Many of us have heard of blockchain and the definitions are becoming more digestible in this tech-centered world – but the sectors that blockchain is impacting are no longer limited to financial services. In fact, for China, the food sector is looking at blockchain to fundamentally transform several key areas within their businesses. Each year, one in 10 people fall ill globally as a result of foodborne diseases, and of those around 420,000 people die. Blockchain has the potential to step in a make a significant cut into these statistics.
We all want it. But, imagine if it could easily and accessibly be at your fingertips. Imagine if you could track trends, consumer behaviours, and market trends that were transparent and shared? That is exactly what is starting to happen.
Alibaba clearly sees the potential advantage of employing blockchain to provide greater product integrity. Vendors on Alibaba’s Taobao and Tmall marketplaces will be able to confirm the authenticity of the items within their systems, thereby stamping out the dangerous fake food. The project is an important first step towards creating a globally respected framework that protects the status of food merchants and gives customers assurance when purchasing.
Additionally, Walmart and IBM are extending their US blockchain collaboration to China, partnering with JD.com and Tsinghua University National Engineering Laboratory for E-Commerce Technologies to establish a Blockchain Food Safety Alliance collaboration to progress food tracking and safety in China.
During a pilot program in the US, it was found that by using blockchain to track food, it cut the time it took to track products from the farm to the store from weeks to a mere two seconds. It is agreed that these partnerships propose to produce a process of collecting data about the origin, safety, and authenticity of the food products, employing blockchain technology to provide real-time traceability at any point of the supply chain.
The four parties intend to work with suppliers and regulators to develop standards, solutions, and partnerships to enable a food safety network in China. There is hope that this will inspire culpability and provide suppliers, regulators, and consumers greater transparency into where their food is from originally, and where it has been before getting to them.
China knows better than anyone the effect of losing trust and confidence in a heartbeat. But having a process to track where the food came from and each level of certification to ensure quality and safety would create a new brand around China.
Where technology can help businesses mitigate the risk of food-fraud will be considered a “big growth area,” according to Shaun Rein, managing director of China Market Research Group. “It’s a great business opportunity. It’s going to be important not just as a China play, but as a global play, because Chinese food companies are becoming part of the whole global supply chain.” Fraud costs the global food industry as much as $40 billion annually, according to John Spink, director of Michigan State University’s Food Fraud Initiative. A Pew Research Center study found 40% of Chinese people believe food safety is a “very big problem,” up from 12% in 2008.
Last year the Chinese government prohibited around 50 factories from producing counterfeit seasoning, designed to look like well-known brands such as Nestle and Knorr, which were produced cheaply through the use of industrial salt, artificial colouring, and food additives. The Beijing News reported that up to a 100 million yuan of fake seasoning per year was being produced by the factories. Counterfeit products including soy sauce, vinegars and soup base mix were packaged in authentic look-a-like packaging. Had blockchain technology been used to verify the authenticity of these products, both retailers and consumers would have been able to monitor and inspect the origin and genuineness of the goods at every stage of the supply chain.
But, the issues in China surrounding fraud do not end at food. More recently a gang in Shenzhen were arrested for manufacturing and selling fake medicines to Chinese hospitals. The National Institutes for Food and Drug Control found that the products could, in fact, worsen patients’ symptoms. The authorities have revealed that the gang sold nearly 6 million yuan worth of these medicines and had stored drugs valued at over 4.3 million yuan. Blockchain’s ability to authenticate and track goods extends beyond food, and could have been deployed in these circumstances to save lives.
An unimaginable amount of revenue is lost each year due to delays, logistics holds up, and the grey market. The Wall Street Journal estimates the grey market in China to be worth RMB 75 billion. Now imagine one click on your computer and you have full access to all disruption routes, red flags within minutes – not weeks and confidence between wholesalers and distributors.
A growing issue in China is the prospect of fake wine in the region. As wine becomes more popular in China, fraudsters have seen an opportunity to cash in. Empty bottles of prestigious wines can fetch up to 7,000 yuan a piece on the black market. These bottles are then re-corked and sold on to unknowing buyers with counterfeit wine inside. The Interprofessional Council of Bordeaux Wine approximates that 720,000 bottles of fake imported wine are sold every day in China. Australian wine critic Jeremy Oliver has been cited as saying that the average bottle of Champagne in China is filled seven times, estimating that 50% of wines retailing for $35 or more in China are counterfeit.
As consumers are unable to track whether an individual bottle has been sold previously there is no way of truly checking the authenticity of a bottle before purchasing. Blockchain could remedy these logistical problems by providing a full ledger of the history of each individual bottle, and thus consumers would be able to track the bottle from its source, and any prior purchases, which could indicate whether the bottle has been refilled with fake wine.
Consumers want to have a comprehensive view of everything they purchase. They are demanding it as a standard and if businesses are not ready to answer this demand effectively they will be left behind. Contact us to find out more and how you can play in the growing blockchain market.
Director, PwC Hong Kong
Tel: + 2289 6490