Editor’s note: This was contributed by Chew Wei Chun. He works at Y3 Technologies and is based in Shanghai and Singapore. He researches the applications of technology in China and you will often find him engaged in deep conversations about the tech innovations that China has adopted.
Food safety has haunted China over the decade, from the 2008 Chinese milk scandal where milk formula is adulterated with melamine to the 2014 tainted meat scandal when expired meat is supplied to fast-food joints such as KFC and McDonald’s. China’s size, population, and lack of regulations have made fake food an even more pervasive problem than in any other country. Despite the Chinese citizens being wary of it, many are still passive about the solutions.
The supply chain in the food industry is surprisingly complex and involves multiple transactions, processes, and transfers. Many areas can go wrong but predominantly most problems occur in two areas: food processing and distribution. In unregulated environments such as rural areas of China, unscrupulous suppliers are known to take shortcuts such as adding adulterants to be more cost-competitive and create more appealing products. The mishandling of food during distribution is another area of concern, including temperature discrepancies during transportation and poor hygiene practices. As such, Chinese food producers are adopting technological innovations to prove the value of their product and regain confidence among consumers.
The advent of IoT and Blockchain is set to empower the Chinese consumer with the ability to track and understand the provenance of their food by providing the following abilities:
Create an audit trail of transactions from farmers and food processing firms to consumers
Provide transparency and visibility in the farming, handling and distribution process
Collect previously untapped data to carry out analytics to improve farming methods
Smart contract enforces contractual terms and accountability among parties involved.
Food producers who actively promote the provenance of their produce are giving themselves a competitive edge and validating a price premium over similar products. By weaving technology into their produce, it enhances their credibility of social elements (such as organic or free-range) and builds a reputation and brand loyalty among consumers.
In 2016, Walmart launched its Food Safety Collaboration Center in Beijing in collaboration with IBM and Tsinghua University to improve the tracking of food using blockchain technology. A traceability test conducted in May 2017 traced the origins of a package of mangoes in 2.2 seconds; this would take 6 days and 18 hours using traditional methods. In late 2017, the collaboration expanded to include JD.com, forming the Blockchain Food Safety Alliance that aimed to achieve greater transparency across the food supply chain.
“By recording the identity of those who input the data into the chain, the technology removes the anonymity that has help food-fraud to thrive,” said Frank Yiannas, Wal-Mart’s Vice President for Food Safety.
JD.com, China’s second-largest e-commerce platform has been exploring the capabilities of blockchain in empowering food producers to provide information about their produce. Their most recent venture with Kerchin, an Inner Mongolia-based beef manufacturer, allows consumers to track the production and delivery of frozen beef. Recorded on the blockchain, information such as the cow’s breed, weight, and diet as well as the farm location can be retrieved by scanning the QR code on the package. More than 10 brands from the alcohol, tea, and pharmaceutical industries have joined this blockchain project since December 2017.
ZhongAn Technology, the tech subsidiary of Chinese Insurtech giant ZhongAn Online, has built a blockchain-powered platform to track the whole process of chicken farming. In partnership with Wopan, a IoT company in Hangzhou, IoT-enabled anklets are attached to chickens and every aspect of their lives are tracked, from the age and distance walked to the slaughterhouse and logistic providers employed. All data are recorded on the blockchain and viewable to consumers from a mobile application. Data collected from the anklets also allow farmers to carry out analytics and improve their rearing methods; a significant breakthrough in farming technology was never possible until the popularization of IoT.
Alibaba’s recent blockchain project with PricewaterhouseCoopers and food suppliers in Australia and New Zealand to provide greater product integrity at its platform is evident of the growing popularity of blockchain to improve food safety.
Another company that is worth mentioning is KaoPu (Kao铺), a food catering company that attempts to improve food safety through blockchain initiatives. By deploying a blockchain network into every point of its supply chain system (production, procurement, logistics) and incentivizing suppliers through the issuance of its own cryptocurrency Sharecoin, KaoPu hopes to attract potential suppliers to join the network and form an ecosystem of trust and food safety.
With McKinsey & Company forecasting China’s middle-class to hit 550 million by 2022, its growing consumer class is demanding higher quality produce and better food safety. Research from Pew Research Center in 2016 reports that 40% of the Chinese public sees the safety of food as “a very big problem,” up from 12% in 2008. A 2015 survey on a pork producer in Jiangsu found that the annual revenue of farmers, meat producers and retailers increased by 38.2%, 28.6% and 33.2% respectively since the implementation of a traceability system. As China heads toward a “Quality Revolution,” organically-grown produce and “traceable” food will see an increasing demand from consumers who are less price-sensitive and more health-conscious.
Food giants such as Walmart and JD.com have achieved notable success in the deployment of blockchain and IoT due to their scale and investments in R&D, but the same cannot be said for smaller food retailers who lack the resources and capability. Nonetheless, China has been beefing up its regulations and implementing strategies to help these food producers and retailers. The revision of the Food Safety Law in late 2015 imposed stricter controls and supervision on the production and handling of food. In October 2017, China’s State Council released a set of guidelines on promoting innovation to establish a smart supply chain that covers major industries by 2020. Coupled with the rapid commercialization of IoT and blockchain in China, it is without a doubt that we will see a lower cost of adoption of these technologies in the coming years.
Blockchain and IoT is set to disrupt major industries worldwide and the food industry would undoubtedly be part of the technological wave. As China leads the world in improving food safety, countries worldwide ought to adopt a learning or perhaps, a “copycat” mindset as the tables are now turned.