Global Dairy eBrief Exclusives
Blockchain: A New Era of Food Transparency
by Margaret Speich and Luke Waring
Walmart explains how a technology originally developed to safeguard digital currency can help build consumer trust, reduce waste and increase efficiency in the food chain.
The list of food companies running blockchain trials reads like an ag-sector all-star team: Archer Daniels Midland, Bunge, Cargill, Dairy Farmers of America, Danone, Dole Food, Fonterra Cooperative Group, Nestlé, Tyson Foods, Unilever—to name a few.
Tejas Bhatt, Walmart’s senior director of food safety innovations, knows exactly why these big names are testing the new technology: Blockchain creates a transparent food production chain from farm to table. That transparency can elevate consumers’ faith in the food system while yielding a host of benefits for farmers, processors, distributors, retailers and consumers, said Bhatt. It can facilitate everything from quick traceability in the event of food safety questions to reduced instances of food fraud to improved distribution efficiencies that translate into fresher products on the store shelves and reduced food waste.
Bhatt outlined Walmart’s fledgling blockchain system to USDEC members at the October 2018 USDEC Board of Directors and Annual Membership Meeting. The system, a collaborative effort with IBM, food suppliers (including Dole, Nestlé and Tyson) and even competitive retailers, creates “a new era of trust across the board, not just with the customer but across the supply chain,” Bhatt said.
What follows is an edited transcript of Bhatt’s presentation, including a short video and slides. Read on to hear his take on blockchain and what U.S. dairy suppliers can gain by joining the first wave of adopters.
Tejas Bhatt
Before I actually get into my presentation, how many of you have heard of what blockchain is? And how many of you think I’m here to give you advice on buying Bitcoins?
Before I actually get into my presentation, how many of you have heard of what blockchain is? And how many of you think I’m here to give you advice on buying Bitcoins?
I am not. I’ll allude to how it is similar or different to cryptocurrencies like Bitcoin, but what we are talking about here has nothing to do with cryptocurrencies.
I wanted to start out by sharing the end vision that Walmart has for our blockchain initiative. Before I get into some of the details about how we are approaching this, why is this different, why is it different this time?
I wanted to start out by sharing the end vision that Walmart has for our blockchain initiative. Before I get into some of the details about how we are approaching this, why is this different, why is it different this time?
Source: Walmart
All right, so I should probably stop there and take questions, right? That’s really the end vision that we have. We know we have a long way to go. By no means are we implying that this is easy, but what we are saying is that now is the time to do this. We think this is the perfect time to embark on this new era of transparency, because we finally have the enabling technology called blockchain.
This is not going to be a Blockchain 101 session. I’m not going to talk to you about all the key aspects of blockchain. I’m going to talk about the application of blockchain, why it’s different; hopefully, that will resonate with you.
Why is Walmart doing this? What is in it for us? Think about the retail shelf and how that’s changing.
In the ’80s, we had about 15,000 SKUs on the retail shelf. By the 2000s, we had 50,000. Now, with online shopping, it is literally an endless shelf, right? So, the complexity of the products that we sell, the foods that we sell in a typical store or online is changing dramatically, exponentially, I would say.
[As consumers,] we are getting further and further away from where our foods come from as a society. We are losing touch with who the farmer is, whether it’s a dairy farmer or a leafy-green farmer.
More and more, our customers, the shoppers in our stores, are asking questions of us [about] where this food comes from. We want to know more about how this food was grown and produced and manufactured and handled before [we] buy it, before [we] eat it. We care about its environmental impact; we care about the carbon footprint; we care about the water use, energy use, waste, all of those things. The new generation that’s coming up cares a lot more about this. That’s going to keep increasing as they shop more, as they grow up, [enter] the workforce and really start driving consumer demand.
I’m a food safety guy. This is a food safety initiative for Walmart. You may remember this large outbreak of E. coli in spinach that happened in 2006 that resulted in 200 illnesses and three deaths across 26 states in the U.S.
We should never forget the public health impact. My boss, Frank Yiannas, always says, “Don’t let statistics numb you, because every person that was impacted is a real person”—someone’s daughter, someone’s mother. But we should also not lose sight of the impact on the industry. We had to wipe out spinach from our retail shelves. The spinach industry took years to recover from that outbreak. [It] devastated that whole sector.
At the end of the day, when the investigation was complete, it was one supplier with one lot of contaminated spinach with one day’s production. That’s it. And yet, it took years for the industry to recover.
That’s not good enough.
You could tell me, “Hey, Tejas, you are talking about something that happened in 2006. We are in 2018. Come on; it’s been 12 years. We’ve gotten better, right?”
I’m a food safety guy. This is a food safety initiative for Walmart. You may remember this large outbreak of E. coli in spinach that happened in 2006 that resulted in 200 illnesses and three deaths across 26 states in the U.S.
We should never forget the public health impact. My boss, Frank Yiannas, always says, “Don’t let statistics numb you, because every person that was impacted is a real person”—someone’s daughter, someone’s mother. But we should also not lose sight of the impact on the industry. We had to wipe out spinach from our retail shelves. The spinach industry took years to recover from that outbreak. [It] devastated that whole sector.
At the end of the day, when the investigation was complete, it was one supplier with one lot of contaminated spinach with one day’s production. That’s it. And yet, it took years for the industry to recover.
That’s not good enough.
You could tell me, “Hey, Tejas, you are talking about something that happened in 2006. We are in 2018. Come on; it’s been 12 years. We’ve gotten better, right?”
Have we? You may have heard of the large romaine [contamination] outbreak that we had earlier this year. We got a little bit better because instead of the regulatory agencies saying, “Don’t consume all spinach,” they said, “Don’t eat all romaine from Yuma, Arizona.”
[But] when you look in your fridge or when we look at the retail shelf, does it tell you whether the romaine is from Yuma, Arizona, or not? No, so the end result is you throw away all romaine.
The impact was pretty similar. It was millions of dollars of loss for the romaine industry. Two hundred people infected from 36 sites, five deaths reported—so it’s not better. Twelve years on, it’s not better.
We think that it’s partly because of the time it takes to get back to the source; partly, it’s because of the time it takes to trace contaminated products versus uncontaminated products. Traceability is not the end-all, be-all. It’s not going to solve all our problems, but it does help us get to the resolution faster, helps us identify problems faster, and hopefully put intervention strategies in place to prevent those problems from happening again in the future.
By and large, the food system is safe across the board. The amount of food we consume is safe, generally speaking. We are not being alarmists here; but when outbreaks do occur, no commodity is really safe.This has been the summer of salmonella, as my boss says. A lot of products associated with salmonella that we don’t typically think about, like cereal—essentially, [outbreaks keep] happening.
We need to do better. We need to protect our customers better. That was the motivation for Walmart embarking on this journey. It was not to ask the question, “What can blockchain do for us?” That’s the wrong question to start with. We were focused on solving a business problem, which was identifying food safety risks earlier in the supply chain, and that led to the next obvious question: Do we know our supply chain first? And we didn’t.
So, this is why a digital, transparent food system matters. In addition to the food safety side of things and food-borne illness side of things, it can also help prevent fraud because if you are shining a light on the supply chain, it’s harder to introduce contaminated or counterfeit product into the supply chain, [such as] seafood, for example.
It also helps us meet upcoming regulations. The Food Safety Modernization Act in the U.S. has traceability requirements that have not been published yet by FDA. Other countries like China, Australia, the EU are looking at updated traceability requirements. By having digital, transparent traceability across a supply chain, we are already going beyond what any regulation could come up with, and it helps protect our interests in that space.
My personal favorite is the application to food waste. The video showed you that we don’t throw away foods that we shouldn’t when we have better visibility, more precision, more accuracy.
The other part of the food waste [equation] is supply chain efficiencies. I will give you some specific examples. We found that by improving supply chain efficiencies, we get fresher product to the customer with more shelf-life, and that reduces the amount of food that gets thrown away at home because they have more time to eat it. That’s a good thing for everyone.
Ultimately, this new era of transparency is leading to more accountability for everyone to do the right thing in the supply chain at all times. That accountability is leading to better responsibility, and that ultimately is enabling greater trust.
We spent two years testing, learning and scaling the technology with our suppliers. We actually started trusting each other more because of the data that was flowing through and understanding each other’s business practices.
We understood the value-add that we were all providing to this ecosystem, and I think that transparency and traceability today is where food safety was back in the ‘80s. Customers were expecting it, and we had to come up with ways to implement HACCP and other food safety mechanisms to meet that expectation back in the ‘80s.
It’s the same today. Customers believe that we already know exactly where the food comes from at all times. Sure, we can trace it back [but] it takes time. It’s a paper-based approach; it’s manual. But what this changes is the customers’ interaction with the food and allows them to trust the food more because they have all the information that they care about.
I’ll walk you through the story of the mango, which was the first proof of concept we did with blockchain, and then I have another example that was more recent.
Ultimately, this new era of transparency is leading to more accountability for everyone to do the right thing in the supply chain at all times. That accountability is leading to better responsibility, and that ultimately is enabling greater trust.
We spent two years testing, learning and scaling the technology with our suppliers. We actually started trusting each other more because of the data that was flowing through and understanding each other’s business practices.
We understood the value-add that we were all providing to this ecosystem, and I think that transparency and traceability today is where food safety was back in the ‘80s. Customers were expecting it, and we had to come up with ways to implement HACCP and other food safety mechanisms to meet that expectation back in the ‘80s.
It’s the same today. Customers believe that we already know exactly where the food comes from at all times. Sure, we can trace it back [but] it takes time. It’s a paper-based approach; it’s manual. But what this changes is the customers’ interaction with the food and allows them to trust the food more because they have all the information that they care about.
I’ll walk you through the story of the mango, which was the first proof of concept we did with blockchain, and then I have another example that was more recent.
We followed a mango right from the seedling to the harvest as it’s being sold, packaged, transported and shipped across boundaries, gets processed, sliced, put in a clamshell, gets palletized, gets on a Walmart truck, comes to a store, where our customer buys it and enjoys it at home.
That’s the supply chain that we followed. We thought we were picking a simple supply chain.
Turned out it was not so simple. Essentially what we did was my boss went to a local Walmart store in Bentonville, Arkansas, picked up a clamshell of sliced mangos and came into the conference room, called his leadership team, and said, “Tell me exactly which farm these mangos came from. Your time starts now.”
After we got over the initial panic, we reached out to the supplier. We tried to trace it back. Any guesses on how long it took us to get back to the farm?
It took us six days, 18 hours, and 26 minutes to get back to the farm—and even after that, we weren’t really sure it was the right farm.
We had the paper trail, but again, because it was a manual process, a lot of comparing incoming lots to outgoing lots, we weren’t 100 percent sure in that accuracy.
We then went in and implemented blockchain technology, where every stakeholder in the supply chain put data onto the blockchain. We partnered with IBM to do that. IBM is a service provider for the technology, but I will be honest, it’s not about the technology. It’s about how this enables a new way of collaborating across the supply chain with a balancing act of protecting transparency with commercial confidentiality. Every stakeholder put data onto the blockchain.
We then went in and implemented blockchain technology, where every stakeholder in the supply chain put data onto the blockchain. We partnered with IBM to do that. IBM is a service provider for the technology, but I will be honest, it’s not about the technology. It’s about how this enables a new way of collaborating across the supply chain with a balancing act of protecting transparency with commercial confidentiality. Every stakeholder put data onto the blockchain.
At the end of the day, we re-ran a trace with another clamshell of sliced mangos, and this time, it took us 2.2 seconds to get back to the farm, with greater confidence in that data.
Now, think about what that would do in terms of not just outbreak response or recalls. That’s the obvious use case here. This changes how you conduct business in the supply chain because you have this level of visibility—instantaneous, real-time visibility—and...you can have better demand forecasting, better supply forecasting.
You can do supply chain efficiencies. There are whole hosts of applications, value-added applications beyond traceability and food safety that you [can] enable.
Once you have this foundation layer of traceability with blockchain...you can’t tell exactly what farm it came from but the group of farms it could have come from or the group of orchards it could have come from. We are not looking for a one-to-one traceability here. In some cases, especially for dairy, that’s not possible. Blockchain cannot solve that for you.
It can tell you with confidence that “it’s only these five farms” and not “Yuma, Arizona.” That’s a huge improvement. We can make better decisions with that kind of precision even if it is not the grand narrative we would like.
You can do supply chain efficiencies. There are whole hosts of applications, value-added applications beyond traceability and food safety that you [can] enable.
Once you have this foundation layer of traceability with blockchain...you can’t tell exactly what farm it came from but the group of farms it could have come from or the group of orchards it could have come from. We are not looking for a one-to-one traceability here. In some cases, especially for dairy, that’s not possible. Blockchain cannot solve that for you.
It can tell you with confidence that “it’s only these five farms” and not “Yuma, Arizona.” That’s a huge improvement. We can make better decisions with that kind of precision even if it is not the grand narrative we would like.
There’s a time-line that told us that the mangos were sitting at import control at [the] border crossing for four days. We were losing four days of shelf-life.
Without this visibility, we thought we were getting lower-quality mangos from the farmer. That’s all we could go on. It turns out it had nothing to do with the farmer. The farmer was giving us really good-quality mangos. It was losing shelf-life at border crossing, so now we can work with customs and border protection to speed that up, figure out why it was sitting there for four days and get better-quality mangos to our customers and a better price to the farmer. So, it’s a win-win for everyone.We are also using blockchain to track certificates, food safety certifications like Global Food Safety Initiative certificates, audits and all of those things. I’ll talk a little bit about that later.
We also followed the life of a strawberry from farm all the way down to the store. It’s hand-picked. It gets packaged in the field and then gets cooled, and it gets shipped to a Walmart DC [distribution center] and a Walmart store where our customers can enjoy it.
Typically, it's assumed that a strawberry, once it's picked, has 14 days of shelf-life left. What we were able to (create) with the data on blockchain was a "FedEx tracking view" of food.
We could tell the time stamps of when it was harvested, time stamps of when it was shipped and received by the cooling facility, when it would leave the cooling facility, when it arrived at a Walmart DC, when it would leave the Walmart DC, when it arrived at a Walmart store. With that FedEx tracking view, we could then tell exactly what was going on with the strawberries, how many days of shelf-life are left.
It was [also] losing four days of shelf-life in transportation. Why was it taking four days for the strawberries to get from California to Arkansas? Again, that’s something we can look into. If we can speed that up, we get better-quality strawberries to our customers.
At the end of the day, what this is doing is enabling transparency, and it’s getting us away from the opposite of transparency, which is anonymity. It’s shining a light on the supply chain, and by shining a light, it’s helping everyone. It’s almost like a rising tide raises all boats, right? When we improve supply chain efficiencies, for example, or we better protect our customers from food safety incidents, it impacts the whole industry. It impacts the whole supply chain.
We are approaching this from a collaborative standpoint. It would have been so much easier for Walmart to have been the 800-pound gorilla to say, “Hey, thou shalt do it this way.” Instead of that, we took a partnership-driven approach, a shared value proposition, so while we are asking our suppliers to give us visibility back to the farm, in turn, we are giving them visibility for the first time into how their product is flowing from our DCs to our stores to our customers.
They can now see the DC that they send the leafy greens to, which could be servicing hundreds of stores. They can now get more accurate information about where the product is [going] and maybe do some marketing around that. We’re bringing visibility from both sides and approaching this from a partnership-driven mindset.
For us, the end game is the focus on the customer. We can create better customer experiences as they show up at a Walmart store. We can tell the story of the farmer. We can show them how their purchases are making a positive impact on the livelihood of the fisherman or whatever that might be.
One thing we don’t want to do is just give all the data to the customer and let them figure out what it means. This is not about overloading the customer with too much information. It has to be the right balance—connecting it with their values.
Some customers care about it being organic. Some customers care about it being GMO-free. All the claims that we make on these food labels, we can now have the data to back up those claims, have the certificates to show and back up those claims.
Again, it creates this new era of trust across the board, not just with the customer but across the supply chain as well.
Where we are today. We’ve moved beyond proof of concept. We’ve moved beyond pilots. We are actually in production.
We’ve partnered with 11 of our suppliers and two of our competitors, Kroger and Wegmans. We believe this is an equal system that we’re building, and food safety is a pre-competitive issue.
We’ve partnered with 11 of our suppliers and two of our competitors, Kroger and Wegmans. We believe this is an equal system that we’re building, and food safety is a pre-competitive issue.
We’ve tracked about 4 million food packages on blockchain in a production environment to date, across 25 SKUs. That includes meat and poultry, fresh produce, even eggs and dairy. I think it’s yogurt that we’re tracking, almond milk, whole hosts of different varieties of products just to test it out to make sure it works before we dole it out.
In September, last month, we launched our Walmart food [blockchain] initiative starting with fresh leafy greens, where we’re requiring all fresh leafy-green suppliers to Walmart and Sam’s Club to on-board to the blockchain platform and start inputting data as we go through this. They have about a year to comply with that.
We think we are building something bigger than Walmart, and we think this is something that is going to transform the food system. I would love to have the opportunity to have a conversation with you on how we can get dairy and dairy products on board with blockchain and get this going, so I’m going to stop here. Thank you for your time.
Margaret Speich is senior vice president of strategic and industry communications and Luke Waring is manager of communications and membership at the U.S. Dairy Export Council. Global Dairy eBrief Exclusives are confidential, password-protected articles for USDEC members only.
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The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. The password-protected article above is intended for USDEC member organizations only and should not be shared with anyone outside your organization.