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If You are What They Say You Are: Preventing Fraud In CPG

Posted by Nick Bravo on 12/8/16 8:22 AM
Nick Bravo
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Luxury industries have always battled forgers, who produce counterfeit knockoffs of prized items and ultimately debilitate brand perception and value. But what if the manufacturer was unknowingly selling fraudulent products? That’s precisely what happened to David Greenstein’s luxury bedding company, Himatsingka, when he found that Chinese spinners in his supply chain were substituting cheaper cotton strains for the more-prized Pima cotton Greenstein promised his sheets and pillowcases contained.

But after running a cutting-edge DNA analysis with Applied DNA Sciences, Greenstein pressured his supply chain partners to provide only unadulterated products: “We had to get them to admit they were doing something wrong and then we had to get them to agree that it was time to change and to buck an industry trend.”

Particularly in textiles, where cotton travels around the world at different stages of its refining and manufacturing process, the opportunity for forgery is ripe. As Nate Herman, Senior Vice President of Supply Chain for the American Apparel & Footwear Associationsays, preventing fraud in CPG is quite serious: “This is a bottom-line issue now. Not only have [consumers and retailers] been paying too much for years, it is a brand reputation and a legal liability. Those are the worst things you can have.”

On-Target Forgery

It’s not only Greenstein who has been duped. Recently, Target was forced to recall over 750,000 pairs of $175 Welspun sheets, sold as Egyptian cotton but ultimately discovered to be fraudulent. Walmart has also offered refunds for Welspun sheets, while JC Penny and Bed, Bath, & Beyond undertake their own investigations. Welspun is currently being sued for consumer fraud in US federal court and promises a reevaluation of their labeling and supply chain practices.

Applied DNA Sciences’ CEO James Hayward doesn’t think the blame lies squarely on any single party, however, as the pressures customers place on manufactures moves down the supply chain, creating incentives for less than honest practices. “Customers want a better price, and the retailer applies that same pressure all the way through the supply chain. So what do suppliers do? They cheat.”

CSI: Cotton

Applied DNA Sciences strives to weed out the cheaters and guess work through two different means. In their lab, run by a molecular biologist formerly of a medical examiners office,  they run DNA tests on cotton (think: CSI) to determine its genetic origin—whether it truly is a prized Pima or Egyptian fiber or something of the more common and less desired upland variety. This means that at each stage of the supply chain, refiners and manufacturers are held to a genetic standard—they cannot adulterate the cotton or Heyward’s forensics team will know it.

Cotton

More interestingly, however, Applied DNA Sciences has developed a unique, botanically-derived DNA serum that can be sprayed through a fogger onto the cotton itself. This serum serves as a certificate of authenticity of sorts, vouching for the product on a microscopic level. This marker can be deployed for any range of purposes: to certify that a crop was grown using sustainable practices, for example, or to certify that it was produced without indentured or slave labor. At any stage, and for any reason, a regulator or third-party agency could use this serum as an unforgeable guarantee. Applied DNA Sciences is tight lipped about the cost of the service, but claims it costs mere "pennies" per pound.

According to Hayward, “Our primary aim is to cleanse the cotton supply chain, and by that I mean eliminating any diversion, any mislabeling, any counterfeiting that can take place throughout the entire cotton supply chain.” And that supply chain is expansive, both in terms of links and of sheer geographic expanse. Hundreds of nations participate in its cultivation, refinement, and manufacturing, 250 million people worldwide derive their living from it, and there are literally hundreds of millions of tons of product every year.

When Bed, Bath & Beyond began using the serum stamping technology to validate its Pima-cotton-lined down comforter, one spokesperson celebrated the news, saying, “we have arrived at the beginning of a new era when to comes to protecting product integrity.” They are not the only ones.

Double Helix, Double Security

Obviously, the implications for DNA testing in CPG are staggering and stand to shake up other industries as well, particularly those that built around premium goods. With up to 55% of Los Angeles-area seafood proven to be mislabeled and fraudulent, Applied DNA Sciences could offer a certification standard to guarantee to restaurant patrons their food is indeed correctly labeled, that they are getting snapper when they ask for snapper. Similarly, the dietary supplement industry often faces charges of mislabeling and faces eroding consumer trust.

Fraud is so common in the food industry, in fact, that reporter Larry Olmsted was able to write an entire book about it, Real Food, Fake Food. According to Olmstead, DNA testing and marking could bring some much needed transparency and credibility to seafood, beef, cheese, wine, honey, and olive oil—all stratified foods with great pricing differences between the baseline and the premium. Manufacturers and retailers alike can sleep well, hopefully on 100% Pima or Egyptian cotton sheets, knowing science is rising to the challenge.

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Topics: Technology, CPG

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