamins and dairy products and shipping them to China. As has been rightly pointed out, it’s the first time that a market has found us before we found it. Daigou sellers have created an industry around giving certainty to the supply chain - in short, they are selling trust.

When we hear announcements of new and expanded trade deals with greater access to export markets, we should should temper our excitement about such announcements, taking into account our dependency on the integrity of others when Australian products leave our shores.

Transparency through technology

Fortunately, we now have the means to address the dangers of globalised food chains, if not the will. The frontier of technological possibility has taken us to a place where transparency, visibility and confidence are no longer pipe dreams.

Australia has a proud history of innovation and adaption. We also have a proud history of economic prosperity; indeed we hold the world-record for the country with the longest economic expansion in history.

In order to secure our prosperity for the next 26 years, we will need to take steps to fortify the integrity of our most important industries. Our government, regulators, retailers, and producers all have a role to play. With will and ambition, we can make it happen.

A lack of trust

Not all nations have the same level of food trust and assumed food security as we do in Australia.

  • In June 2015 Chinese authorities seized $483 million (USD) worth of smuggled meat. Some of it dated back to the 1970s and had been thawed and refrozen over and over.
  • In November 2013, the US FDA found a cheese brand sold in supermarkets was doctoring its cheeses. They found Parmesan that contained no Parmesan at all, instead it contained cheaper cheese and up to 8.8 per cent wood pulp.
  • Don’t forget 2013 when frozen ‘beef’ products in supermarkets across the UK and Ireland were found to contain horse DNA – up to 100 per cent in some cases.

Australia is not scandal-free

There are still question marks over the safety of food in Australia, despite our high level of trust.

  • In 2015, 26 people allegedly contracted hepatitis A from frozen berries imported from China. 
  • $25 million: The largest ever food safety settlement in Australia, after Bonsoy soy milk was found to contain dangerous levels of iodine in 2010.
  • Where does this high sense of trust in Australian foods come from? It’s driven by our abundance of produce – and a certain obliviousness to our food supply chains.

Contact us

Greg Quinn

Greg Quinn

Partner, PwC Australia

Tel: +61 425 326 833

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