Why does TE-FOOD focus on emerging countries?

Some people asked why do we narrow our focus on the emerging markets, when farm-to-table food traceability is still rarely used even in developed countries.

It’s true, that currently, country-wide farm-to-table traceability exists only in Japan, and only for cattles. It may sound strange, because national and global food safety organisations emphasize the importance of farm-to-fork traceability for years, but still, there is no such complete and widely used traceability system in the developed countries like TE-FOOD in Vietnam.

So why do we focus on emerging countries?

Beside the fact, that emerging markets contain more than 50 countries, representing 60% of the world’s population and 45% of its GDP, we have various reasons (not in order of importance):

High level of food frauds and corruption

Around 2/3 of the food frauds are executed in emerging countries. As foodborne diseases cause 700 million illnesses, and 400,000 daths each year, these countries are the most affected ones. Food traceability has immediate and spectacular effect in these countries. Many governments and food safety authorities in the emerging countries are actively looking for possible traceability solutions, but in most cases, the well known solutions which work in developed countries are simply too expensive for them.

Pricing

When we developed TE-FOOD, we had to find solutions for the Vietnam implementation. We had to work out a system which can operate at a fraction of the traceability costs we see in Europe, and still beeing profitable. By using QR code based identification, the omittance of any special hardware, and the PPP model (a kind of freemium model), TE-FOOD is a very competitive system even in the emerging countries.

Insufficient technology

Although there are modern, technology driven companies in the emerging countries, those are usually large, international companies. Most supply chain participants are small, and don’t use any technology in their processes. In most cases they have paper based registry of their inventory and transactions, which hinders transparent operations.

But this brings good opportunities for TE-FOOD. While supply chain companies in the developed countries followed the paper, excel > desktop app > client-server app > cloud app route, emerging countries will simply skip this organic evolution, and exchange checkered paper to modern mobile apps. This way, they can implement traceability easier, as they don’t have the burden of a painful migration, like those with existing but aged systems.

Governmental influence

It’s impossible to ignore, that governments in the emerging countries have more influence on the supply chains. In most cases, there are a lot of NGOs to evaluate regulations, but the goals of the governments can be put into effect more easily, than in the developed countries. This makes implementations faster.

Growing middle-class

Growing middle-class, and — as a consequence — increasing awareness amongst the population of emerging countries drives growing demand for consumer level product history insight. This makes a constantly growing pressure on governments of counties like China and the ASEAN countries to improve food security.

This evolution of thinking can be seen in the industry forecasts. According to studies, Compound Annual Growth Rate (CAGR) of food traceability is the highest in Asia-Pacific (16.7%) compared to the rest of the world (5.5–8.7%, where the lower end applies to the developed countries).

Lack of transparency for the government

Without traceability and electronic reporting of livestock, governments in the emerging countries don’t have any insight of the food supply chains. They don’t know the volume of supply and demand, they don’t know how many companies are active in this field, they don’t know what will be the effect of a contamination or disaster. They try to act as soon as possible, but without proper insight, this often looks like improvisation.

The size of black market forces these governments to increase the VAT rates, thus causing difficulties for legal operations.

Implementing traceability to make supply chain operations transparent benefits governments to gain insights, enable forecasts, and target subsidiaries better.

On the long term, it helps to make higher VAT volumes even with lower VAT rates.