The report, ‘Minimising Fraud and Maximising Value in the UK Food and Drink Sector 2014‘, which reviewed data from listed food and drink industry companies with total annual sales of more than 200bn, discovered that the food and drink industry could boost its profitability by 4.48bn by tackling fraud.
The cost of groceries could also be reduced by as much as five pence in every pound.
Food and drink fraud is the crime in our baskets , says Jim Gee, head of forensic and counter fraud services for PKF Littlejohn. It results in food and drink being more expensive than it should and its reduction can significantly improve value for money.
By cutting fraud, the price of groceries could be reduced by five pence on a loaf of bread, 11 pence on six eggs, 16 pence on a pint of beer and 28 pence on a bottle of wine. I estimate that the cost of food and drink fraud to an average household is as much as 424 over a year.
Like other industries, the food and drink sector is affected by fraud and is fast learning that it needs to protect itself. The good news is that addressing fraud can cut the cost of fraud by up to 40 per cent and increase profitability significantly.
“We estimate that of the 58 listed food and drink companies which reported profits, six would increase their profitability by between one and nine per cent; 31 would do so by between ten to 49 per cent; 15 would do so by between 50-99 per cent; and six companies would increase their profitability by more than 100 per cent.
Of the 15 companies which made losses; three would make a profit not a loss; eight would reduce their losses by up to ten per cent and four by over ten per cent.
Professor Lisa Jack, co-author of the report, claims that food fraud is always financially motivated. “On the whole, food fraud does not harm public health. It’s more that consumers and food businesses are not always getting what they pay for.
“Scientific testing and systems audits have a place but food fraud, like any other fraud, can also be tackled if you follow the money, ask the right questions and have controls in place that make fraudsters think twice before attacking your business.
“Food fraud is about more than just the food: for example, many frauds also evade duties and VAT, and so we all lose out from lost revenues.
“Margins are so tight in the food sector that almost any food can be misrepresented to get a bit of profit for a fraudster.”