By Garrett Baldwin
In March, the International Criminal Police Organization, or INTERPOL, announced a record seizure of counterfeit food and drink products destined for global markets.
It happened due to Operation Opson V, a remarkable collaboration between global regulatory agencies, police professionals, customs agents, and others to seize 10,000 tons and one million liters of counterfeit food and drink goods between November 2015 and February 2016. But that is just a drop in the bucket compared to the amount of counterfeit goods flooding the international market.
While it hasn’t been a front page story prior to a feature on 60 Minutes last fall, the trend of counterfeit food and agricultural products continues to grow as a widespread problem around the globe. Operation Opson transcended 57 nations and ranged from fake olives to sub-standard quality products, from fertilizer-contaminated sugar to banned food additives.
Based on reports, the global crime fighting unit seems more concerned about what slipped through under the watch of regulators than celebrating their massive haul. In fact, food crime is generating more money than one could imagine.
“Today’s rising food prices and the global nature of the food chain offer the opportunity for criminals to sell counterfeit and substandard food in a multi-billion criminal industry,” says Chris Vansteenkiste, Cluster Manager of the Intellectual Property Crime Team at Europol.
Investors should be increasingly wary of this trend, the most common fake foods in the world, and the dangers associated with their consumption.
Counterfeiting On the Rise
Originally launched in 2011, the Opson counterfeiting force began in 10 European countries. Realizing the ever-growing problem, it has expanded to 57 nations. Now in its fifth year, Interpol’s food-counterfeiting division discovered a stomach-turning wealth of products that should be concerning to both consumers and investors. They include:
- Kilograms of monkey meat at a Belgium airport
- 24 tons of tilapia deemed unfit for human consumption in Togo
- At least 20 kg of caterpillars and more than 10 kg of locusts in France
- Chicken intestines laced with formalin, at least 70 kg of it, in Indonesia
- 30 tons of beef and buffalo meat unfit for human consumption in Thailand
That’s just a sample.
“Fake and dangerous food and drink threaten the health and safety of people around the world, who are often unsuspectingly buying these potentially dangerous goods,” said Michael Ellis, head of INTERPOL’s Trafficking in Illicit Goods unit.
So what are the most common counterfeit products on the global markets today?
Here’s five commonly faked foods to be aware of in the world today.
Fake Olive Oil: A Problem that Won’t Dissolve
When it comes to fake olive oil, the United States government has essentially given up on trying to reduce counterfeit imports. According to a 2010 study by the University of California-Davis, products with the label “extra virgin olive oil” failed to meet the standard set by the International Olive Council (IOC) – based in Madrid – in 70% of cases on California grocery shelves.
It gets worse on the global scale. Despite that up to 50% of olive oil receives the “extra olive oil” classification by manufacturers, according to the IOC, only 10% of olive oil production truly meets the criteria.
The subject was part of a remarkable exposé in January by investigative news television show “60 Minutes.” That report cited a 2015 investigation by the Italian customs agency, which found that seven of its nation’s best-known olive oil producers had offered lower quality producers under the “extra” banner. In 2014, the inspectors engaged in 6,000 random quality checks and confiscated products worth at least 10 million euros.
It is estimated that Italian criminal organizations – with some nicknamed the “Agromafia” – operate a $16 billion counterfeiting industry that includes fake olive oil and cheeses. In many cases, counterfeiters simply dilute “extra” olive oil with vegetable oil or soybean oil.
And the “From Italy” branding, a stamp of supposed legitimacy, can simply be excused due to the loose interpretation of language – as long as something passes through one of the nation’s ports, it technically is “From Italy.“
Something’s Fishy at The Restaurant
The U.S. imports roughly 90% of the five billion pounds of fish consumed by Americans each year. That’s a healthy sign of international trade until one discovers that just 0.01% of all the fish are tested for authenticity, according to the Government Accountability Office (GAO).
Whether it’s by mistake or possible fraud, conservation group, Oceana found that in 2015 16.3% of all seafood in the U.S. is mislabeled. That represents billions of dollars in fake food in the U.S. fish market. Moreover, that is down from a study by Oceana that suggests the number was 33% in 2013.
It gets worse if you live in a big city and find yourself eating fresh fish.
Oceana also discovered that every single sushi restaurant mislabeled fish in a study conducted between 2010 and 2012. The most common mislabeling: snapper and tuna. Incorrectly labeled fish naturally can lead to fraudulent pricing and be costly for consumers, but it can also have negative health consequences for unknowing buyers. This is particularly true for pregnant women, who may be exposed to toxins like mercury in a product they never intended to eat.
Not So Sweet: China’s Honey Pot
Most of the honey that you use in restaurants isn’t honey. It’s honey-flavored corn syrup.
Consumers simply need to read the label.
The most important test of honey is the presence of pollen, which can be determined by tests conducted by the FDA, European Commission, and World Health Organization.
That’s an important test because U.S. honey producers only manufacturer 150 million pounds each year, well short of the 400 million pounds needed to meet domestic demand.
That’s created a lot of opportunity for counterfeit goods. Modern Farmer reports that honey is being cut with sweeteners, sugar water, or corn syrup. And that’s if your lucky. There are plenty of other cases from China, where honey has been cut with pesticides. China’s fake honey problem is so problematic that the nation even has a counterfeiter who compared himself to early 20th century gangster Al Capone.
In fact, China’s honey problem is on scale with olive oil fraud in the U.S. According to tests of honey sold in stores throughout the country, roughly 60% of the product was nothing more than colored glucose water.
Fake Coffee: A Morning Jolt of Reality
Across the East, ground coffee has also been detected to contain chemicals unfit for consumption. Any number of things can be added to ground coffee – whether it’s bean husks, corn, or ground paper.
Ground coffee isn’t alone as a falsified ground powder. Pepper, cinnamon, even the ultra-expensive saffron has been the subject of widespread fraud as global spice demand grows. But ground coffee represents an opportunity for fraudsters to fill packaging with fillers and cut costs.
That would suggest it’s better to stick to whole beans when buying coffee. However, like olive oil, the question is whether you’re actually receiving what you paid for.
With significant droughts hitting South America, a shortage of coffee has meant higher prices, and higher demand for specialty coffee. Given that the Robusta bean is far more resistant to disease – and often more commonly found in instant coffee – it has been substituted fraudulently into packaging of Arabica beans. Not many consumers can tell the difference when the two are mixed, a problem given the increasing popularity of foreign blends with Americans.
Luckily, scientists in Italy are on the case. They have devised a chemical that can determine the percentage breakdown of each type of bean in a package, due to the naturally occurring chemical homostachydrine, which is twenty times more common in Robusta beans than in the Arabica beans, according to a study in journal Food Chemistry.
Cracking Up: China’s Egg Problem
Seventy-one percent of Chinese citizens were concerned about food safety as a serious problem in 2015, according to Pew Research Center. The situation is so problematic, that not even the water is real. According to Food Safety News, Chinese government testing showed that 60% of bottled water is fake. In most cases, bottles are refilled with tap water and sold on the markets. But at least the water isn’t going to lead to memory loss.
It appears that the nation’s most serious food safety emergency is fake egg products. With a fake shell made of Calcium Carbonate, these low priced eggs have tricked many consumers in the nation and in neighboring countries into buying them. The rest of the contents: A combination of wax, Potassium, Gelatin, water, artificial colors, and gypsum powder, starch, or resin. Online videos show that once cooked, the fake yolks can actually bounce on the floor.
In a recent – and somewhat disturbing interview with the Epoch Times – one counterfeiter explains that he teaches people how to make fake eggs for $120 per lesson. In addition, he claims that the participants in the real supply chain, from farm directors down to wholesalers, have business relationships with him.
The biggest consequence of these false food products are the side-effects of eating them. Several reports indicate that consumption of them can cause memory loss and Alzheimer’s disease.
What Investors Should Know
Food counterfeiting has emerged as an enormous problem for the global agricultural community and investors across the value chain should heed caution. Counterfeit food presents increased risks associated with certain food supply chains, impacting increased costs as a result of the fraudulent food and potentially as a result of consumer backlash in response. The problem is especially concerning in nations where there is a lack of proper regulatory oversight or agencies designed to determine the authenticity of the products. Understanding the regulatory characteristics along a supply chain for a potential investment will be increasingly critical particularly as investors expand their portfolios to include investments along supply chains within, or servicing, emerging markets.