Trust the Label? Fraudulent Foods

06 November 2015
Trust the label? Fraudulent Foods

Food adulteration, which can refer to everything from dishonesty regarding the geographic origin of a food to the use of lethal poisons as “secret” ingredients, has long plagued consumers. Up until the nineteenth century, few were even aware of the deceptions retailers and processors were getting away with.   Some argue it took the 1820 publication of A Treatise on Adulterations of Food, and Culinary Poisons by German chemist Frederick Accum to expose the unsafe practices of many food retailers.  And while Accum was one of the first to bring the issue to light, dishonest practices in the food industry—especially those that are economically motivated—have remained rampant. 

In 2009, the US Food and Drug Administration (FDA) provided a working definition of “economically motivated adulteration” (EMA) at a public meeting:

“Fraudulent, intentional substitution or addition of a substance in a product for the purpose of increasing the apparent value of the product or reducing the cost of its production, i.e., for economic gain.”

One of the most challenging aspects of modern-day food fraud is gaining a detailed understanding of the issue; when fraudulent practices are economically motivated, they can be extremely well-disguised, making them challenging for inspectors to catch and nearly impossible for consumers to notice.

The Grocery Manufacturers Association estimates that food fraud costs consumers up to $15 billion per year and that roughly 10 percent of all commercial food is affected —especially olive oil, honey, and milk.  

Background

Despite recent advances in detection technology, fraud continues to play an important role in food markets. Adulteration can theoretically impact any edible item, but tends to occur in higher frequencies in olive oil, fish, fruit juices, honey, dairy products, meat, grain-based foods, alcoholic beverages, organics, spices, tea, coffee, and several highly processed foods. The producers, manufacturers, or distributors who intentionally deceive consumers typically do so because committing fraud can be easy and cheap, while the potential gains from doing so can be massive.

While the problem is widespread, only a handful of countries have organizations actively challenging various forms of food fraud,   and many of those that do only established institutions due to a prior incident. In an interview with Gro Intelligence, Dr. Doug Moyer, a researcher at the Food Fraud Initiative at Michigan State University, explained how food fraud policy is often driven by consumer outrage. And consumers are most likely to be outraged when adulteration has resulted in widespread, life-threatening or deadly illness. 

In the United States, several groups including FDA, the US Pharmacopeial Convention (USP), and the National Center for Food Protection and Defense (NCFPD) maintain various databases and coordinate prevention and correction efforts. Dr. Moyer contends that because such data is historical, its usage is useful for awareness and education, but has limited predictive value. A powerful and effective data analysis project would require more quantitative and dynamic data in order to gauge the current risk and scale of a particular food fraud incident. 

While food adulteration can occur in a number of ways, most instances are examples of replacement, addition, or removal. 

Replacement refers to the partial or complete substitution of an ingredient. Many prominent fraud cases have involved various forms of replacement, such as the addition of melamine into milk in China in order to cheat protein-measuring tests. Replacement also covers geographic dishonesty, such as olive oil that is labeled as Italian, even though it actually consists of oils from other regions; as well as the mislabeling of food as “organic” or “natural” when such food has not met these criteria. 

Addition occurs when a non-authentic ingredient is included in a food product in order to disguise the existence of an inferior product, such as dye being applied to spices—like red dye to chilli powder—in order to mask poor quality. 

Finally, removal can be described as the intentional exclusion of an ingredient without disclosure to the consumer. An example of removal could be the filtering of honey for various pollens or residues in order to disguise the product’s biological and geographic origins.  

“Extra virgin” “Italian” Olive oil 

Edible oils are relatively easy to distort, hence their comprisal of roughly 26.5 percent of all documented fraud cases in the USP Food Fraud Database.  

Geographic deception is particularly rampant in oils. Italy, widely associated with producing premium olives, is one of the largest exporters of olive oil. It is also, however, a major importer of the product, bringing in 59.5 million tonnes of olive oil, nearly 60 percent of all European imports and twice that of second-largest importer Spain.  What many producers across Italy (as well as Spain) are doing here is importing large quantities of olives and olive oils from across Southern Europe and North Africa and processing, refining, and labeling it as “Italian” (or “Spanish”), despite their more complex origins. Surprisingly, this practice is actually legal, though the source of the underlying commodity is supposed to be specified on the label. 

Consumers covet “extra virgin” varieties of olive oil, expecting products marketed as such to indeed have the necessary levels of oleic acidity—the sole trait that distinguishes oil as extra virgin—to earn that designation. And yet, producers, refiners and distributors have been shown to market their oils as “extra virgin,” even when their composition does not earn them that right. Furthermore, many labels contain various phrases that seem related to the processing of the oil, such as “cold-pressed,” yet such terminology can actually be irrelevant, as the distinction between cold and hard-presses is archaic, given that most oils are produced today using centrifuges. 

Governments of some of the key olive producing countries have initiated efforts aimed at thwarting fraud, at least at the refinery level. In Italy, there is a section of the Italian Carabinieri, the specialist food piracy branch, that is highly trained by the national olive oil association and is able to readily discern between the quality and origins of various oils. This branch of the Carabinieri participated in a sting operation in 2008 known as “Operation Golden Oil,” which led to the arrest of 23 individuals and seizure of 85 farms that were connected to fraudulent trade.  

Additionally, there have been cases of cheaper oils, including soybean or canola, being mixed with and marketed as pure olive oil, a blatantly fraudulent practice. Some refiners go so far as to mix chemicals such as beta-carotene into these substitute oils to alter their taste and dyes to alter their appearance, so that they might look more like authentic olive oil. Just last year, several major producers, including Salov North America Corp. (maker of Filippo Berio olive oil) and Deolio USA (maker of Bertolli and Carapelli olive oils) were accused of mislabeling in separate class-action suits. The suits come on the back of a 2011 University of California study which suggested that a majority of imported olive oils sold in California failed to meet the generally accepted criteria for labels such as “virgin” or “extra virgin.”  Indeed, the study indicated that a whopping 69 percent of imported oils fell short of meeting the standards necessary to be classified as “virgin” or “extra virgin” compared to the California-produced oils, of which only 10 percent failed to meet their respective quality criteria.  

It’s not yet clear how the California lawsuits will play out and if there will be an impact on broader US policy. Dr. Moyer notes that domestic olive oil producers have historically “struggled for regulators’ attention regarding fraudulent products and ‘hidden competitors’,” but reiterated that the incidents of fraud which sicken and kill consumers are the ones that become highly publicized, and as a result are the most effective in driving food fraud policy, legislation, and enforcement. In many markets, it remains challenging for consumers to take legal action against committers of food fraud because those culpable frequently command a considerable share of the market and wield significant influence. Furthermore, the fact that the mislabeling in these cases tends to have no significant impact on health or safety—consumers are being ripped off, not endangered—may mean that regulators are slower to act.

Fraudulent honey is not so sweet 

Over the past few years, the honey industry has been shocked by widespread accusations of adulteration: about 7 percent of fraud cases in the USP Food Fraud Database have involved honey.   And while the practice of artificially manipulating honey is rampant, some of the fraudulent practices in markets like China are particularly alarming. There, the antibiotic chloramphenicol, the use of which in food is prohibited in many countries, is frequently used to retroactively and proactively treat bees, and has as a result been detected in retail honey. Chloramphenicol can have adverse health effects on humans, particularly infants, and its side effects even include potentially fatal illnesses such as acute lymphocytic leukemia and aplastic anemia.  

US honey demand used to be entirely met by domestic supply. That was until foreign producers, chiefly China, began to flood the market with cheap product. Throughout the 1990s, American beekeepers claimed China was artificially and unfairly lowering prices by dumping honey into the US market.  US trade officials first placed large import duties in May 2001 on Chinese honey in an effort to curb dumping.  While on paper, Chinese honey exports to the US nearly came to a screeching halt as a result, a deeper dive into bilateral trade data suggests otherwise. 

As seen below, Chinese honey exports to the United States began to decrease once these anti-dumping duties were enforced, while imports from other Asian countries like India, Malaysia, and Indonesia rose markedly. An investigation by US authorities soon unveiled an international conspiracy through which Chinese honey was being exported to neighboring countries and then re-labeled as Malaysian, Indonesian, or Indian and sent to the US. Brokers in Taiwan, South Korea, and Russia were also implicated.  

A number of international companies were found to be involved in the illicit China-to-US honey shipments. One firm, ALW Food Group, based in Germany, fraudulently shipped $80 million worth of honey through a false labeling scheme.  Their elaborate conspiracy involved shipping honey in black drums because Chinese drums were typically green; altering the taste and disguising the origin of the honey through the addition of sugar, molasses, or fructose syrup; and keeping communications with brokers to telephone calls conducted in German. ALW depended on several brokers overseas to handle the on-the-ground shipments and cooperated with several local processors, one of which, Honey Holding, was known to willingly accept honey shipments that all others had rejected at a discounted price. Honey Holding, a Texas-based processor, then sold this widely-rejected honey to other food companies in the US. AWL was eventually raided by US authorities, and some employees were arrested; at least two of these employees pleaded guilty to one count of fraud. 

The concerns over Chinese honey have not been limited to the US—the European Union banned Chinese honey imports and increased its inspection efforts in June 2010. The EU now requires advanced certification proving that the import is not of Chinese origin, as well as additional tests designed to verify the absence of chloramphenicol and lead. The EU has gone so far as to even ban imports from India (which it lifted by 2012), given the frequency with which Chinese honey was smuggled through the subcontinent. Indeed, industry analysts believe that Chinese honey continues to be smuggled into India through third parties, as imports from India as well as Vietnam continue to surge at a pace that likely outstrips domestic production figures.  

The ability for Chinese honey to be smuggled into the US over so many years and in such vast quantities highlights a common shortcoming in trade inspection—such inspections are typically driven by country of origin information, meaning that it becomes difficult when the country of origin is being obfuscated. Some independent bodies in the US, like the certification agency True Source Honey are working to address the honey authenticity issue by independently auditing and certifying foreign honey suppliers.  Meanwhile, the US industry remains hopeful that the FDA and other regulatory bodies will make their inspection efforts more robust and capable of more effectively blocking Chinese honey. 

Milk riddled with melamine

In many ways, the melamine incident of 2008 opened the floodgates for food safety and adulteration awareness and action. This instance of fraud occurred in China, and contaminated products including milk, milk products, and even baby formula; as a result of the tainted products, nearly 300,000 infants fell ill, and, unfortunately, several died.   

According to the World Health Organization (WHO), melamine “is an organic base chemical most commonly found in the form of white crystals rich in nitrogen.”  At first glance, it may seem odd that a nitrogen additive would be included in milk products. Yet the reasoning is that China has historically faced significant adulteration of milk via dilution, through which water is added to raw milk in order to increase volume. Dilution reduces milk’s protein level and makes it fairly easy for regulators or quality assurers to identify cases of adulteration. The tests utilized by regulators measure nitrogen levels of the milk as a proxy for protein level checks—fraudsters, therefore, add melamine into milk to raise these nitrogen levels and make it seem as though the product has sufficient levels of protein. 

Melamine crystals can react with naturally occurring body fluids to give rise to kidney stones, and can also block various channels within kidneys that are highly sensitive. As a result, kidney failure is a fairly common side effect of melamine ingestion and was the cause of six deaths in the 2008 incident.  

While over 20 companies played a role in the scandal, the state-managed Sanlu Group soon emerged as the ringleader and initiator of much of the fraud.  The company was blamed for the melamine addition, and although it received its first complaint in late 2007, it took until September of 2008 for Sanlu to acknowledge the situation and issue a recall.  Chinese authorities destroyed some 10,000 tons of formula seized during this period, but much of the damage had already been done. Sanlu Group later filed for bankruptcy,  and foreign manufacturers quickly began to take advantage of dire situation and ramp marketing efforts in order to win over market share. In 2003, New Zealand was exporting just under 100,000 tonnes of concentrated or sweetened milk and cream to China; while that year, the US was exporting about 60,000 tonnes of whey and natural milk products to the country. By 2014, New Zealand’s exports exploded to over 700,000 tonnes, while the US’s whey and natural milk exports quadrupled to over 200,000 tonnes.  And while the Chinese market has become flooded with foreign milk—data suggests at least half the Chinese infant formula market is represented by foreign brands—local production may be en route to recovery. Chinese dairy imports have slowed this year, demonstrating the country’s growing ability to win back local consumers, and the heightened regulatory environment that has helped enable that regaining of trust.

Dr. Moyer noted that China is an excellent example of a government that is moving quickly to address food fraud issues. While many foreign consumers view a market like China as a source economy for food fraud-stricken products, he contends that the domestic consumer markets of these countries bear the same risk. He points out that this dynamic creates an environment in which advances in policy and enforcement, and awareness and inspection have a much more effective outcome than simply stricter import bans from foreign consumer markets, such as the European Union or the United States in the case of honey.

Conclusions

Though the root of economically motivated adulteration is monetary, the consequences of such fraud can prove to be not only harmful to consumers, but even fatal. Such economically-driven fraud is also typically challenging to discover or prove, and this has caused frustration for many countries, trade groups, and health organizations alike. While governments and trade organizations understandably place a great deal of attention on food safety, it is easy to forget how quickly a food fraud issue can become a food safety issue.

The cases detailed in this analysis on olive oil, honey, and milk are just a handful of known adulteration cases that have occurred recently. There are undoubtedly more cases that we have yet to learn of, and many more still that we will likely never learn of. Governments must at the minimum take a best-effort approach to increase  archival data of known food fraud events, as the data behind food fraud and adulteration is currently extremely limited. 

As with any market, the best way to create an equal playing field is by unveiling the obfuscated advantages that few abuse in order to gain over the rest–by increasing the breadth and depth of data available on food fraud, stakeholders will begin to expose the severity and acuteness of this opaque epidemic. 

 

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