Sunny Lu is co-founder and CEO of VeChain. He graduated from Shanghai Jiao Tong University, majoring in electronics and communications engineering. Sunny has served as an IT executive in Fortune 500 companies for more than 13 years, and was formerly CIO of Louis Vuitton China. He started VeChain in 2015, and is committed to blockchain technology and its business implementation.
Food safety isn’t a topic that we like consumers to think a lot about because they don’t typically think about it unless there’s been a lapse in food safety. And when there is a lapse, it’s critical to respond quickly -- primarily to ensure that consumers are not affected, but also to minimize the impact on the brand.
Brands associated with food safety incidents do experience significant impact. A 2013 study put the economic impact for these incidents just in the U.S. at $7 billion. It’s not just the negative buzz associated with the brand itself, which is particularly nightmarish in an omnichannel world where consumers make their voices heard across multiple social and digital channels. It also creates an opportunity for competitors to swoop in, capturing the hearts, minds and palates of formerly loyal customers who may be tough to win back. Once consumer trust is lost through a negative experience, it’s very tricky to win back.
When it comes to food and beverage production, there are risks at each stage of the process, from farm to fork. And while full traceability is the holy grail, it seems like an impossible quest. Very small producers can talk about provenance because they are their entire supply chain. But everyone else — even the largest manufacturers with large pockets and significant appetite for technology — still seems to struggle.
Marketing and regulations can only go so far to create trust between consumers and manufacturers. With continued demand for more transparency and accountability, we need to seek new ways to ensure that our supply chains are robust and instill confidence in consumers.
Enter blockchain, a technology designed with transparency and trust at its heart, and with the ability to fundamentally change levels of confidence in food safety.
What is blockchain?
Blockchain is a technology that was created specifically to solve the problem of transparency and trust between multiple parties.
It creates a digital ledger or record for an item. Interactions with or transactions involving that item are recorded in the record. People and organizations who need to access the data are granted secure private digital “keys” to do so.
When one copy of the ledger is updated, it automatically pushes updates to all other copies, providing real-time data transparency. Why have a decentralized system with multiple copies? Because it lessens the risk. The “master copy” can never be lost when all the copies are identical.
How can blockchain support food safety?
Food and beverage manufacturers can improve food safety by implementing blockchain throughout their supply chains.
Imagine being able to track each side of beef, crate of corn or vat of milk from the farm through to its arrival on a consumer’s plate. Imagine being able to track, monitor and report on key characteristics like where ingredients came from, how long they were in transit, and their exposure to temperature levels throughout their lives. And imagine being able to do it in such a way that creates a single, tamper-proof view of all this data, shared by all participants across the supply chain.
A side of beef leaves the Smith farm with its provenance, weight and temperature all logged by the producer by using a smartphone and an RFID tag, NFC chip or QR code. The duration of the beef’s journey to ABC Food is logged, as are the temperature and humidity in the refrigerated truck it travels in. Its arrival at ABC Food Company is logged, as is its weight and temperature, before it’s whisked away to be butchered and processed into ground beef.
That ground beef is made into meatballs, and is packaged up to be sent to XYZ Store. The shipment of meatballs is tracked on its journey to the store and to the shelves, with location and temperature readings recorded to ensure the product is fit for sale.
Every time an interaction occurs, the data updates all copies of the ledger, providing full transparency to the participants in the supply chain. Should a reading indicate that a threshold has been crossed — for example, temperatures exceeding the permitted range — participants can be immediately alerted and action can be taken to remove items from the supply chain.
Crucially, because the blockchain provides identical information to all participants, it creates complete transparency and trust. There’s no hiding or tampering with data, so brands know that the food is being treated in accordance with agreed safety procedures and regulations.
And should an incident be discovered post-manufacture — for example, consumers reporting inorganic material in a candy bar or the occurrence of dreaded E. coli in spinach — the data in the blockchain makes it simple and fast to track down where the contaminated food was sold, as well as which other batches or products may have been affected.
China as blockchain’s food safety testing ground
Food safety is a global problem. China is one market where considerable time, money and legislative might is being invested to ensure improved food safety for a rapidly growing population.
With a number of high-profile food scandals in recent memory, Chinese consumer trust in food safety is appallingly low. In a 2015 study, 71% of Chinese people said they considered food safety an issue. But people need to eat and drink, and as demand continues to grow with the population, measures need to be taken to remove threats and create trust.
Blockchain-enabled supply chains are key to helping Chinese producers, brands and retailers tackle thorny problems like trust and transparency, particularly when combined with the scale of the massive market. One particular area of opportunity lies in the dairy industry, which suffered from melamine-tainted milk scandals twice in the past decade. Both local and foreign producers are investigating blockchain as a solution to build greater transparency and trust with retailers and consumers.
Using blockchain in the U.S. to mitigate risk
U.S. consumers undoubtedly have greater trust in brands and the food safety measures that they take. But contamination still happens, and when it does, the impact is arguably much greater -- particularly in an open market where news stories can be picked up and disseminated to a much broader global audience via social and digital media.
Furthermore, U.S. food and beverage brands cannot underestimate the impact of brand affinity and loyalty. A large-scale contamination incident or poorly handled product recall will have a significant impact on consumers’ willingness to repurchase an item or similar items from the same brand.
Blockchain-enabled supply chain solutions that remove risk and significantly accelerate traceability searches are valuable tools in the war for consumer loyalty in the U.S. market.
A solution to (re)building trust in food safety
As food and beverage brands continue to strive for food safety standards, they’re also battling for brand loyalty and continued consumer confidence in the products they offer. At the heart of each of these challenges is trust that participants in the supply chain are meeting their obligations, and that products are safe to consume.
Blockchain enables the data transparency throughout the supply chain that is so crucial for to building this trust. The question isn’t whether a manufacturer is going to need a blockchain-enabled supply chain. It’s whether it will be adopted quickly enough to (re)build trust with partners and end consumers.