1 Fraud Vulnerability in the Supply Chain Dan Kastor Sr. Director, - - PowerPoint PPT Presentation

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Fraud Vulnerability in the Supply Chain

Dan Kastor

• Sr. Director, Regulatory Affairs

May 11, 2018

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Several experts say the best way to reduce the risk of buying spiked ground spices (and get much better flavour) is to buy the spices in their whole form and then grind them at home The Canadian Food Inspection Agency (CFIA) has beefed up its inspection of spices sold in Canada to detect products that have been adulterated by other ingredients… …a study by Queen’s University Belfast in the United Kingdom warns that fraud in the global food supply chain is becoming increasingly common due to the huge profits associated with this type of criminal activity.

By Levon Sevunts-Radio Canada International Thursday 12 April, 2018

Queen’s University-Belfast in UK (Prof. Chris Elliott)

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• 3 year PhD funded by UK retailers and key Herbs and Spice industry companies
• Aimed at researching the adequacy of techniques (FTIR and NIR) to detect EMA in
• ur product category as well as exploring the extent of EMA generally.
• The consortium project will likely run into 2019

Output so far (tons of press) has been the creation of validated chemometric models on which to reliably screen samples of herbs and spices for the presence of adulterants added for financial gain.

OREGANO - Queens are now looking to move to get this method accredited. Queens continue to test many hundreds of samples of oregano globally via this screening technique. SAGE - The sage model shows a good fit, similar to the oregano results. This model was able to clearly identify different sage species. PAPRIKA – more samples are needed to build this model, The NIR fit was better than the FTIR fit in the case of paprika. GARLIC –The model is in its very early stages.

Today’s Presentation

• Background and Landscape
• Protecting Against Food Fraud at McCormick
• Forward-Looking Strategy and Actions

“Make the best, someone will buy it” Willoughby McCormick

McCormick: the Tas aste te y you T

• u Trus

ust™

A 129-year commitment to leadership in food safety and quality

1889 2018 “We view food safety and superior

quality as a key differentiator for McCormick” Lawrence Kurzius

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In 2018, McCormick Delivers the Taste You Trust™ on a Global Scale

McCormick manufactures, markets and distributes flavor products including spices, seasoning mixes and condiments to the entire food industry – retail outlets, food manufacturers and foodservice businesses

$4.8 Billion in sales 66% Americas 21% EMEA 13% APZ 10,500 Employees Worldwide 50 Facilities in 26 Countries 60% Consumer 40% Industrial Every day, no matter where or what you eat, you can enjoy food flavored by McCormick.

brands in more than 150 COUNTRIES AND TERRITORIES

>150

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~ 2,800 suppliers 15,000+ raw materials/ingredients

~ 100 raw material/ingredient source

countries (39 for spices and herbs)

Wet, Dry, Frozen, Ready-to-eat etc. competencies

McCormick Quality & Regulatory Programs and Expertise Cover an Extensive Range of Competencies, Ingredients and Source Countries

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Translating Food Safety Into Quality and Quality Into Premium Will be a Winning Proposition More than Ever Across the globe, today’s educated consumer, especially millennials, is watching.

Transparency rules!

Consumers want to know what’s in their food, where it came from and its journey to them. Premium packaging today is clean and clear as one response.

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Those Savvy Canadian Millennials…

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Projected Population by Generation (1000s) Canada Millennial Preferences and Values Surrounding Food

• Eighty per cent of Millennials want to know more about how the food they buy was grown or processed.
• Millennials are interested in the story behind their food and are looking to learn more about what’s in it

and how it’s made. Transparency in business operations is important to Millennials.

• In the food industry it is important that companies can trace the source of ingredients used in their

products to ensure they are safe, produced sustainably, and with the highest quality standards.

Source: Millennial Marketing Source: Food PackagingLabels.net. How Are Millennials Changing the Food Scene?

Executive Summary

• Interest in Food Integrity continues to dominate global food safety, quality and regulatory

forums, with herbs and spices together with meat, fish and alcohol being the most discussed.

• Food authenticity is a growing concern with increasing public awareness.
• Still no clear legal definitions of integrity, authenticity or food fraud.
• On the traceability and auditing side, schemes have been amended to include specific

aspects of vulnerability assessment.

• We remain at the forefront, influencing these shaping events.

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How does Authenticity Differ from Food Safety & Quality ?

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In Scope

Our 6 Principles of Food Integrity

At McCormick we consistently address the 6 principles of Food Integrity via a number of well established overarching programs:

• 1. The food we produce is safe – via GFSI
• 2. The food we produce is authentic – via GFSI
• 3. The food we produce is nutritious – via MSI
• 4. The systems we use to produce our food are sustainable – via PLP (Purpose Led Performance)
• 5. Our food is produced to the highest ethical standards – via PLP
• 6. We respect the environment and those who work in our food industry – via PLP

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GFSI SI Food Fraud Preventio ion Co Compli liance Requir irements

• GFSI clearly defines the scope of Food Fraud to include all types
• f fraud (e.g., not just adulterant-substances but also to include

theft, tampering, counterfeiting, etc.) and all products (e.g., incoming goods such as raw materials and outgoing goods including finished products destined for retail shelves.)

• GSFI only requires that a Food Fraud Vulnerability Assessment be

completed and documented and then that a Food Fraud Prevention Strategy be completed and documented.

• There are no further published requirements or guidance on the

method, process, details, length, depth, etc.

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GFSI SI Food Fraud Prevention Audit Requirements

1. Conduct a Food Fraud Vulnerability Assessment (Y/N)? 2. Written (Y/N)? 3. Implement a Food Fraud Prevention Strategy (Y/N)? 4. Written (Y/N)? 5. Minimally conduct an annual Food Fraud Incident Review (Y/N)? 6. Confirm these meet the “GFSI scope” of all types of Food Fraud (Y/N)? 7. Confirm these meet the “GFSI scope” of all products from both incoming goods (e.g., ingredients) and outgoing goods (e.g., finished goods) through to the consumer.” (Y/N)?

17 MSU Food Fraud Initiative, Food Fraud Audit Guide MOOC (Massive Open Online Course), July 2017 (see http://foodfraud.msu.edu/mooc/)

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Highest Vulnerabilities

Mislabelling – fake credence certification, Natural Flavouring Substances – synthetic vanilla sold as natural Dilution – Oregano containing other foreign leaves Unapproved enhancements – chilli powder containing illegal dyes

Where are we vulnerable ?

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Consider materials that are in low supply, have highest demand, and challenging to obtain…

Raw Material Focus

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Supply Integrity Strategy

Supply Chain Integrity Program Spice & Herb Integrity Assessment Vulnerability Assessment Tools VACCP/BRC 7 Supply Chain Intelligence RM Exposure List Industry Influence and Emerging Technology

Vulnerability Assessment Tools

• Numerous IT tools for vulnerability assessments emerging.

Vulnerability assessments involve the review of controllable factors, uncontrollable factors and mitigating factors in a systematic way to establish the potential for fraud or adulteration to occur on the products within that group

• Extensive review undertaken of current vulnerability tools
• Procedure developed–Vulnerability and Horizon Scanning

directive

• Based upon USP methodology (www.foodfraud.org)

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Vulnerability Assessment Systems

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New Origin/New Vendor Program

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TESTING PERFORMED ✓ Microscopy ✓ Volatile Oil and Geography Scan ✓ Chemical Screen ✓ Illegal Dye Screen ✓ Heavy Metals (Cd, Hg, As, Pb) ✓ Pulsed Photo- stimulated Luminescence (PSL) ✓ DNA Fingerprinting

• McCormick completes its assessment at a global level
• The assessment is based on supply chain knowledge, our internal

verification processes, and the history of occurrence of food fraud by material category

• The final vulnerability assessment is documented in the Unapproved

Additives tab of the Global Raw Material Exposure List (GRMEL)

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Vulnerability Assessment Systems

GRMEL – Unapproved Additives - example

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Protection of the Brand and the Consumer is Our First Priority

• Consumers trust the McCormick Brand and food

safety and quality are critical to that trust.

• Business Survival – Our brands are most important

assets.

• Industry Responsibility – We are committed to

food safety across the supply chain more than ever.

• We have top level commitment to invest in trade

associations to raise the bar for all of the spice industry.

• Safe food starts with safe ingredients.

Supply Chain Controls , Long Term Alliances and Global Standards Drive Prevention…

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Chain of Custody Controls to Prevent Adulteration

Manufacturing Process Control Source Material Control Strategic Vendor Alliances

Field McCormick

Supply Chain Control Principles

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Manufacturing Process Control

• Have state-of-the-art processing

facilities

• Apply robust incoming inspection,

testing and process controls

• Meet the same quality standards

and expectations required by McCormick facilities worldwide

• Possess a rigorous Quality

Assurance Program

• Undergo an audit by our Global

Sourcing Group at least annually

Source Materials Control

• Our strategic suppliers procure

spices and herbs only in the whole, unground form

• It makes the prior addition of an

economic adulterant highly unlikely since its presence depends on a product being finely ground to prevent detection

• Since the source material has not

been ground or processed, it can readily be identified as pure plant material

• This unique approach greatly

minimizes the possibility of intentional economic adulteration

Strategic Vendor Alliances

• Value and respect the business

partnership

• Understand and adhere to GAP’s and

GMP’s

• They have relationships with local

farmers and as such have the ability to influence quality back to the field

• McCormick provides ongoing QA

direction to insure that we command the same rigorous quality programs as with

• ur own operations

A B C

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Engagement at Source

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By having strong personal vendor relationships we develop an in-depth understanding of the situation in source countries and identify the best raw material

• rigins.

Relentless focus on improving our vendor’s capabilities through a very sophisticated vendor certification management program which requires trust & understanding.

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Farm Collector Processor Shipper/Exporter Agent

Importer/Dealer

Broker McCormick

Export Import

Customer

• Many Touch Points
• High Risk of

Contamination

• Complexity Hinders

Ability to Ensure Quality and Safety

• Very Difficult to

Work Directly to Impact Quality and Safety Upstream

Traditional Complex Supply Chain (Indirect)

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Farm Collector Processor Shipper/Exporter Agent

Importer/Dealer

Broker McCormick

Export Import

Customer

A Global Sourcing Commitment to Quality (Most Direct)

• Fewer Touch Points
• Reduced Risk of

Contamination

• Facilitates Work

That Directly Impacts Product Quality and Safety

• Enabled by Our

Size and Critical Mass

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Purpose -led Performance Approach

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Every day, McCormick proves that responsible business is smart business. At McCormick, we are equally dedicated to strengthening our business and improving the world around us—an approach we call Purpose-led Performance (PLP). It’s our commitment to deliver industry-leading financial performance while doing what’s right, with an unwavering responsibility to the long-term vitality of our people, communities and the planet we share.

OUR STORY:

Our Purpose-led Performance Principle

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Our Purpose-led Performance Str Strategic ic Fr Framework

We bring Purpose-led Performance to life through the following key focus areas:

Building vibrant communities where we live, work and source.

Communities

Making a positive impact on our planet.

Planet

Working to improve the health and well-being of all people and helping

• ur employees thrive.

People

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Our Purpose-led Performance Work

Source 100% of branded iconic ingredients sustainably by 2025. Increase the livelihoods

• f 90% of smallholder farmers

who grow McCormick’s iconic herbs and spices by 2025. Champion equality for women and people of color in leadership, and empower women farmers across the company’s supply chain. Reduce the company’s environmental impact by lowering its carbon footprint, decreasing water use, reducing solid waste and developing sustainable packaging innovations.

CSR/Sustainability Efforts take many forms…

Indian Chili Backward Integration Indonesia Disaster Recovery Help Mada Program

✓

Monthly rice reward for school attendance

✓

Donation of medical clinic

✓

Reforestation program

✓

Vanilla farmer education

✓

Food assistance for families

✓

AVT McCormick Joint Venture

✓

Improved farm practices, controls and quality

✓

Enhanced traceability

✓

Improved Farmer well-being

✓

Earthquake recovery for community near key spice strategic supplier

✓

Donated 2 medical clinics in remote Cinnamon growing areas

✓

JV cinnamon facility used for logistics center for emergency supplies

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Cucumber farmers in Turkey

✓

JV with Kutas

✓

Seed development

✓

Sustainable farming practices

✓

Improved Farmer livelihoods

Ba Backward In Integratio ion of In India ian Ch Chilli illis

Country Stats

• Approximately 45% of global

production is from India

• 85% consumed in country
• McCormick purchases 25%
• f exported product
• Estimated area cultivated nearly

2 Million Acres by >300,000 farmers yielding >220 Million MT/Year

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Chilli Supply Chain Traditional

End Customer Sales Channel Food Manufacturers Spice Processors Traders/Commission Agents @ market Village level trader /Aggregator Farmers Cold Storages Cold Storages Market

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Tensions impacting the Indian Chilli grower…

• Small farm holdings
• Competing crops with “less hassles”
• Disease attacks & inconsistent weather
• Improper Post Harvest handling
• Storage availability
• Labor Shortage
• Power Shortage
• Water shortage
• 8% - 12% of chilies exported, remainder are

consumed in India

AVT McCormick Visits and Farmer Discussions

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BI Farmers work with AVT McCormick to improve Chilli growing

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AVT McCormick identify growing areas based on climate, soil, water, competing crops and then request specific villages to join program based on selection screening

BI Farmers Realize Greater Yield, Improved Quality and Enhanced Food Safety

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Simplification of the Supply Chain leads to Quality, Food Safety and Transparency

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Cold Storage Managed Farmer(s) Customer

Industry Adulteration History

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• Sudan Red dyes – leading now to 16 dyes being tested on all red or yellow products
• Oregano study in the UK – 25% of 78 samples found to be adulterated – some up to 70%
• Spent material being blended into high value product and not labeled
• Peanut in cumin
• Mahaleb in paprika
• Lead chromate in turmeric
• Various dyes in saffron
• Imitation vanilla extract sold as natural
• Micro risk - salmonella

Th The McC cCormic ick Forward-Lookin ing In Integrit ity St Strategy

Program led by new role – Clare Menezes – Director Global Food Integrity.

• 1. Evolve our existing vulnerability programs and initiatives Globally – elevate

authenticity within our QMS (Quality Management System)

• 2. Proactively influence regulators, trade, customers and consumers

regarding differentiated benefits of high integrity McCormick S&H supply chain and perceptions of overall industry - Via Quality Story, Superiority Campaigns, Consortium representation and Trade association activities

• 3. Leverage Analytical Sciences to reinforce chain of custody approach. 3 year

investment plan for emerging Science already identified, evolving to a controlled non targeted testing approach

• 4. Invest in tools to use early warning PESTLE indicators to act on data and

intelligence in real time PESTLE = Political-Economic-Social-Technological-Legal-Environmental

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Thank you!

PURE TASTES BETTER

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