The U.S. Dairy Exporter Blog: Market Analysis, Research & News

  • Chipotle's Stumbles Illustrate Gravity of Traceability

    By Mark O'Keefe March 16, 2016

    Commitments to follow traceability best practices now cover more than three-fourths of U.S. milk production. 

    Chipotle's “Food with Integrity” program only used suppliers that met its requirements for animal welfare, sustainability, and social accountability. "We do it," said Chipotle, "for farmers, animals, the environment, dentists, crane operators, ribbon dancers, magicians, cartographers and you."

    But when Chipotle tried to locate the source of two separate E. coli outbreaks that sickened dozens of customers across several states last year, they couldn't do it, and are still paying for it. Lingering damage includes declining sales, a fallen stock price and a burrito-sized hit to the image of the Chipotle brand.

    On Tuesday, Chipotle Mexican Grill Inc. said it would book its first quarterly loss as a public company. Restaurant sales dropped 26.1% in February. 

    Chipotle's difficulties illustrate how companies with sterling reputations can suddenly find their businesses threatened if they cannot quickly and successfully implement traceability protocols. Other food safety situations, such as the contaminated spinach crisis of 2006, show how one company's vulnerability can hurt an entire industry.

    "When a food crisis goes global, the consequences can be even greater and the damage across cultures challenging to repair," says Margaret Speich, who oversees global crisis readiness as USDEC's senior vice president, strategic and industry communications. "Fast and conclusive traceability can slow or even stop a snowball before it starts rolling downhill, out of control."

    U.S. Dairy industry best practices established

    That's one of many reasons The Innovation Center for U.S. Dairy, established under the leadership of America's dairy farmers through the dairy checkoff program, has developed voluntary enhanced traceability best practices for dairy processors. When the best practices were released in 2013, five large processors, accounting for more than 20 percent of U.S. milk production, made the commitment to the protocols.

    Since then, 21 more processors have committed to the guidelines, which now cover more than three-fourths of U.S. milk production.

    Traceability.png

    “Traceability can protect and potentially increase your company’s bottom line," said Vikki Nicholson, senior vice president of global marketing at the U.S. Dairy Export Council, who worked with the The Innovation Center for U.S. Dairy to help develop the industry best practices. "The beauty of adopting enhanced traceability best practices is that it forces you to evaluate your business operations, which can lead to improvements in record-keeping, consistent lot Identification and inventory management, just to start.  

    "Traceability provides the ability to quickly identify if your products are included or excluded in a situation, determine which lots are involved, and where the product is within the supply chain. Timely, solid information like that can greatly minimize damage to your company’s brand and the broader U.S. dairy industry," she added.

    According to the Centers for Disease Control, in the first Chipotle E.coli outbreak, 55 people were infected in 11 states. Twenty-one people were hospitalized. In the second, smaller outbreak, five people were infected with a different strain reported from three states. One ill person was hospitalized.

    Chipotle and public health officials have been unable to identify a single food item or ingredient that could explain the outbreaks. The Centers for Disease Control issued the following statement:

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    "A review of Chipotle's distribution records by state and federal regulatory officials was unable to identify a single food item or ingredient that could explain illnesses in either outbreak. Food industries are an important partner in making food safer for everyone. They can help stop outbreaks and lessen their impact by keeping detailed records to allow faster tracing of individual shipments of foods from source to destination."

    Even a false alarm can cause lingering damage

    In 2013, a dairy processor in New Zealand was involved in a food-safety scare that underscored the importance of traceability. Thirty-eight metric tons of whey protein concentrate made by the Fonterra Co-operative Group were suspected to be contaminated with Clostridium botulinum. That led to recalls of infant formula in China, Vietnam and Saudi Arabia.

    It proved to be a false alarm—the WPC was found to be clean—but the damage was already done. Fonterra’s inability to promptly and definitively track the destinations of the suspected batches of WPC escalated the problem, causing global markets to close.

    Following that incident, New Zealand formed a working group to outline ways to upgrade the nation’s dairy traceability system.

    "The Fonterra situation is a reminder we cannot rest on our laurels," Speich wrote in a 2015 U.S. Dairy Exporter post. "Anything can happen in today's highly competitive global environment where complex production and distribution channels are intrinsically linked, and rumors spread across continents in milliseconds." 

    Congress gets involved in Washington 

    In 2010, Congress passed the Food Safety Modernization Act, the most sweeping reform of food safety laws in more than 70 years. The law is meant to shift the focus from responding to food contamination problems to preventing them. Pilot studies have been completed, and now the Food and Drug Administration will provide a recommendation to Congress on the next steps to enhance traceability.

    Cognizant of this, The Innovation Center for U.S. Dairy developed a voluntary program for dairy processors to guide them on the implementation of enhanced traceability. Processors with long-established traceability procedures can utilize the program to find potential gaps and make improvements.

    Practical resources to help dairy processors evaluate and implement enhanced traceability protocols can be found at dairytraceability.com. In addition, check out our concise, downloadable 21-point enhanced traceability checklist at the bottom of this page.

    How one mid-sized processor employs traceability best practices

    While most large processors were quick to commit to the voluntary guidelines, more small-to-mid-sized processors need to make the traceability commitment for the industry to reach its goal of having 80 percent of U.S. milk production covered.

    One mid-sized dairy cooperative that has adopted a strong traceability initiative is Agri-Mark. 

    "Food safety has always been a vital initiative for our coAgri-Mark.pngmpany, but traceability outside of our own walls requires standardization of processes and data," says Susan Zucker, supply chain director at Agri-Mark, a USDEC member company.

    "In order to make sure that we are ready when our trading partners are, we need to stay on top of the industry initiatives and standards so we can implement business processes and systems that mirror these best practices."

    The best practices established by The Innovation Center for U.S. Dairy have been invaluable.

    "(They) provided a guideline for us as we reassessed our data structures for lot ID and product labeling. We need to make sure that this information can be captured electronically with bar codes as well as human readable for manual recording," Zucker says. 

    If a food safety issue occurs, governments in the United States and overseas expect fast action to isolate the problem and limit harm. There are no excuses.  

    "No matter what size your company is, customers and consumers are relying on your ability to be able to trace raw materials, ingredients and finished product throughout the supply chain," Zucker says. "Best practices and standards are crucial for transferring information about products that we need for traceability between trading partners."

    Customers and consumers driving demand for traceability

    Because food safety is an increasingly important issue to consumers around the world, knowing our industry is adopting enhanced traceability guidelines increases public confidence in U.S. dairy products and ingredients, both domestically and internationally.

    "Customers and ultimately consumers are the driving force for enhanced traceability—more so than legislation—which is why the U.S. dairy industry continues to be committed to enhancing traceability practices across U.S. processors," Nicholson said. 


    Dairy processors with questions about making the industry's traceability commitment should check out the resources below. They can also email Vikki Nicholson at vnicholson@usdec.org or call at (703) 469-1522. 

    Additional Resources: 



    The 21-point traceability checklist for dairy processors
     

    (Download the PDF with a click here.) 

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    Subscribe to the U.S. Dairy Exporter Blog  


    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. How to republish this post.   

    Market Access Traceability Food Safety
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