Dairy industry must be alert to global fraud trends

By Jim Cornall contact

- Last updated on GMT

A new report by supply chain assurance company Lloyd’s Register found the beverage industry faces increased fraud incidences and supply chain disruption. Pic: Getty Images/nedjelly
A new report by supply chain assurance company Lloyd’s Register found the beverage industry faces increased fraud incidences and supply chain disruption. Pic: Getty Images/nedjelly

Related tags: Food safety, Dairy

The dairy industry must be alert to fraud and supply chain issues, after a new report, by supply chain assurance company Lloyd’s Register (LR), found the beverage industry is facing increased fraud incidences and supply chain disruption.

According to the survey, 97% of senior executives across the beverage sector have been affected by food fraud in the past 12 months, with 80% agreeing food fraud is a growing concern. The impact of Covid-19 on supply chain performance has also been felt, with 92% of beverage manufacturers reporting ‘significant’ supplier issues in the last 12 months.

Only 22% of those who completed LR’s survey said they were ‘very confident’ their suppliers are meeting food safety standards. Even more concerning is 92% reported ‘significant’ supplier issues, with 70% having changed at least one of their suppliers in the past 12 months for this reason.

The findings, detailed in the LR report Confidence and Supply Chain Risk in the Beverage Sector, ​highlight the high food-fraud incidence and significant supply chain disruption facing the beverage industry.

For the dairy industry, both suppliers and manufacturers should be alert, particularly given the rise of enhanced-protein products. Milk has often been the center of fraud by means of adulteration, and both suppliers and manufacturers should be alert to the results of the survey. In 2008 for example, the dairy industry in China was subject to major fraud, following the unlawful use of melamine in powdered milk products, resulting in long-lasting reputational damage.

Kimberly Carey Coffin, global technical director at Lloyd’s Register, said, “There are some deep-rooted issues in beverage supply chains, which this survey now brings to the surface. Undoubtedly, the Chinese milk scandal, one of the most notable examples of adulteration for the sole purpose of economic gain, was a blatant disregard for consumer health which resulted in the local dairy industry, as well as the wider dairy industry, being impacted by mistrust.

“With new enhanced-protein beverage products, such as the rise of A2 milk, coming into the market, they add more intricacies to assurance of authenticity and transparency. Milk product is becoming more complex as the dairy industry competes with alternatives, such as plant-based products, and any damage to reputation is likely to be felt more than ever. There is an increasing focus on nutritive claims, around quality, and fat and protein content. As such, manufacturers must ensure that any claims can be substantiated. If processes for evidence-based validation of claims are not in place, brand reputation may be at risk.

“The important thing for the dairy sector is to refocus on how products are derived, where they are sourced, as well as how they’re controlled along the road from farm to package. A systematic assessment of the vulnerabilities across supply chains is essential to understand where weaknesses lie, but there is clearly a long way to go, given that industry standards are currently being overlooked when vetting suppliers. The simple step of adopting Global Food Safety Initiative (GFSI) benchmarked standards for supply qualification is a solid first step towards much needed peace of mind in times of growing uncertainty and risk.”

Currently, just 32% confirm suppliers are verified as compliant with a recognized GFSI benchmark standard, according to the report findings. Almost one in five (19%) admitted either no food safety checks are made as part of sourcing decisions, or meeting regulatory requirements is considered sufficient.

“Compliance and governance with respect to supply, ensure you get what you want. Understandably, testing and auditing remains the essential component of most organizations’ compliance programs, but not all suppliers, geographic sourcing locations or materials are equal. When it comes to managing risk, it’s about understanding where your true risks are and being able to flex how performance is managed.  Recognizing that a one-size-fits-all approach heightens risk opportunity across their supply network, a company can ensure a more appropriate mix of proactive and reactive measures to build confidence levels,”​ Carey Coffin concluded.

Related topics: Regulation & Safety

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