(Estimated reading time: 3 Minutes)
1 Food Fraud
As the European example illuminates, food fraud can quickly become pervasive and costly. Counterfeit food producers generate approximately $49 billion per year, causing costs to consumers of up to $15 billion. Analysts estimate anywhere between 5-7% of the American food supply is affected by fraud.
How can the issue be so widespread? For starters, the volume of food processed by the supply chain is immense – an average supermarket contains 39,000 items that have traveled over 1,500 miles (2400 kms). Maersk, the Danish shipping giant, foresees savings in the billions due to blockchain adoption – keeping track of the amount of paperwork for each container often times costs as much as moving the shipping container around the world, according to a New York Times article.
Blockchain enables a company like Maersk to have instantaneous access to an immutable database so that it can approve and process transaction with unprecedented efficiency. These improvements not only benefit the company – they are disbursed throughout the supply chain, to farmers and consumers alike.
2 Food Recall
Nothing tarnishes a restaurant’s brand image like a disease outbreak. Chipotle Mexican Grill, an American fast casual chain with over 2,000 stores, is the most commonly cited example. In 2015, an outbreak of E. coli rocked the company, almost halving the company’s share price. The company never recovered, and its long-time CEO recently stepped down. Almost 2,700 tonnes of food were recalled in the United States alone, and the average recall costs $10 million, stretching over $1 billion in some instances.
Chipotle executives are notorious for lamenting the difficulties of tracing the outbreak. The company, built on a mission of providing organic and local ingredients, sources its inputs from hundreds of small farmers, making their supply chain an intricate web nearly impossible to untangle.
Blockchain’s applications for a multinational corporation like Chipotle are immense.
Chipotle can quickly and convincingly ensure their ingredients are produced using methods that meet their high standards, and consumers have proof that they are eating food marketed and branded as organic, fresh, and ethically sourced.
3 Food Waste
According to the United Nations, the United States spends $218 billion annually handling food waste, equivalent to 1.3% of GDP. Results vary, but there is a consensus that between 30-40% of food produced is wasted, creating a host of social and economic issues.
Though less obvious than the above two concerns, blockchain’s genius applies to spoiling food as well. Food in transit, particularly produce, may degrade due to delays over paperwork or inefficiency. Blockchain’s transparency comes with newfound speed, ensuring limited delays across the extensive supply chain. In addition, blockchain’s vast amount of data allows a company or an organization working to combat food waste track particular corridors in which disproportionate amounts of waste occur.
Up next: Agri-Tech Startups using Blockchain (Part 3)
In the next newsletter you will be able to read about what problems blockchain is solving…