Fraud warning as sector reopens

Many people have been heading out for their first drink at a pub, café or restaurant, but is the beverage what they think it is? David Burrows reports.

According to a survey of 100 senior executives across the beverage sector, 97% have been affected by beverage fraud in the past 12 months. What’s more, 80% see fraud as a “growing concern” for their business.

Lloyd’s Register (LR), which commissioned the poll for its report, Confidence and supply chain risk in the beverage sector, also identified “significant” issues in the supply chain on the back of the pandemic.

For example, only 22% of those quizzed said they were ‘very confident’ that suppliers are meeting food and drink safety standards. Meanwhile, 70% of respondents have been forced to change at least one of their suppliers in the past 12 months.

“With food fraud occurring almost universally across the sector and supply chain performance under pressure, it is hard to believe that the two aren’t linked,” explained Kimberly Carey Coffin, global technical director at LR.

So should hospitality businesses be worried and what they can do to protect themselves?

For a start, food safety needs to be given a higher priority when vetting suppliers. Almost one in five (19%) of the executives surveyed admitted that either no food safety checks are made as part of sourcing decisions, or that meeting regulatory requirements is considered sufficient. 

Despite the risk to brands and potential serious consequences for people’s health, only 37% of those surveyed by LR regarded managing fraud as a “very high priority”; one in five in the alcohol sector rated it as an “average priority” or lower. 

“[…] we have found evidence that at the sector level, confidence in beverage supply chains is not where it needs to be and approaches to best practice in due diligence vary widely,” the report reads. 

The findings point to an “urgent need to achieve greater transparency and make beverage supply chains safer, more reliable and resilient, if consumer confidence is to remain intact”, noted LR in its report. This is perhaps more important now than ever. “As catering and hospitality venues begin to reopen post-Covid, there are significant implications for the sector,” Coffin told Footprint. “If the price looks too good to be true, questions need to be asked.”

While criminal activities may not be committed with the intent to cause harm, neither are they concerned with risks to others, LR warned. Adulteration and substitution
can be life-threatening, whether due to contaminants or the risk of allergic reaction. 

LR’s report highlighted a counterfeiting network in China that was unearthed by police in January this year – the group was bulk purchasing cheap wine and packaging it as Australian brand Penfolds. Operation ‘bad juice’ in 2019 identified six companies in Italy that were adulterating apple juice with water and sugar substances and passing it off as organic and ‘of European origin’. 

Beverage fraud can have severe health consequences. The Guardian reported last year that more than 100 people in Mexico died after drinking tainted alcohol. Some reports suggested the cases could have been linked to coronavirus lockdowns and bans on sales of liquor.

When asked who is primarily responsible
for keeping consumers informed about fraudulent products, manufacturers pointed to retailers, industry bodies and consumer groups above themselves. But businesses need to remain alert.

 Coffin said fraud, in food or drink, is “not an easy fix”, and advised businesses to assess the vulnerabilities in the supply chain. She said the sector has a responsibility to question the manufacturer, broker or distributor, in regards to origin, authenticity and quality controls, to ensure the integrity of the products that they’re purchasing and offering for sale. 

Businesses also can’t rely on scientific detection as the sole mitigation strategy: “A commitment to maintain a constant state of awareness of changes 
in the supply chain landscape is essential for prevention,” she added.

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