The profound lack of transparency in the global food system is both an everyday problem for consumers and an urgent concern for the regulators who oversee food safety around the world.
Today’s consumers are hyper-conscious about the food they buy, checking product labels for ingredients, expiry date and place of origin in addition to price. They are increasingly troubled by reports that they may be eating mislabelled seafood or olive oil that is not actually olive oil. At the same time, regulators are concerned about both counterfeits and about potentially adulterated products entering the food system. Amid these consumer and regulatory concerns, food system stakeholders are aspiring to achieve increasingly ambitious goals.
During the past several decades, the quest for transparency, provenance and the elimination of waste in the F&B industry has led organizations to address challenges in the farm-to-fork (food) and grain-to-glass (beer and spirits) supply chains. Because these companies deal with perishable products that can be rendered unsafe by even small lapses in process controls, they have a double incentive to adopt innovative new approaches to supply chain transparency.
Blockchain technology presents an immense opportunity to, for the first time, achieve transparency across the global food system. Blockchain innovations are well positioned to enable industrial scale farm-to-fork tracking that can address consumer needs for authentic data, resolve numerous regulatory challenges, and create massive new opportunities for sustainable distribution and re-use. To realize this future, ecosystem partners in the global F&B market (a massive $6 trillion industry with a CAGR of 9%) must cooperate to meet the increased demand for traceability and transparency in the supply chain, while also reducing food waste and enabling sustainable productivity.
What is blockchain for F&B?
A blockchain is a distributed, digital ledger that records transactions as a series of blocks that are linked together sequentially in a chain. Because it can only be updated by consensus, a blockchain is inherently tamper-resistant. The ledger itself is spread across multiple systems and is updated every time there is a new transaction.
While many F&B companies are already using advanced data-tracking, even the best-of-class supply chain solutions reach their limits when they have to communicate with other proprietary systems. These disconnects lead to inevitable gaps in visibility. Blockchain improves end-to-end traceability while building scalability and trust into the entire supply chain ecosystem. It provides a single source of truth, delivering real-time insights for decision-making, which in turn enables automated and efficient operations.
Applied to the F&B sector’s typical supply chain process (see Figure 1), blockchain would capture data from numerous different entities in the ecosystem. Smart contracts (self-executing contracts triggered by blockchain transactions) are powerful ways of executing agreements to streamline and automate existing processes like tamper alerts, invoice creation, invoice reconciliation, payment execution, and contract management. The blockchain transactions highlighted in Figure 1 (including smart contracts and financial transactions) can be executed across the value chain.
Key blockchain use cases in F&B
In the context of the F&B industry, four blockchain use cases are likely to contribute the most significant ROI: improving traceability and transparency, eliminating counterfeit products, enabling sustainable supply chains and tracking assets via NFTs.
1. Improving food traceability and transparency
Adulteration (including the use of excessive preservatives and hazardous chemicals), improper tracking of food allergens, and production process lapses (especially for perishables) are all major challenges in F&B given their potentially deadly implications.
According to a NielsenIQ report, "transparency" will be one of the two most important consumer trends in the coming years. The US-based Food Marketing Institute (FMI) found that 75% of consumers are likely to buy brands that provide in-depth product information. Meanwhile, governments globally are trying to address these issues through tightened compliances and regulations around food safety and quality.
Blockchain’s ability to establish and track provenance enables supply chain participants to pinpoint a trustworthy initial data source, track changes in ownership, and trace the history of products and ingredients.
2. Eliminating counterfeit products
Valuable and rare food and beverage products, in particular, are commonly counterfeited. In a recent report by Business Insider, experts estimated that about 20% of wine sold worldwide is fake - particularly the rare, high-end-wines that command the highest prices on the global market. For that very reason, wine producers have been some of the F&B industry’s early adopters of blockchain authenticity verification solutions.
Blockchain ensures product authenticity throughout its journey and facilitates secure data exchange between all market participants. The immutability property of blockchain prevents tampering with records, and innovations in label and packaging technology (see point 4 below) are creating new ways to reinforce the link between the physical product and its digital presence in the blockchain.
3. Enabling sustainable supply chains
According to recent estimates, around 17% of our global food production – approximately 930 million tonnes – ends up lost or wasted, resulting in elevated prices, decreased access (especially for low-income groups) and unnecessarily large carbon footprints across the F&B ecosystem.
The UN’s 12th Sustainable Development Goal espouses “responsible consumption and production” and aims to halve food waste by 2030. The UN views this effort as critical given that the world population will reach 8.6 billion in 2030.
Blockchain can minimize waste in the global food system by maximizing useful shelf life, tracing food freshness, optimizing partners networks, and increasing recall response efficiency.
Beyond ensuring that a higher percentage of our global food output reaches end consumers, blockchain will also bring other sustainability innovations to the F&B industry. Blockchain will create numerous solutions to track the carbon footprints of organizations, building a circular economy and enabling reuse and recycling. In particular, blockchain will allow the F&B industry to make better use of reverse logistics systems, which show significant promise to reduce carbon footprints in other industries but are more challenging to implement in F&B due to the issue of perishability. Improved reverse logistics will allow producers/shippers to both recapture value from rejected loads and significantly reduce reliance on single-use packaging and shipping materials.
4. Tracking assets via NFTs
Blockchain can integrate with asset-identification technologies like barcodes and RFIDs to track assets as non-fungible tokens (NFTs). Linking food products to unique digital NFTs will promote greater visibility on product details and changes in ownership for all ecosystem participants. NFTs can also reduce product recalls by quickly and precisely identifying affected products lines and manufacturing batches, thus back-tracking the entire supply chain. These NFT-enabled efficiencies will not only advance important sustainability goals, but also drive measurable cost reductions.
The future of blockchain in F&B: A unified data paradigm
In our current global food system, true farm-to-fork transparency is a rare luxury rather than an omnipresent reality. For every vegetable from a local farm, we consume numerous ingredients whose ultimate origins are obscure not only to consumers, but often to F&B manufacturers and brands themselves. Consumers are increasingly demanding transparency, and F&B industry stakeholders are responding in kind, but companies have lacked a unified data paradigm that can truly span the entire global supply chain.
Blockchain represents an opportunity to build that unified data paradigm and create a supply chain ecosystem that can transcend proprietary internal systems, varying national food and agriculture standards, and the efforts of unscrupulous producers and sellers. Furthermore, blockchain has the potential to unlock numerous benefits for all key players in the global F&B supply chain, from manufacturers to suppliers, retailers and consumers.
Consulting Partner, Domain & Consulting
As a global consumer goods consulting partner and IT delivery leader, Sujit has helped clients in their transformation journeys for more than two decades, focusing on IT and process consulting, digital transformation and designing innovative solutions to address business challenges. He has worked extensively with global customers in the CPG (F&B and HPC), manufacturing and pharma sectors, developing solutions in areas that include ERP, CRM, supply chain, eCommerce and D2C transformations.
Karthik Subramanian R
With more than 8 years of experience handling transformation programs, Karthik enables organizations to maximize the impact of blockchain adoption. In particular, he focuses on using blockchain to bring supply chain transformations across domains like manufacturing, retail, consumer, and shipping and logistics.
Content Writer, iDEAS