The Indian food industry is on an upward trajectory and emerging as a high growth space considering its contribution to the global food industry. Showing immense potential, it is expected to grow at an 11% CAGR to US$65.4 billion by 2018 as per India Brand Equity Foundation. The foundation also states that the food space also forms a significant chunk of India’s retail sector, which is further expanding and is expected to reach US$894.98 billion by 2020. The successful penetration of retail into tier 2 and 3 cities driven by the introduction of diverse food varieties (both ethnic Indian and global foods) is one of the prime reasons for the phenomenal growth of the industry. Some other factors that have fueled this growth include:
- Increasing disposable income and awareness of health and nutritional food choices
- Growing organized retail and e-commerce, which is prompting increasing investments in infrastructure and cold chains
- The Government’s aim to build India as a food sourcing hub given its large agricultural base and growing sectoral food processing focus
Governments around the globe have been actively introducing regulatory standards and guidelines for the procurement, production and provision of safe and hygienic food. In India, historically the onus for safe and wholesome food for human consumption has been with multiple ministries and departments. The Food Safety and Standards (FSS) Act, enacted in 2006, was India’s endeavor to harmonize its food regulations with international standards. A statutory body, the Food Safety and Standards Authority of India (FSSAI), was established to enforce the provisions of the FSS Act, which regulates the manufacturing, storage, distribution, sale and import of food and related products. The responsibility of implementing the FSS Act rests with the Ministry of Health and Family Welfare.
The question of food safety has always been a global concern. Recent reported cases of food adulteration, increasing consumer awareness and rise in the volumes and frequency of food imports and exports have elevated the risks associated with the quality and safety of food products. As a result, global regulators have increased their scrutiny on the quality of food during its entire life cycle — procurement to consumption. Large FBOs in the food ecosystem will be expected to step up and conduct proactive food compliance and capacity building activities to provide safe and wholesome food to consumers. This can be done through various mechanisms and tools to measure the quality standard of products. FSSAI regulations may differ for the various FBOs — for instance, the requirements for products would vary based on their medium of sale, such as through brick-and-mortar stores or e-commerce websites and sale of non-prepacked (loose) foods. They may also be different based on the type of food product.
Setting up a robust food safety management (FSMS) plan and dashboards for real-time monitoring are some other ways to regularly check food safety standards. Non-compliance with regulations can have a damaging impact on a company’s reputation in the market, possible penalties and even product recalls. Thus, managing food safety and adhering to FSS Act have become important cogs in the wheel of compliance for all companies.
Below are the key risks and compliance areas that require attention in in the food cycle — from the point of procurement to the point of consumption.
FBOs today need to strike the right balance between being successful and profitable and, at the same time, complying with regulatory requirements. In striving to do so, FBOs may face a number of challenges, which include:
- Maintaining the safety and hygiene of food products throughout the supply chain and when crossing borders
- Providing safe food to the end consumer
- Complying with evolving regulatory requirements
- Adopting food safety systems
- Identifying, mitigating, controlling and monitoring risks
New age and discerning consumers are steadily demanding better and safer food through convenient channels. As a result, retail becomes a critical touch point in the life cycle of a food product. If an issue is reported at a retail outlet, the FBO in question should ideally be able to trace each ingredient used in product manufacturing, back to its source. FBOs should also have proper documentation, records, paper trail and approvals of any sort to solve a problem.
Food traceability is therefore becoming increasingly important to garner visibility in the supply chain and possibly manage future issues to safeguard public health as well as FBOs. This is intended to help companies understand and implement ways to track products throughout the food chain with an intent to improve food safety and deter fraud, adulteration, product recalls and counterfeit products. Determining the origin of products and ingredients from the farm through food processing to retail, food service and the consumer is growing in importance.
For retailers, it would be prudent to understand the changing regulatory trends in the food safety space, and imbibing leading global practices in daily processes can help mitigate potential cases of non-compliance. Some of the ways through which retailers can help in mitigating cases of low quality food distribution are:
- Exercising caution and undertaking required procedures
- For importing food into the country
- For introducing own or private labels
- Ascertaining traceability and maintaining previous compliance records from procurement source
- Formulating adequate procedures for maintaining records of retail compliances in order to demonstrate that necessary requirements were adhered to
- Having a consumer grievance redressal process along with operating procedures for regulatory inspections and recalls
- Using technology for compliance management
The last mile of the consumer food chain can be safeguarded through a “farm to fork” compliance approach only with the proactive and collaborative participation of the retail sector.
Raghu Guda, Director, Fraud Investigation & Dispute Services, EY India has co-authored the above article.