FOOD DEFENSE STRATEGIES: Four Ways to Proactively Protect Your Brand

Food Defense: Proactively protecting the food supply chain is paramount for protecting company profitability, liability, and survival. Unfortunately, companies have discovered that a single incident of tampering, tainting or contamination can have disastrous consequences to their brand and, in some cases, to their company. Perhaps the real tragedy is that some contaminations may have been prevented if a comprehensive food defense strategy had been enforced throughout the manufacturing process and across the supply chain. The most important purpose of a food defense strategy is to help increase consumer safety, but protecting the brand and company profitability should also be considered. A solid food defense strategy, implemented throughout a company and supply chain, can better help protect employees, reduce operational risks, and protect shareholder value. The reputational risk that today s companies are facing goes beyond legal risk. If there is a problem with a supplier, even if the supplier has violated an existing contract, who will be blamed? You. It will always be the company that makes the promise to the customer. Daniel Diermeier, PhD, author, Reputation Rules: Strategies for Building Your Company s Most Valuable Asset There has been a lot of focus placed on regulatory compliance because of the FSMA. However, other threats could also have devastating effects on corporate profitability and liability. According to Don Hsieh, Director of Commercial Industrial Marketing for Tyco Integrated Security, To global food manufacturers, their suppliers and their distributors, the implications of the Food Safety Modernization Act are much more than simply about compliance with regulation. Food Defense is all about protecting the brand. Prevention remains the best brand protection option. A proactive food defense program may prevent food adulteration by helping companies avoid, or be alerted to: // Diversion of raw material and/or ingredients before and during transit domestically and internationally // Inadvertent or intentional in-plant contamination // Failures in temperature controls, within plants and throughout the supply chain // Failures in internal oversight procedures with respect to sanitation, storage, and cross contamination standards // Lack of a trackable history for ingredients and end-products // Uncontrolled access by visitors and contractors within production facilities or storage areas THE COMPLEXITY OF THE FOOD SUPPLY CHAIN EXAMPLE 15% of U.S. Food Supply is imported 80% of seafood 50% of fruit One loaf of bread may have as much as 7 ingredients that could come from 14 countries.

PROACTIVELY PROTECT FOOD THROUGHOUT THE SUPPLY CHAIN Although it can be difficult to achieve end-to-end supply chain protection, some risks can significantly be reduced by combining methodical, procedural, and technological advantages. Four Ways to Proactively Protect Your Brand The Four A s of food defense Assess, Access, Alert and Audit are the core components of a proactive food defense program that delivers the actionable intelligence to help food companies and suppliers implement the preventive controls necessary to protect their valued brand. 1. Assess: The FSMA requires food facilities to perform a hazard analysis, and to prepare and maintain written preventive control plans. As a starting point, the Hazard Analysis and Critical Control Points (HACCP) plan is an important risk assessment tool for identifying strengths and vulnerabilities. Currently, most risk assessments are being performed by professionals who are only trained in food safety. Given the additional food defense vulnerabilities, a HACCP trained professional who also has an in-depth knowledge of security technologies can perform a more effective risk assessment. This more thorough risk assessment builds toward the development of a comprehensive food defense management plan which includes: // Documentation procedures for personnel, suppliers and subcontractors // Security technologies, standards and procedures for buildings, perimeters, shipping/receiving docks, warehouses and storage areas // Emergency planning and protocols // Sanitation procedures and authority to access particularly sensitive processes and areas // Supply chain monitoring, documentation and security 2. Access: Controlling access to areas and facilities via the front door is only the beginning of what access control can do to help better protect a production facility. Food adulteration can come from anywhere visitors, contractors, disgruntled employees, and 3PL or 4PL staff. Preventing unauthorized access to critical control points, and monitoring movement through those areas, must also be part of a comprehensive food defense initiative. Critical control points include: raw material storage; processing areas; packaging and label storage; hazmat and chemical storage facilities; allergen zones; allergen-free zones; finished product warehouses; shipping and receiving docks; and laboratories. Preventive controls that can help deter, detect and delay include: // Controlling physical access to a facility with access control cards // Monitoring personnel with integrated video and access control solutions // Managing multiple sites with web-based, multisite access control solutions // Preventing and detecting intrusion in key areas // Virtually roping-off critical control points using RFID hot zones and video analytics, to help reduce cross-contamination or intentional adulteration in wide open production facilities

3. Alert: Historically, safety and security initiatives have been focused mainly on production facilities. In the past few years, it has become more apparent that food defense threats can come from anywhere in the supply chain. In fact, 90% of cargo theft occurs on trucks while they are in transit 3. In the last two years, the food & beverage category has experienced the highest number of cargo thefts in the industry 4. Criminals aren t conscientious about protecting the safety of the food when they are reselling back into the legitimate supply chain. Therefore, it s more critical than ever to take steps to protect the entire supply chain, both within the plant and for goods that are in-transit. Monitoring and tracking technologies can help facilitate a proactive response to transit issues when they arise by: // Actively monitoring shipments with GPS that can provide real-time alerts of potential misdirection, detour or hijacking // Locating and immobilizing vehicles in real-time to prevent cargo theft // Using temperature and humidity sensors to ensure the safety of food throughout the cold chain // Integrating multiple alerts and centralizing management and control of alerts through a Physical Security Information Management (PSIM) solution 4. Audit: Under the current system, food safety controls, process checks, and quality control audits are typically completed by in-house and/or government inspectors. This system is flawed for a number of reasons human error, knowing when an auditor will visit, and awareness of the items an auditor will check. Companies can get a false sense of reality because reports are based on audits performed at given points in time. Randomly sampling and auditing specific operational standards and procedures with video technologies can help improve compliance by verifying current procedures are being followed at all times. Video surveillance and monitoring solutions can help improve safety and security by: // Increasing compliance with standard processes, such as sanitizing food contact surfaces, cleaning utensils, using protective clothing and eyewear, testing finished products and practicing proper hygiene // Offering video analytics to help monitor employee performance, to improve operational efficiency, to maintain compliance, and to use as an employee training tool // Adding Web-based security system capabilities to help mitigate the risk of on-site systems being tampered with or maintenance skipped // Ensuring compliance with animal welfare procedures to prevent public relations issues from activist groups using covert cameras The solid food defense plan that includes the Four A s Assess, Access, Alert and Audit can help deter adulteration and theft, detect breaches in security protocols, and document materials and goods throughout the supply chain. Proactively protecting your food supply chain makes good business sense. It can help protect consumers, your brand(s), your company s profitability, and corporate stock value. 1 Recall Execution Effectiveness: Collaborative Approaches to Improving Consumer Safety and Confidence, Deloitte on behalf of the Food Marketing Institute ( FMI ), the Grocery Manufacturers Association ( GMA ), and GS1 U.S., June 2010 2 US Grocery Supplier 3 Chubb 4 Freight Watch

KEY THREATS TO BRAND AND PROFITABILITY Recalls can Significantly Impact Company Profits, Both Directly and Indirectly Recalls can pose a significant threat to public health, but they can also be costly to companies both financially and in reduced brand equity. It is estimated that on average, a food recall will cost $10 million in direct costs 1. Indirect costs, can come from litigation, post-incident governmental oversight (agreed or mandatory), lost sales, and damage to a company s market value and brand reputation. Social Media and 24-Hour News Cycles Allow Consumers to Quickly Share News Today s companies must also be mindful of the power of social media and the proliferation of 24 hour news cycles. News worthy stories, especially when negative, spread quickly and deeply in these media. While immersed in a recall crisis, the depth and breadth of these media outlets, make it nearly impossible to systematically react to negative publicity in a timely manner. Following a Recall, Consumers May be Less Inclined to Purchase the Affected Brand Once a recall has occurred, consumers are less inclined to purchase the affected brands in the future. In a Harris Interactive poll, consumers indicated that 55% would switch brands temporarily following a recall, and 15% said they would never purchase the recalled product again, while 21% would avoid purchasing any brand made by the manufacturer of the recalled product. Affects on Brand Reputation Can Last for Years After a Recall A U.S. Grocery Supplier survey seems to validate these intentions. In the year following large spinach and peanut recalls, almost three-quarters of consumers stopped purchasing those products out of safety concerns. In the second year, the percentage dropped to one-quarter, but the impacts were still being felt 2. // Food Safety Modernization Act: In 2011, the Food and Drug Administration (FDA) enacted the Food Safety Modernization Act (FSMA). The act s primary goal of the legislation was to shift the focus of food safety toward preventing contamination in the food supply. Key mandates include: preventive controls; inspection and compliance; increasing the FDA s ability to intervene and respond to recalls; and enhancing federal agency partnerships.