No escaping farm-to-table issues in trade with China
OPINION: Food quality and food safety are huge concerns in China. New Zealand businesses must share those concerns if they are to continue growing the volume and value of their food and beverages sold to the increasingly affluent Chinese public.
We might think New Zealand milk products, meat, wine, honey and so on are world-leading on quality and safety. But what actually matters is our capacity for maintaining and protecting the quality and safety of every shipment to China – and our capacity to answer the questions of consumers in that market.
In short, New Zealand producers and exporters need to get really serious about the "T" word. Traceability in its fullest sense: The capacity to track and trace every batch of a product (and perhaps every item in the batch) for rapid recall if needed, and to provide discerning consumers with all the answers about the product when it is on offer to them.
Ultimately, traceability is about having relevant and accurate product information exactly where and when it's needed in the supply chain and in the marketplace. Food safety has long been a huge issue in China, fuelled by repeated instances of food contamination, fraudulent labelling and regulatory incompetence or corruption. In the Pew Research Center's 2016 survey of Chinese public opinion, 40% of respondents said the safety of food was "a very big problem".
That is reflected in Beijing's new Food Safety Act, under implementation since October 2015. This law puts much greater responsibility on producers and supply chains, consistent with China becoming a more consumer-oriented market and more open to a multitude of foreign suppliers. Direct regulatory action by the Chinese Government is still a feature in regard to "high risk" foods, with infant milk products chief among them.
The biggest New Zealand exporters to China are, of course, acutely aware of public sentiment there and of regulatory developments. The dairy industry in particular has come a long way since the 2008 melamine milk contamination crisis (in which Fonterra's then-partner Sanlu was implicated). These days New Zealand dairy plants producing infant formula for the Chinese market are subject to regular inspection by officials from the China Certification and Inspection Group (CCIG), and the brands open to importation are tightly restricted.
Similar registration and monitoring applies to more than 100 New Zealand meat processing and cool storage sites, and the CCIG has indicated the same for this country's suppliers of wine and honey to China from mid-2017 onwards. Such regulation (in partnership with New Zealand government agencies) amounts to site-specific traceability. Officials have direct visibility at the key processing stage.
But what of the whole supply chain, of the production in lower-risk product categories, and of Chinese consumers' rising demand for information? Here, China is showing it will increasingly rely on international traceability standards and systems. Fonterra has grabbed the lead among New Zealand exporters, confirming publicly this month (in December 2016) its plans for whole-of-supply chain traceability on all products by 2020. The dairy giant is building capacity to track and trace ingredients and products throughout its business, between the farms which supply milk and the retailers who sell Fonterra products to consumers.
China is the major impetus, with reference back to 2013 and the whey protein concentrate (WPC) contamination scare that temporarily threw New Zealand milk powder exports there into turmoil. The WPC incident was a false alarm but it did highlight deficiencies in Fonterra's traceability processes at the time.
The company will now have electronic data processes based on the "one up-one down" principle of traceability: Each business site and business partner in the supply chain will record and hold relevant information on the ingredients and products it receives, processes and stores, and on the other sites and partners to whom it sends those ingredients or products. Fonterra will have the capacity to identify and isolate any product of concern within three hours (not the five days required in 2013). Electronic data capture and sharing makes this possible. So does Fonterra's application of global data standards which enable every batch to be uniquely identified and located with absolute precision, and to be linked to relevant information on its origins, contents, and processing and distribution history. Traceability of this scale and complexity requires data collected, stored and shared to global GS1 standards as now used by businesses and governments in more than 150 countries. Global standards have become the "common language" required by supply chain participants across the world. Fonterra was quick to recognise this after 2013 and its major traceability programme will show the way for New Zealand's other global food and beverage producers.
In China, Alibaba Group has also come to the same recognition – and this too, can have huge benefits to New Zealand-China trade amid heightened concern on food quality and safety. Alibaba has recently adopted GS1 standards in its dealing with suppliers worldwide: They are asked to use the standards for all product identification and information management in order to access and use Alibaba's online retail and other trading platforms.
At last count, Alibaba had 435 million active buyers: The use of global data standards will make it much easier for them to find products on Alibaba's online stores and to access information on them (including access via smartphone apps).
For New Zealand businesses supplying China, the traceability stakes are high and rising. That's a function of our growing presence in the market – and our associated reputation for quality and safety – and also of China's increasing sophistication in matters of market regulation and consumer choice. This reputation could be put at risk by exporters who do not have best practice traceability systems. It is important that industry leaders and government continue to facilitate adoption of world-class systems for exporters, in particular.
Thousands of New Zealand businesses already use GS1 standards every day. For those with China and the "T" word increasingly on their minds, the Fonterra example and Alibaba's data invitation are signposts to a bright future.
Dr Peter Stevens is the Chief Executive of GS1 New Zealand. He was a member of the Government-appointed working party on traceability in the dairy industry in 2013-14.
-Published in the DominionPost, 10 January 2017