Sustainability Market Intelligence Reporting Asia, February 2015 - Traceability

Date
22 May 2015

Consumers’ and retailers’ concerns about the sustainability of food and beverage products in New Zealand’s export markets can have a major impact on exporters. NZTE and MFAT collect information and market analysis on sustainability trends from our posts offshore to keep exporters informed.

Traceability is about a consumer being able to attribute the inputs of a final product to their original sources by following a product through a supply chain. This can allow a consumer or retailer to understand the environmental impacts incurred in producing a final product along with a number of other factors such as health risk, social impact, and quality. The issue of traceability has become topical in Asia following a number of food safety scandals. In this context, MFAT and NZTE’s Asian posts were tasked with answering three questions related to traceability in their home markets that would be of assistance to exporters. These questions were:

  • How much interest are consumers showing in traceability information?
  • What major traceability information requirements have been proposed or implemented? 
  • How might the trend towards traceability impact New Zealand exporters?

It is clear that in developed Asian countries, traceability provides, first and foremost, information to consumers about food safety. These Asian consumers relate country of origin with safety, in particular domestic food production is considered safer than foreign food and beverage. For New Zealand exporters this could create the extra step of associating New Zealand products with safe food production systems (which in Asian consumers’ minds includes some elements normally considered under “sustainability”).In developing Asia there appears to be less interest in traceability information but there are pockets of wealthy consumers where foreign produce is associated with high-quality that traceability information could be important to reach.

DISCLAIMER

While the Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise have verified the information in this document, we make no representation as to the completeness, correctness currency, accuracy or fitness for purpose of the information. The Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise will not be responsible for any damage or loss suffered by any person arising from the information contained in this document, whether that damage or loss arises from negligence or otherwise. 

China

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard setting/certification bodies)?

Food safety is the number one concern of the Chinese consumer and improving food safety is one of the Chinese government’s priority goals. In fact, the need to develop a national food safety traceability system was an explicit outcome of the 3rd Plenum of the 18th Central Committee of the Communist Party (CCCP) meeting in November 2013.

A significant number of provincial governments have moved ahead of the release of a national policy by introducing their own traceability regulations and schemes, or have announced their intention to do so. We are currently aware of at least 14 provinces that have either already introduced or are carrying out trial periods of various traceability regulations/schemes.

While specific details on these provincial schemes are not readily available, we anticipate that these various schemes will become mandatory under local regulation, if not so already (see infant formula regulations in Guangzhou below). This will impact the way that New Zealand companies trade and distribute product in the market and could involve labelling or packaging requirements, as well as traceability requirements on the New Zealand end (e.g. listing agricultural inputs on the farm). Schemes are expected to cover all New Zealand’s major food exports, including dairy, meat, fish, fruit and wine.

It is not yet clear what degree of coordination is taking place between provinces and the national authorities in terms of such regulations. However, our response to the development of private and province-specific traceability systems, which could add cost and complexity to New Zealand exporters, is to push for a collaborative effort towards a national traceability system.

As background, below are a few examples of traceability regulations and schemes that have attracted some media coverage over the past six months.

The Shanghai Daily reported in July 2014 that food businesses in Shanghai must be able to trace the origin of their raw materials or face fines up to 50,000 yuan (US$8,050) by the Shanghai Municipal Government. This traceability requirement would later be extended out to food processing companies, meat packing plants, wholesalers, grocery markets, supermarkets, school canteens and restaurants.

The Shanghai Husi Food Company scandal of August 2014 (which supplied rotten meat to KFC and McDonalds) resulted in the Shanghai Municipal Government holding hearings for a new Shanghai Food Security Information Traceability Management Regulation. The current draft regulation covers eight food categories including grain, meat, poultry, vegetables, dairy products, cooking oil, seafood and wine.

On 29 December 2014, Guangdong Province released China’s first infant formula milk powder traceability system. Consumers can now use their online platform or mobile app to trace the origins of the raw material in participating products, and find information about the product’s production, distribution and sales data.

Media reports in January 2015 show that other provincial governments are also setting up new traceability systems in their provinces. Fujian Province has announced that they will set up 100 food traceability management “demo areas” in various supermarkets, wholesale markets and food stores across the province this year. Jiangsu Province announced that they will be expanding on their existing traceability system (that covers dairy products, alcohol and food additives, but only on a “beta” trial with a small number of companies) to include children’s food and meat products in the year ahead. The Jiangsu Province initiative is reported to have gained support from the Ministry of Science and Technology.

How much interest are consumers showing in traceability information for food and beverage products in your host country?

Despite traceability becoming more and more of a “hot topic” in regulatory circles, and technology now being available to provide a lot of this information, it seems the demand for traceability information among Chinese consumers is not (yet) very high.

In March 2014, the Guangzhou Daily reported that while many products are labelled as “traceable” and local markets are often equipped with information scanning machines, consumers are seldom seen to take advantage of this service. Sales assistants explain that younger consumers who are generally more concerned with food security and are tech-savvy enough to use the scanning machines (or the QR code function on their smartphones) are “too busy” when shopping to seek this information. On the other hand, the more senior consumers may have the time to seek this information, but often don’t know how to use the machines or own smartphones with QR scanning functions.

In June 2014, a journalist carried out an investigation in five Beijing supermarkets to gauge the popularity of existing product traceability systems. When consumers scanned the QR code on a product, or inputted the unique traceability number into the supermarket’s machine (or website), the details of production, distribution and sales of the product in question were immediately available. However, the journalist found that while among 100 interviewees 90% of the consumers admitted to knowing about this service, only 20% had bothered looking up this information.

Researchers looking into this study attributed this lack of interest in the traceability information service to two main reasons:

  1. Chinese consumers still prefer to rely on their own previous experience or the experience of others (i.e. word of mouth) to judge whether a certain product is fresh or “safe”, rather than relying on technology.
  2. Chinese consumers have not yet formed the habit of taking personal responsibility for the “safeness” of their food, because they believe this should be the responsibility of the government and the supermarkets. 

In August 2014, further media reports supported this trend by consumers and producers claiming that much of the existing food traceability systems available in supermarkets are “little more than gimmicks”. There is an apparent lack of trust in the systems underlining these traceability information services.

It seems that traceability, in both consumer and regulatory arenas, is of growing importance to NZ interests; and we will be closely monitoring these developments as they progress forward.

Japan

How much interest are consumers showing in traceability information for food and beverage products in your host country?

Japanese consumers have a high interest in traceability information as it pertains to the origin, quality and safety of food and beverages. There is less, but a growing interest in relation to the environmental and social impacts of food production. Some retailers such as the Aeon supermarket chain have responded to this growing interest by developing environmental and social strategies and selling fair trade/environmentally certified products. According to a survey conducted in 2012 by the Food Marketing Research and Information Centre under contract to the Ministry of Agriculture, Forestry and Fisheries (MAFF), over 80% of the 2000 respondents agreed with the statement: “Efforts to improve food traceability is important to our dietary life”.

Following a number of serious food safety incidents related to imported food produced in China (most prominently pesticide-contaminated dumplings in 2008), Japanese consumer sensitivity relating to a product’s country of origin increased. Generally, domestically produced food is perceived to be of superior quality and safety. The Fukushima nuclear accident in 2011 however, heightened consumer sensitivity on the origin of food and beverages within Japan. Despite robust monitoring and standards setting well beyond international requirements; sales of food and beverage from Fukushima and surrounding areas has not recovered.

A recent spate of food contamination issues involving a number of high profile companies has served as a strong warning to food business operators, who increasingly recognised the need to establish and strengthen traceability practices. The uptake of social media means that financial/reputational damage to the producer from a contamination is immense and nearly instant. In response to the recent contamination cases, food manufactures have had to recall tons of product. McDonalds Japan reportedly lost USD 325 million in market capitalisation following contamination incidents in 2014 and 2015.

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard setting/certification bodies)?

Japan has a mandatory national traceability system for beef and rice. For other commodities, MAFF provides comprehensive guidance on standards in accordance with Japanese Agricultural Standards (JAS) and traceability requirements. The labelling rules for country of origin centres around the Food Sanitation Law and the JAS Law. The major traceability information requirements that have been implemented in Japan are as follows:

National traceability system: Japan currently has a mandatory traceability programme for domestic beef and domestic/imported rice:

  • Under the Beef Traceability Act of 2003, all domestically produced beef are required to be traceable from consumer to farm. Cattle ID numbers and packaged meat products are coded using the GS1-128 barcode system. 
  • The Rice Traceability Act of 2010/11 enforces food supply retailers and restaurant businesses to inform consumers of the production locale of the rice that they provide. 

Voluntary traceability system: For other commodities such as fruit and vegetables, shellfish, eggs, and farmed fish, there is no mandatory traceability system. Traceability policy is the responsibility of each food business operator, although MAFF has provides guidelines for voluntary traceability.

In 2007, the meat industry voluntarily introduced the GS1 Standard System for pork and poultry and uses it in a similar way to the Beef Traceability Act, to prevent transmission of infectious diseases to consumers.
Traceability of food imports: Japan requires conventional import permits, animal or plant health certificates to facilitate the tracing and tracking of internationally traded products.

Country of origin labelling: The basic labelling rules for country of origin for fresh foods and processed foods are as follows:

  • The JAS (Japanese Agricultural Standards) Law requires country of origin labelling for all fresh foods and processed foods sold to consumers in Japan. 
  • The JAS Law also requires country of origin labelling of the main ingredient in 22 categories of domestically manufactured processed foods, plus four processed food items.

Despite Japanese consumers’ high interest in food traceability, the current system depends largely on voluntary efforts by industry or individual firms. Consumers are well aware that there are some weaknesses in current regulatory settings. For example, although Japan has a very strict rules and monitoring systems for the labelling of foods in supermarkets, this is not applicable for ingredients used in restaurants. There is also a grey area in relation to the definition of domestic and imported processed foods, as processors are able to claim Japan as the sole country of origin if at least 51% of ingredients are sourced from Japan. Further, it is almost impossible for consumers to know where ingredients of imported processed foods were sourced, as country of origin labelling of ingredients is not required for imported processed foods.

How might the trend towards traceability impact New Zealand exporters in your host country?

New Zealand’s reputation for quality produce and high food safety standards positions New Zealand exporters favourably in the Japanese market. The trend towards traceability provides an opportunity for New Zealand exporters to differentiate from competitors. However, consumer education on New Zealand’s high standards and internationally recognised regulatory settings for food safety will be required in order for exporters to fully reap this benefit.

References:

Comparison of Global Food Traceability Regulations and Requirements
www.onlinelibrary.wiley.com/enhanced/doi/10.1111/1541-4337.12101/
GS1 Japan – Food Traceability
www.gs1jp.org/
MAFF Food labelling & Japanese Agricultural Standard
www.maff.go.jp/e/jas/index.html
What does 'Made in Japan' mean to the local consumers?
www.save-children-from-radiation.org/2012/12/07/what-does-made-in-japan-mean-to-the-local-consumers/

Indonesia – Traceability

How much interest are consumers showing in traceability information for food and beverage products in your host country?

Traceability (including the sustainability considerations of traceability) is yet to become a prominent feature of Indonesian consumer preferences. Indonesian consumers are significantly more motivated by price (and other factors) than they are by traceability information in purchase decisions.

Indonesian consumers (as a whole) do not consider food safety as a key attribute when purchasing food and beverage products, although external appearance and “clean looking” food is somewhat more important. Accordingly traceability – for food safety reasons – is yet to register widely with Indonesian consumers. Likewise with regard to traceability from an environmental perspective, this is yet to become an important consideration for most Indonesian consumers.
This is not to say that the country of production/brand is unimportant to the average Indonesian consumer. 60% of Indonesian consumers state a preference for (and greater trust in) “local” brands, or brands that are perceived to be local.

Importantly for New Zealand food and beverage exporters however this trend does not hold for consumers within the wealthy urban class who are almost exclusively responsible for consumption of new product categories in-market, and who are driving growth in the consumption of foreign food and beverage products.

This group is a natural target for New Zealand’s premium food and beverage products. Whilst traceability is not a significant factor for consumers amongst this class, there is some interest in the country of origin of food products. High-end supermarkets will accordingly label meat and horticultural products with the country of origin. This interest in country of origin is not driven by sustainability, although food safety is a factor. Perhaps the primary focus however is the perception of quality and “prestige” associated with foreign brands.

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard setting/certification bodies)?

We are not aware of any traceability information requirements enforced by the Indonesian Government, nor by retailers or private certification bodies.
High-end supermarkets do display information on the country of origin of certain fresh food products. This is however largely for promotional purposes and is neither mandatory, nor a widely adopted practice outside of a small group of supermarket chains.

How might the trend towards traceability impact New Zealand exporters in your host country?

Traceability trends are unlikely to impact significantly on New Zealand exporters to Indonesia in the near future due to an absence of traceability requirements, and weak consumer focus on traceability.
There is however a commercial advantage to be realised by establishing New Zealand as a source of quality products and prestige brands - and indeed in establishing brand New Zealand as synonymous with these attributes.

Republic of Korea

How much interest are consumers showing in traceability information for food and beverage products in your host country?

Korean consumers pay close attention to food safety. The recent Fukushima nuclear reactor incident, for example, has heightened the level of Korean consumer interest in the origin of fish. But regular outbreaks of foot-and-mouth disease in Korean cattle and pig populations, avian influenza in birds, and BSE in US beef imports have kept this issue top-of-mind for many Koreans for some time.

According to the consumer survey conducted by the livestock research centre in November 2014, 35.6% of Koreans responded that country of origin was the most important factor in purchasing meat products at hypermarkets and/or butchers. Country of origin is also one of the top three factors (along with freshness and price) for consumers when purchasing seafood and vegetables.

Reports have also begun to emerge about “pursumers” (pursue+consumers), fastidious consumers who thoroughly investigate the country of origin and traceability information of agricultural produce or livestock products. As the number of “pursumers” has been increasing products and restaurants targeting them are becoming popular in Korea.

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard setting/certification bodies)?

In this sensitive food safety environment, Korea’s Ministry of Agriculture, Food and Rural Affairs (MAFRA) and Ministry of Food and Drug Safety (MFDS) have put forward various country of origin labelling and traceability information requirements on the basis that consumers have the right to this information. These include:

  • mandatory country of origin labelling for beef, pork, chicken, and duck in restaurants. Lamb will be added from June 2015;
  • the two main ingredients in processed foods must list their country of origin. This will be extended to the three main ingredients in 2016;
  • traceability for fish products, although not mandatory, due to consumers’ contamination fears of imported fish from or near Fukushima.
  • traceability information on baby foods and health foods became mandatory from December 2014; and
  • food manufacturers and importers with annual sales of more than US$5 million also need to provide traceability information on their products from December 2014.

In addition, moves have been made independently by businesses, such as:

  • Maeil Dairy, one of Korea’s major dairy manufacturers, provides country of origin details for all ingredients in its infant formula on their website, emphasizing their products are safe from, in particular, radioactive materials;
  • Korean companies who run specialty organic/natural food stores (e.g. Orga Whole Foods, Chorocmaul) have adopted their own quality control system, including traceability systems, to build confidence among customers. Overall, Korea’s organic market is growing rapidly, recording more than 10% annual growth;
  • A newly released almond drink has been called ‘Premium California almond’ and, similarly, an orange juice manufacturer has opted for ‘Florida juice’ as a name for their products to emphasize where the ingredients are from.

It is important to note part of the motivation for introducing traceability information requirements in Korea is to distinguish locally produced products from imported ones. Local products are marketed as premium due to their perceived quality and safety. Incidents where businesses disguising imported livestock and fish products as locally produced products are not uncommon. There have been cases of New Zealand and Australian-produced beef and cheese being sold as Korean.

Meanwhile, in order to encourage food manufacturers and restaurants to use more locally-grown produce/ingredients, Korean lawmakers are considering passing laws that will enable the government to give additional recognition to the origin of processed products and/or restaurants if locally-produced ingredients make up for more than 95% of the ingredients.

How might the trend towards traceability impact New Zealand exporters in your host country?

While Korean origin food is prized, Korea cannot supply all they consume. The use of locally grown produce as ingredients in processed food decreased from 76% to 30% between 2009 and 2012. New Zealand’s reputation for high food safety standards means our exporters are well positioned to benefit from the trend towards imported ingredients and traceability.

Deer Industry New Zealand (DINZ) is one New Zealand industry which has already taken steps around traceability specifically for the Korean market in response to a grey trade in supposed New Zealand deer velvet from China. DINZ has initiated a traceability programme with its Korean partners to authenticate the deer products imported directly from New Zealand. If an importer can prove the deer velvet was imported directly from New Zealand, DINZ would provide a stamp of authentication which carries a serial number. Moreover, a consumer can enter a serial number on the www.deernz.co.kr website to see the importer and exporter details. For products that contain NZ deer velvet, a DINZ logo will be put on the packaging showing the New Zealand origin of deer velvet.

With the Korean Government supportive of a programme whereby shoppers can scan products at point of sale using their cell phones to find out information such as country of origin, shelf life, etc., the DINZ traceability programme may be a leading example for other New Zealand companies to follow with technologically savvy Korean consumers. 

India

How much interest are consumers showing in traceability information for food and beverage products in your host country?

In India, consumer interest in traceability is primarily related to concerns about food safety and growing consumer interest and knowledge of food safety issues. A large consumer base with specific dietary restrictions (e.g. vegetarian, vegan, halal and Jain) also means there is significant consumer interest in understanding the ingredients of products. The Indian government’s push for greater export competitiveness is seeing traceability becoming an increasingly important issue as a requirement from many of their exporting partners (e.g. EU).

Food safety is a significant issue for Indian consumers with all-too-frequent issues of food adulteration and fraud (i.e. best before dates being replaced, misrepresentation of ingredients, erroneous food claims such as ‘organic’). In a survey conducted by TUV SUD (a German based global testing, certification, inspection and training provider), 83% of Indian consumer respondents said that they had experience with unsafe products. Indian consumers consequently pay close attention to key information such as ingredients, manufacturer location, product origin and expiry dates to avoid purchasing contaminated or expired products. Due to the level of risk around food safety, Indian consumers are also willing to pay more for products that are superior in safety. In the TUV SUD survey, 93% of consumers were willing to pay a premium for safer products (on average they were willing to pay 23.6% more). Increasingly, consumers are aware that the ability to track food and hold fraudulent culprits accountable is significantly hampered by the lack of effective regulation and information on the supply chain. This in turn influences the government and has seen much greater emphasis on food safety regulations being established and enforced by the Indian government.

Increasingly as well, Indian consumers are demanding more information about the sustainability of production (including sustainability of packaging), organic credentials, and potential allergens. While large supermarket chains are still not present in the Indian market, in recent years there has been a growth in high end food retail stores such as Nature’s Basket (owned by Godrej Group), Food Hall (owned by Future Group) and LeMarche. These food retail stores cater to the wealthier Indian consumer and stock health and organic foods and include a range of imported food items.
Prime Minister Narendra Modi is intent on boosting India’s economic development. A key economic initiative is Modi’s “Come, Make in India” campaign which seeks to make India into a manufacturing hub and a competitive exporter of high-quality and high-value products. Growing export capability has recognized the need for improved traceability as increasingly export destinations such as the EU or the United States demand a higher standard of quality, food safety and product knowledge (including with respect to ethical production). Indian businesses also increasingly recognise that traceability adds to brand value which means consumers are willing to pay a premium.

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard setting/certification bodies)?

The Food Safety and Standards Authority of India (FSSAI) was established under the Food Safety and Standards Act, 2006 to set science-based standards for articles of food and “to regulate their manufacture, storage, distribution, sale and import to ensure availability of safe and wholesome food for human consumption.” FSSAI has consequently worked to bring standards into line with CODEX best practice and has put in place a number of regulations around food labelling with improving food safety, and minimising fraud as key objectives. While there are still some challenges with labelling requirements, they are designed to ensure greater food safety and greater integrity and reliability of information available to consumers at point of sale. Additionally, the Modi government is focused on increasing the efficiency of systems for processes such as mandatory certificates and other licensing requirements through single window portals, and improving the efficiency of supply chains. FSSAI also plays a role in achieving these broader objectives.

The joint demand for greater and more reliable information, as well as export requirements, has led to branding initiatives that allow consumers to recognize that certain standards have been attained by the producer. For example, in October 2014, the National Research Centre for Grapes (NRC) announced plans to begin a branding effort to communicate when grapes were 'residue free'. This will essentially mean that grapes which have been certified by the laboratories approved by India’s Agricultural & Processed Food Products Export Development Authority (APEDA) will exhibit a logo on the box declaring that the product is residue-free. This has been a requirement for export to the EU and, until now, this effort was restricted to export grapes but it’s an example where traceability information is being extended to the domestic market.

Similarly, specific traceability projects have been implemented by APEDA. This has been largely in response to export markets increasingly demanding greater traceability to help ensure quality, food safety, residue levels (including appropriate pre-harvest and post-harvest practices, as well as processing) and ethical concerns raised by consumers (such as child labour). Some specific examples of traceability projects include:

  • GrapeNet was developed by APEDA in response to the EU’s growing concerns about residue levels being detected on Indian grape imports. Facing a ban and loss of market access, the Indian government established greater regulation and guidelines for grape producers and APEDA established GrapeNet in order to monitor producers and supply chains, and ensure adequate documentation trails could be established to assure the EU that Indian grapes were meeting the requirements. GrapeNet monitors each step in the grape export supply chain including farmers (and the farms where the produce has been grown), exporters, State Government Horticulture/Agriculture departments, Accredited Laboratories, Agmark, Pack houses, Phyto-sanitary Certification Departments, National Referral Laboratory (NRL), APEDA, etc., all through a centralized web-based monitoring software. The model for GrapeNet has now been extended to Mangos and Pomegranates (AnarNet). 
  • Tracenet (For Organic Products) was developed to allow traceability and ensure the certification of organic products. This was established and implemented by APEDA in June 2010.
  • Peanut.NET was started in response to high levels of aflatoxins being detected in groundnuts, APEDA established Peanut.NET to ensure adequate controls to minimize the potential presence of the aflatoxins in groundnuts in excess of prescribed levels. Again, this is an internet-based electronic service offered by APEDA to Indian stakeholders for facilitating testing and certification of export destined peanuts to ensure compliance with international standards. Peanut.NET collects, stores and reports forward and backward traces and quality assurance data entered by the supply chain stakeholders.

The Indian private sector is also responding to an increased demand, and business opportunity. Some examples of Indian companies established to provide traceability services include:

  • Freshtrop claims to be one of the first Indian companies to offer complete traceability of its produce through an online system. The system enables all concerned in the fresh produce supply chain, including consumers, to track information on its products from its origin to the supermarket shelves.
  • Indian Food Corporation and Jain Irrigation Systems Ltd. joined together to develop a protocol of good agricultural practices called ‘Jain GAP’, an Indian horticulture knowledge network, specifically concerned with irrigation use and practice. The standard is a simplified version of Europe’s NGO GLOBALGAP. 
  • Fresh dairy player Lactalis recently acquired Tirumala Milk Products in Chennai. The focus of the new arrangement is to encourage farmers to link with the Lactalis procurement system to ensure transparent and direct dealing with farmers while supporting them to improve milk quality and produce innovative milk products suited for the Indian population. 
  • Headquartered in France, but active in India, ECOCERT, a certification agency for organic and fair trade standards, is active in promoting organic lifestyles through its presence in all Indian states. The company claims to have certified around 350,000 hectares of land in India. Spearheading a state-sponsored programme to meet international organic standards, the company issued a C3 certificate in July 2013 to a village in the state of Bihar making it the first village in India to obtain a fully organic status.

How might the trend towards traceability impact New Zealand exporters in your host country?

Growing consumer demand for higher standards of food safety has already begun to shape Indian Government policy. India’s Ministry of Health and Family Welfare, together with FSSAI, are focused on attaining higher food safety standards and ensuring that they can hold producers and importers to account for those standards. This has meant that for importers of foreign goods, labelling requirements for packaging can be particularly onerous with requirements trying to limit the risk of fraud once the product has reached the Indian market. Labelling requirements present some significant challenges to New Zealand companies exporting to India. The Indian government’s concern for ensuring food safety and minimizing fraud on the Indian market will continue to drive requirements for importers, not only in terms of labelling but also with respect to biosecurity requirements.

While demand for traceability on packaging is not yet significant in India, demand will continue to increase as the growing middle classes become more familiar with foreign food and beverage products and develop more awareness of societal, environmental and ethical issues with respect to production. Increasing consumer awareness about organic and fair trade are examples of where consumers may begin to demand greater knowledge and assurances of production and the supply chain. In the short-to-medium term, however, demand for product information will be driven largely by food safety concerns. 

Malaysia

The concepts of ‘sustainability’ – and ‘traceability’ in particular – take on slightly different emphases for each of the three major ethnic groups that make up the majority of Malaysia’s population of 28.6 million (Malays (50%+), Chinese Malaysians (approx. 25%), Indian Malaysians (approx. 7%)). Ethnic Malays are Muslim by law, so for these consumers (and other Malaysian Muslims), it is of utmost importance that they can be confident that any product they consume is ‘halal.’

‘Halal’ means ‘allowed’ or ‘permitted’ according to Islamic law. The notion covers religious requirements related to the type of food and method of slaughter. Halal food must also be safe to consume from a more general food safety/hygiene perspective. Halal products must not be contaminated by proximity to non-halal products (e.g. pork, alcohol) at any stage in the supply chain and any processing or packaging must be halal-compliant.

The Malaysian government is focused on further developing its already large industry, including through market development by raising awareness amongst Muslim consumers about the importance of eating halal. Consumers are responding by taking halal credentials more seriously than in decades past. Muslim consumers in Malaysia identify products as halal by their logo. It is estimated that more than seventy halal logos associated with various international halal certifying bodies are recognised by the Department of Religious Development (JAKIM) for the Malaysian market, but that used by JAKIM itself is the most widely recognised and trusted.

Cases of suspected contamination of ‘halal’ products (e.g. with pork DNA) are major headline issues and can at times contribute to a perception that products produced within Muslim nations are of greater integrity. As Malaysia further develops its halal industry and Muslim consumers become ever more discerning about halal standards, we can expect increasing scrutiny of the halal credentials of products at each stage of the supply chain (and consumer preferences may yet emerge for products backed by Islamic financing).

Some retailers spoken with in the process of researching this report, believed that there is evidence that non-Muslim consumers are also choosing halal, due to the food safety guarantees that come along with the certification. This all means that the importance of halal in this market is growing for at least the following three sets of reasons:

  1. a growing Muslim population and focus on attracting Muslim tourists;
  2. a more halal-focused population, with more halal standards being developed and more consumer scrutiny of halal credentials; and
  3. a non-Muslim market for halal foods based on food safety concerns.

The growth of the halal industry can be viewed as an opportunity. While Malaysia aspires to further develop its agriculture industry and reduce food imports, it remains, for now, a net importer of the ingredients required to sustain its rich food culture (importing RM15.6 billion in 2013). In particular, Malaysia imports 95%of dairy products (amounting to RM3.2 billion of imports in 2013). It also imports significant amounts of sugar and confectionary, cereals and fruit and vegetables and around 80% of beef (while remaining fairly self-sufficient in poultry, pork and eggs).

The New Zealand Ministry for Primary Industries can assist companies to understand how to comply with Malaysia’s halal requirements. At the Malaysian end, departments involved in ensuring food safety and sustainability are the Food Safety & Quality Division (FSQD) of the Ministry of Health, the Halal Hub of the Department of Religious Development (JAKIM), the Department of Veterinary Services (DVS), and the Department of Agriculture (DOA). FSQD’s role is to plan, implement and monitor the Food Safety and Quality Program to protect the public against the dangers in terms of health and fraud in the storage, preparation, processing, packaging, transportation, sale and consumption of food. JAKIM and Department of Veterinary Services work closely to develop and enforce halal practices in food production. DOA regulates importation of plants and plant products and is intending to tighten up importation requirements over the coming years, beginning with a small slate of products in January 2015.

Outside of the halal context, we see little evidence of consumer pressure for mandatory country of origin labelling of products and ingredients. A recent food safety scare in Malaysia emphasised that consumers tend to focus on the general product group implicated in a scare irrespective of country of origin. This tendency can risk briefly curtailing demand for products from safe sources also.

Limited interest in country of origin labelling is consistent with a market that is only very slowly beginning to develop consumer awareness/interest in sustainability issues more broadly. Over time we might expect that – encouraged by policies adopted by the large foreign supermarket chains gaining popularity in Kuala Lumpur – wealthy urban areas of the country may begin to follow overseas trends towards interest in food miles, animal welfare and environmental protection. However, these issues are currently extremely low profile. At time of writing, the number one concern of Malaysian consumers (other than halal) is price – with GST to be introduced for the first time (at a rate of 6%) in April 2015, price-sensitivity is high (although most F&B products are eligible for exemption from the new tax).

Hong Kong and Macao

How much interest are consumers showing in traceability information for food and beverage products in your host country?

Hong Kong and Macao import over 90% of their food products, and over two-thirds of adults in each city are concerned about food safety. Both Hong Kong and Macao were hit with a series of major food scandals in the second half of 2014, which heightened public concern over food traceability, and local confidence in food suppliers was shaken as a result.

In July, there was public outcry over the local imports of rotten food by McDonald’s in Hong Kong. Media reports suggested that rotten meat was supplied to McDonald’s in Hong Kong after it had been reprocessed and repackaged with false expiry dates at a Shanghai plant, and the Hong Kong authorities claimed that it was misled by McDonald’s Hong Kong during its investigation. This also affected Macao, as McDonald’s in Macao also imported the tainted products. In September, many food products such as bakery items were recalled in Hong Kong and Macao, as the authorities checked whether they contained what the media referred to as “gutter oil”. The oil in question was exported by a Taiwanese company which had bought substandard and tainted oil made of fat collected from fryers, cookers and grease traps. The regional scandal involved 243 tonnes of the illegal oil.

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard setting/certification bodies)?

Hong Kong’s Food Safety Ordinance (Cap. 612) provides food safety control measures, including a registration scheme for food importers and food distributors and a requirement for food traders to maintain proper records of the movements of food to enhance food traceability. A food business must be able to identify the food that they have on the premises in order to facilitate tracing products in the event of a recall or a food incident. Records showing the dates, descriptions, quantities and sources / destination of supply should be kept for specific foods for at least 60 days and be readily available for inspection.

Imported fresh or frozen meat, game and poultry must be obtained from sources approved by the Food and Environmental Hygiene Department for imports with valid official health certificates issued by competent authorities of exporting countries. Imported milk or milk beverage and frozen confections should be imported from a source of manufacturer which has been approved by the Food and Environmental Hygiene Department.

The recent public outcry over imports of rotten food by McDonald’s has prompted Hong Kong to consider strengthening cooked meat regulations. Unlike the situation with raw meat, the importation of cooked meat does not require a permit, and the authorities have to rely on traders to provide documentation, such as records of the place of origin of the cooked food and the supplier.

The Pesticide Residues in Food Regulation (Cap.132CM) came into effect in Hong Kong in August 2014. Its framework is largely built on Codex standards. The industry and stakeholders can find appropriate MRLs for pesticide food pairs in the official online Hong Kong Pesticide MRL Database.

The Food Safety Law in Macao took effect in October 2013. Macao importers are required to keep all the relevant import records and invoices issued by the authorities of the exporting countries and exporters for product tracing.

How might the trend towards traceability impact New Zealand exporters in your host country?

At a time when local confidence in food suppliers has been shaken following major food scandals, New Zealand exporters should take extra care to maintain trust in the food safety of New Zealand products in a sophisticated market like Hong Kong. With the new legislative requirements, it is likely that New Zealand exporters will receive more requests from Hong Kong importers and distributors for information on the sources and MRL levels of food ingredients in their export products. To protect the image of their brands, it is important that New Zealand exporters are ready to respond to such requests in case of any local food scandal involving their products.

In general, the pesticide use recommendations adopted by New Zealand’s fruit and vegetable export sectors are designed to meet their most stringent market requirements with trading partner MRLs. MPI has also taken Hong Kong’s new MRLs into account in its advice to these export sectors on what pesticides and what pre-harvest intervals should be incorporated into their pesticide residue management systems. In this context, New Zealand’s residue regulations in place for all food sold in New Zealand and exported overseas should ensure that the fruit and vegetable export sectors are not impacted significantly by the new Hong Kong MRLs, which generally reflect Codex standards.

Recently a local importer of New Zealand food products was requested to provide a letter of guarantee by a major local distribution chain stating that their imported products would comply with the new pesticide residue legislation. The Hong Kong Government in general recommends importers adopt a control-at-source approach for ensuring food safety. It advises local importers to check with their suppliers as to whether their products would comply with local requirement and keep records of related documentation. It does not require local distributors to seek such a letter of guarantee from their overseas suppliers. Whether any Hong Kong traders wish to meet the requirement of such a guarantee letter from local retail chains is a commercial decision, and not a regulatory requirement.

Additional Sustainability Updates

  1. New legislative amendments comprising requirements on nutritional composition of formula products will come into operation in Hong Kong on 13 December 2015 for infant formulae and on 13 June 2016 for follow-up formulae and prepackaged food for infants and young children respectively.
  2. The Hong Kong Government is consulting the public on possible mechanisms to impose regulatory control on health and nutrient claims for formulas and foods for children under the age of 36 months.
  3. The Hong Kong Government is consulting the public on its proposal to regulate genetically modified (GM) food by introducing a Mandatory Pre-market Safety Assessment Scheme (PMSAS), which would require importers to ensure that the products they import contain only officially approved GM ingredients, but would not require mandatory labeling of GM products.
  4. One of the key food importers has recently told NZTE that a lot of their 5-star hotel clients in Hong Kong inquired about sustainable seafood products.
  5. NZTE ran a sustainable seafood themed promotion with JW Marriott Hotel Hong Kong at Fish Bar in October 2014. Their F&B Director indicated that their hotel would change to use more sustainable seafood products in their F&B outlets.

Singapore

Traceability

How much interest are consumers showing in traceability information for food and beverage products in Singapore?

Singapore imports around 90% of its foodstuffs, and people are used to consuming F&B from a wide range of countries. Most consumers are ambivalent about the source of products consumed, as long as the overall safety of their food is assured.

Interest in traceability is rising because it can help to ensure food safety, e.g. consumers want some reassurance that unsafe food products can be speedily recalled. For example, in September 2014 the Singapore Government agency AVA recalled Taiwanese packaged products that had used tainted oil. However, interest is rising from a low base: for many consumers, interest in traceability goes no further than a heightened sensitivity about purchasing products made in China.

Most consumers use country of origin as a proxy for safety and quality. Retailers promote their beef as being specifically from New Zealand or Australia because it is assumed to be safe and of high quality. For example, following a food scare in China, McDonalds Singapore reassured consumers its beef was a quality product because it was only sourced from “Down Under”. Supermarkets frequently run promotions based on the high status of a particular country of origin, e.g. Cold Storage supermarkets have featured the F&B of New Zealand, Australia, Japan, Korea, Canada, France etc.

In 2014, Cold Storage extended promotions to a regional level, as New South Wales struck a deal with Cold Storage, but this is not a typical feature of the Singaporean market. Beyond the retail sector, it is common for upmarket restaurants to include products’ country of origin in menus – for example, Wakanui restaurant prominently features the New Zealand origins of its beef (as pictured above) and other menu ingredients.

The limited supply of locally-produced foods is gaining increased coverage. Retail marketing focuses on the freshness of local food. For example the Fairprice chain of supermarkets reproduced a government agency’s tagline, “For the freshest produce, go local”. This campaign forms part of the Singaporean Government’s objective to increase local food production (e.g. to 10% for green vegetables and 15% for fish).

Anecdotally some consumers, particularly among high-income groups, demonstrate higher levels of concern about F&B traceability and wider quality issues. This is particularly evident for meat and vegetables (e.g. see Hubers Butchery). Niche retailers operate in a new but fast-growing market, e.g. note the growth of start-up The Barbie Girls, which focuses on quality and traceability. Niche companies pride themselves on such requirements, as well as on other quality measures (e.g. hormone-free chicken or carefully sourced organic vegetables).

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard-setting/certification bodies)?

The Agri-Food and Veterinary Authority (AVA), the Singaporean government agency which sets all traceability requirements, has two primary priorities for F&B: food safety, and diversification of supply. The objective is to ensure reliability at competitive prices. Accordingly, traceability requirements exist to varying degrees, depending on a product’s assessed level of risk.

Meat, poultry, eggs and high-risk seafood are subject to the strictest government traceability controls. For meat and poultry, the authorities permit imports only from specific countries, and from accredited establishments in those countries. Traceability for these categories is strict: for example, every carton and basic packaging unit of meat and meat product imported must be labelled with the following particulars:

  1. a description of the meat product; 
  2. the country from which the meat product originates; 
  3. the brand name of the meat product, if any; 
  4. the name and designation number of the processing establishment in which, and the date on which, the meat product was processed, if applicable; 
  5. in the case of a processed meat product, the name and designation number of the slaughter-house in which the animals used in the production of such meat product were slaughtered and the date of the slaughter; 
  6. the name and designation number of the establishment in which, and the date on which, the meat product was packed; 
  7. the batch number and, where the meat product is canned, the canning code; 
  8. the net weight of meat product as contained in each basic packaging and outer carton. 

The rigidity of traceability requirements for the defined high-risk F&B categories reduces consumer choice. However, in general the population sees these traceability and other restrictions as necessary safeguards for protecting food safety. AVA is well-regarded and trusted by the population.

In non-sensitive F&B sectors, government information requirements are more relaxed. For example, traders of pre-packaged foods must register with the AVA and Customs. They must obtain their products from “regulated sources”, as demonstrated through documentary proof that the products were “produced in an establishment under proper supervision of the competent food authority or which has a quality assurance program acceptable to AVA”.

In addition to the government requirements, MUIS (Majlis Ugama Islam Singapura, the Islamic Religious Council of Singapore) administers Singapore’s halal certification regime. Although certification is voluntary, 15% of the population is Muslim, and seeks to purchase approved F&B. MUIS’ halal certificates, which are issued based on a set of systems-focused halal certification requirements (HalMQ), are widely recognised. MUIS’ halal mark is accepted by Muslim consumers not only in Singapore, but in neighbouring halal markets and in Gulf Cooperation Council (GCC) countries. While sometimes MUIS provides leadership internationally in halal matters, it also follows decisions taken by relevant Islamic authorities overseas. The New Zealand Ministry for Primary Industries engages with New Zealand’s approved halal certifiers and MUIS to facilitate trade access to the Singapore market.

How might the trend towards traceability impact New Zealand exporters in Singapore?

Although the Government’s strategy (the Food Security Roadmap) is to promote locally-produced food, this should not adversely affect New Zealand exporters. This is because domestic producers have very limited capacity, and produce a very limited range of F&B. The Government’s strategy is not to displace international providers, but rather to build a defensive food supply ‘buffer zone’ for times of crisis.

Nonetheless, New Zealand exporters face headwinds in establishing a dominant position in Singapore. In part, this is because Government policy stresses food security through diversification of sources. In addition, Singapore is a mature market with significant international competition for a number of products where New Zealand could contribute.

New Zealand’s “clean and green” brand is viewed favourably, and Singaporeans do not generally have environmental concerns about products having travelled long distances to market. One recent campaign run by Cold Storage supermarkets even made a virtue of how far the product had to travel. This can be beneficial for New Zealand products that are already well-established in Singapore, such as dairy, beef, and wine. Other foodstuffs are not as closely associated with the New Zealand brand, although there can be some benefits by association.

Philippines

How much interest are consumers showing in traceability information for food and beverage products in your host country?

There is no evidence of consumers in the Philippine market showing interest in traceability information for F&B products.

What major traceability information requirements have been proposed or implemented in your market (including by government, retailers or private standard setting/certification bodies)?

Under the Food Safety Act, there are traceability requirements for producers of food. This is a regulatory requirement in case of a food safety issue, not a consumer-driven one. The applicable section of the Act is:

SEC. 27. Traceability. – Traceability shall be established for foods at relevant stages of production, post harvest handling, processing or distribution, when needed to ensure compliance with food safety requirements. The rule on traceability shall also cover production inputs such as feeds, food additives, ingredients, packaging materials and other substances expected to be incorporated into a food or food product. To ensure traceability, food business operators are required to:

(a) Be able to identify any person or company from whom they have been supplied with:

  1. Food;
  2. A food-producing animal;
  3. Production chemicals as pesticides and drugs; and
  4. Production, post harvest handling and processing inputs such as feeds, food additives, food ingredients, packaging materials, or any substance expected to be incorporated into food or food product.

(b) Establish and implement systems and procedures which allow the above information to be available to the regulatory authorities on demand; and

(c) Establish systems and procedures to identify the other businesses to which their products have been supplied. This information shall be made available to the regulatory authorities upon demand.

Traceability in case of food-borne disease outbreak shall be established by the National Epidemiology Center (NEC) of the DOH.

How might the trend towards traceability impact New Zealand exporters in your host country?

We see no implications for NZ exporters at this time.

 

Back to top