BLOCKCHAIN & FOOD INDUSTRY

Blockchain’s food application is one of the dominating topics in the food news. Therefore we take a look at the solutions and limitations of this trust technology for the food industry. In short: Blockchain technology can significantly improve issues of FoodSaftey and FoodTransparency. But – the technology is only as good as the (honest) data-input.

What is Blockchain?
According to economic encyclopaedia, Blockchain is a „decentred, chronologically actualised databank, with a consensus mechanism based on the network, for the stable, digital securisation of ownership.“

Put differently, Blockchain is an open-end list of data records, which are connected by cryptography, timestamp and transaction data. Later transactions build upon previous ones and confirm them as correct. The single transactions are combined to blocks – a block chain arises.

The Blockchain technology is said to be a „trust machine.“ Within the decentred system no higher-level supervisory entity is needed – it is self-controlling (Distributed-Ledger-Technology). The other participants would immediately recognise manipulated or deleted transactions.

This method of cryptographic interlinking is well-known as basis for crypto currencies (e.g. Bitcoin), but also used for other operations such as contracts (Smart Contracts), land title registers, medical information, company shares, insurances, logistic, internet of things (for the registration of things, the tracking and verification of rights of disposal and ownership).

What is the problem of the food industry?

• Inefficiency & opacity
• FoodSafety: today the traceability of contaminations and a quick and precise product recall is difficult
• FoodFraud: today manipulation of food, ingredients or packaging is still occurring

Every year more than 28 million people in the USA suffer from food poisoning. Around 3.000 die as a result. For the food industry this means high costs and image problems. Today, a quick tracing of contaminated ingredients or process steps is still difficult.

Why? The producer-storage-distributor-processor-retailer-consumer network is complex and based on different, hardly matchable datasets (from paper to excel). This fact makes it partly impossible to identify the origin of single ingredients. It seems unbelievably, but it takes nearly 7 days until a team of the US retail corporation Walmart could track the origin of a packaged sliced mango.

How can Blockchain help?

• Quicker retracing of process steps and origin

And thereby:

• Improvement of distribution chains (e.g. shorter storage time)
• Extension of shelf life, fresher products
• Reduction of food waste
• Quicker and fairer payment of (small) producers

Ideally, the consumer (or any other food chain participant) can scan the product (e.g. via QR code) and immediately get all information about origin and processing. Big food and retail corporations like Walmart, Nestle, Unilever, Dole or Tyson are already cooperating with IBM to master the issue of traceability of ingredients. Walmart was using blockchain to track the pork transport in China and of Mexican mangoes. With the new software, the origin of the aforesaid sliced mango was determined within 2,2 seconds.

As far as fair pricing is concerned: as all data is visible for all market participants, small producers can be less forced to dumping prices or subsequent “marketing” payments. Also mediators could become redundant, which in turn reduces transaction costs.

Food-Blockchain Startups
At the moment IBM is pioneering Blockchain applications, but Blockchain startups are catching up, for instance:

• Provenance: Product traceability software. Partnership with Unilever, Sainsbury’s and others to track social sustainability and financial efficiency across supply chains.
• Arc-Net: Targets food fraud in cooperation with PwC Netherlands.
• Bart.Digital: Blockchain and digital certification to bring transparency to the agriculture market
• Bext360: Specialised on the tracking of the coffee supply chain.

Limitations

• Honest participants & true information
• Transparency vs. confidentiality: handling of business critical information

Blockchain can only be as good as the data input. Critical voices, as the one of Mitchel Weinberg (founder of the anti-food-fraud company Inscatech), points to the challenge of true data, because Blockchain cannot check the validity of the data. What is more: most data is business relevant and market participants might not be willing to share this data publicly. The relation between transparency and confidentiality must be well gauged. According to Weinberg the following points must be guaranteed in order to make Blockchain’s food application a winning pairing:

• all food market members must participate
• honest participation and true data.

However, the Blockchain revolution starts right now. Also Alex Tapscott (author of Blockchain Revolution: How the Technology behind Bitcoin in Changing Money Business and the World) prompted the audience at the 4Gamechangers Festival 2018 in Vienna: „Start now with blockchain applications in your business!“

Conclusion
Blockchain technology seems promising to improve delicate food industry issues like food fraud or the overreaching of small producers. For consumers, and also other markets participants, a more transparent picture of the food’s origin, processing and condition would appear. Currently, the pairing of Blockchain & food is still at the beginning of it’s journey. Let’s see when this technology finds broad application.