Backlash Against China

Trend: Misleading product labeling and poor quality is creating a buyer's strike against some products imported from China.

BusinessWeek describes some of the problems with food imported from China. For some companies, the backlash against China is a growth opportunity. And a new word hits the tipping point -- traceability. Excerpts below.

Link: NOT Made In China

With today's global food supply, however, eliminating every particle from China is impossible for most major food companies. Even a simple product like a cereal bar contains ingredients from India, the Philippines--and China, which now supplies the bulk of the world's vitamins, apple juice, and other goods.

Instead, the latest woes have many food giants scrambling to ratchet up efforts to ensure the safety of imported ingredients. That's providing a big boost to a host of companies aiming to help with the task. While Kellogg's has long had systems in place to monitor its global food chain, for example, it has arranged additional third-party audits of its suppliers. Many companies are also broadening the list of things they're analyzing.

This increased scrutiny is good news to Gene Rider, North American consumer goods vice-president of Intertek Group PLC. Operating in 110 countries, with headquarters in London, the company offers a complete quality system for clients ranging from Kraft (KFT ) Food Inc. and Unilever to Nike (NKE ) and Microsoft Corp. (MSFT ) Intertek will evaluate and train suppliers, test products, and provide other services. Since the latest bans and recalls, inquiries have more than doubled, says Rider. "Companies are increasingly asking to outsource their quality programs," he says. "It's tremendous for us."

IBM also sees a big opportunity in this market. One of the key steps to putting safe food on the dinner table is tracing the entire path of ingredients and products from fields and factories to grocery store shelves. Such a system sounds like a no-brainer, but in practice it's difficult, requiring sophisticated markers and software. The tech giant is trying to capitalize on that demand by providing the tracking tags and sensors to monitor shipments or processes, as well as the computers and software to make sense of it all.

Already, retailers overseas have found big profits by giving consumers just that kind of information. After outbreaks of Listeria bacteria and other tainted food in Europe, French hypermarket chain Carrefour created Quality Line products, which come from local farmers who have agreed to tough quality standards. The products are now offered in 15 countries and are increasingly popular. In Belgium, where feed contaminated by dioxin was fed to livestock, 98% of beef and 56% of pork carry the Quality Line stamp. Shoppers appreciate the extra assurance.

For now, big U.S. chains are just beginning to move in that direction, with certified organic foods and produce labeled with the country of origin....IBM isn't just waiting for the market to develop. Recently it has tried aggressively to drum up customers with the help of a survey showing that nearly 40% of consumers are already changing what food they buy because of safety concerns.

In recent years, food producers have been under relentless pressure to buy ingredients at the lowest price. That, inevitably, led them to China. Now, says DSM's Filz, they increasingly are "moving away from decisions made just on price to something like a stamp or seal." No surprise then that DSM is creating such a seal, which would guarantee the quality, reliability, and traceability of its products. That's good for safety--and for DSM's business.