Blockchain Food Distribution: How Food Distributors Use Tech
Blockchain technology has received a steadily increasing stream of attention since Satoshi Nakamoto first created it in 2008 — and for good reason! Blockchain is already being used to revolutionize operability in a range of industries from healthcare, government, and public services, to manufacturing, finance, logistics, retail, and — yes — food distribution.
More than just revolutionizing the ways we work, Gartner has recently predicted that blockchain will create $3.1 trillion of new business value by 2030. That’s a world of possibility for CPG businesses, and many others, to tap into.
Let’s take a look together at what blockchain actually is, the benefits it brings, and how blockchain and food distribution can come together to add new value to the CPG space.
What is blockchain?
Let’s start with a definition.
Blockchain technology is a decentralized system used to maintain a record of transactions. It is a digital ledger that can be shared among two or more parties, and the entries cannot be altered once they are recorded. In this way, the blockchain is tamper-proof — food producers can use this technology to maintain traceability in the supply chain, for example.
But the partnership of food distribution and blockchain isn’t the first way this technology has been used. Blockchain technology was first developed to record financial transactions and has become synonymous with the world of cryptocurrency.
Popular uses of blockchain
The most well-known example of blockchain technology is Bitcoin. This open-source cryptographic currency has become a viable alternative to “fiat” currencies (e.g. US Dollars, Euros, etc.) in recent years — allowing users to purchase goods and services without the need for banks or other financial institutions.
Initial Coin Offerings (ICOs) — an equivalent to the Initial Public Offering (IPO) used by many businesses today — is another great example of how blockchain technology is changing the way money moves through organizations. Firms can use ICO to acquire funding for the development of a new coin, app, or service (CPG distribution included!) whereby interested investors can purchase a new cryptocurrency token produced by the company through an initial coin offering. This token may have some utility with the company's product or service or represent a stake in the company or project.
But back to food distribution and blockchain now, as that’s what you’re most interested in!
An introduction to food distribution and blockchain
Food traceability is a very clear use case for blockchain in distribution. Blockchain technology provides an easy way for all supply chain parties to access real-time information about inventory levels, shipment status, and other relevant data. This information is stored on a decentralized ledger that cannot be altered by any single party, making it more reliable than traditional databases.
According to Juniper Research's 'Key Vertical Opportunities, Trends & Challenges 2019-2030' report, blockchain combined with the Internet of Things, machine learning, artificial intelligence, and tracking technologies will streamline the supply chain end-to-end. This will result in lower retailer costs and greater regulatory compliance while speeding up food recall procedures.
Juniper Research also claims that blockchain technology will save about $31 billion in food fraud around the world by 2024.
What are the benefits of using blockchain in food distribution?
Blockchain is an incredibly transparent and secure system for food traceability
By design, blockchains are inherently resistant to any data modification — it simply isn’t possible to alter the data record!
As a result, a blockchain can serve as an open, distributed ledger, recording transactions between two parties efficiently in a verifiable and permanent way. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks.
The blockchain tracks the origin of food items from farm to table. Distributors with top-to-bottom secure transactional data, temperature data, and inventory levels track how fresh food is and how long it's been traveling in real-time and assess its shelf life. This tracing process helps prevent contamination by providing real-time information about where food comes from, who handled it, and when last inspected for safety.
Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires the collaboration of the network majority.
Essentially, there’s no way for certain “bad apple” parties to act under the radar and hide issues, mistakes, or fraud in the food distribution supply chain.
Since it’s decentralized, blockchain offers a higher degree of security
Let’s unpack that point in more detail as it’s an important one to acknowledge.
Because blockchain is decentralized, no one party can control the information in the ledger. This means that once data is recorded and confirmed by multiple nodes, there is no way to change it without everyone noticing.
Since this type of ledger is public and distributed, anyone can view it at any time. The information contained within it cannot be altered without being detected by other users in the network, so the process of recording entries into the ledger cannot be corrupted by those seeking to manipulate data for their gain or personal gain.
Given the fact that food fraud is apparently getting worse, this can be a game-changing benefit for CPGs and their food distribution partners — especially for brands catering to premium buyers or in organic, ‘good for you’, and grass-fed categories.
Blockchain can bring added sustainability — and build consumer trust
Following on from the previous point, IBM is using blockchain to help companies reduce their environmental impacts, like minimizing food wastage and using minimal or no agrochemicals in the food production process. The company recently launched a new product dubbed IBM Blockchain for Sustainability that will enable companies to track their supply chains and identify any potential issues with sustainability.
The concept is that by tracking products on a blockchain ledger, companies will be able to monitor their supply chains better and ensure that they are sourcing materials ethically. This is particularly important in the food and beverage industry, where there have been numerous incidents of food contamination or fraud in recent years.
IBM's platform uses Hyperledger Fabric technology and the company's cloud services to store data off-chain while keeping it secure and tamper-proof on the blockchain.
With the rise in environmentally conscious consumers, companies set independent standards to gain a competitive advantage. Food producers and retailers use blockchain technology to record each food supply chain step and exchange data with consumers. All in all, they can build and protect a positive brand image and increase food trust and confidence.
If a CPG is transparent about the quality and provenance of its foods, consumers will trust them more.
Blockchain offers greater efficiency and is very cost-effective
Blockchain improves the efficiency of food distribution by reducing the amount of paperwork required and removing the need for long verification processes. Blockchain also makes it easier to scale your operations and reach customers that were previously difficult to serve.
Since blockchain allows transactions to happen 24/7 by multiple parties based on a peer-to-peer network, these transactions can occur quickly and efficiently without downtime — or any downtime costs.
For CPGs and food distributors looking to increase their profit margins, the ability to update the blockchain in real-time, without disruption or downtime, can be a huge benefit indeed.
Blockchain makes regulatory compliance easier
Regulatory compliance can be a complicated process. Blockchain technology allows for real-time auditing and tracking of transactions, which makes it easier for businesses to comply with government or international regulations and standards.
It also allows for data sharing between different organizations. Keeping records up-to-date, staying current on new regulations, and ensuring that your CPG stays compliant can be challenging for any business. However, blockchain technology offers an opportunity to simplify the compliance process by creating an immutable ledger of all transactions recorded on a distributed network.
Blockchain enables seamless payment getaways
Lastly, blockchain technology makes payments and transactions more efficient by cutting out intermediaries such as banks or payment processors like PayPal or Stripe.
It's faster than traditional payment methods — with blockchain, you can send money from one place to another and make international transactions without currency conversion fees in minutes, not days or weeks. And because there are no middlemen collecting fees along the way, it's usually cheaper than sending money through traditional channels like banks or credit card companies.
4 inspiring use cases for food distribution and blockchain
Now that we’ve covered what blockchain is, how it works, and the benefits it can bring to CPGs, let’s take a look at the ways this technology is already being used in food distribution today.
Food waste minimization
Many food distributors are turning to blockchain technology to track their products from farm to fork to reduce food wastage. Blockchain can make it easier for companies to monitor their supply chains and identify potential food contamination or spoilage sources.
Using the public ledger technology offered by blockchain networks such as Ethereum or Hyperledger Fabric allows businesses to track their inventory through all stages of production and distribution with greater transparency than ever before and cut costs.
Walmart is using blockchain technology to track products from farmers to factories and the logistic process to their stores. The retail giant has teamed up with IBM to create a Hyperledger Fabric-based food traceability system which can now track the source of over 25 products from five distinct vendors thanks to a Hyperledger Fabric blockchain system. This could help them avoid future problems like its massive recall of romaine lettuce in March 2022 due to Cyclospora contamination.
Provenance data provision
With more product provenance provision trends, blockchain has helped brands seamlessly provide their product catalog's production and supply chain information.
CHO, one of the most renowned olive oil producers in Tunisia, is using blockchain to create a provenance record whereby consumers can access factual data regarding the origins of their olive oil and quality checkpoints by outlining each step of the product's journey — all thanks to IBM's Food Trust blockchain.
Blockchain-based solutions enable regulators to better understand what's happening in their respective markets in real-time and ensure that they have access to accurate information, thereby enhancing transparency and efficiency.
Regulators like Sustainable Shrimp Partnership (SSP), an Ecuadorian farmed shrimp regulator, and Aquaculture Stewardship Council (ASC) utilize blockchain technology by uploading and sharing data more easily and quickly. This facilitates enforcing compliance with regulations across multiple jurisdictions without relying on centralized authorities like governments or corporations who might have corruption.
Food freshness tracking
Like Walmart, Carrefour is using blockchain to provide their customers with historical data for two product categories: fresh microgreens from some of the in-stores hydroponic farms and their brand of fresh chicken.
Customers can access the product's history, including the manufacturing process, halal and hygiene certifications, date of birth, nutrition information, and temperature data, by scanning a QR code with their smartphone.
In terms of building trust and embracing traceability, the opportunities are almost endless when it comes to food distribution and blockchain together!
Food distribution and blockchain are the perfect pairing — and we can’t wait to see how this collaboration evolves!
As a forward-thinking food distribution partner, Buffalo Market distributes, stocks, and merchandises some of the most rapidly-developing and internationally-recognized brands to major and independent stores throughout the US.
If you're a CPG looking to deliver fresh, healthy, and delicious products to your customers, we would love to hear from you. At Buffalo Market, we are committed to helping our customers thrive by providing them with the best solutions and services in the industry.
Our team of experts works with a leading distribution system using technology to provide the highest quality service possible. Keep following along on our blog to learn more about how blockchain and other emerging technologies can revolutionize and improve the way we do business in CPG.
And to join forces with a food distribution partner who’s committed to ongoing improvement, then contact us today.