The report, Minimising Fraud and Maximising Value in the UK Food and Drink Sector 2014, reviewed data from 73 listed food and drink industry companies with total annual sales of more than £200bn.
It found the food and drink industry could boost its profitability by £4.48bn – or more than 34% – by preventing fraud.
Harm public health
This would make companies more competitive and enable them to reduce prices for their customers, it claimed.
Professor Lisa Jack, co-author of the report from the University of Portsmouth’s Centre for Counter Fraud Studies, claimed food fraud was always financially motivated and did not harm public health.
“It’s more that consumers and food businesses are not always getting what they pay for,” she said.
“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.”
But food fraud was about more than just the food, she claimed. “For example, many frauds also evade duties and VAT [valued added tax], 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.”
Food fraud resulted in food and drink being overpriced and reducing it could significantly improve value for money, said visiting professor Jim Gee, head of forensic and counter fraud services for PKF Littlejohn and co-author of the report.
Crime
“Food and drink fraud is the crime in our basket,” he said. “By cutting fraud, the price of groceries could be reduced by five pence on a loaf of bread, 11p on six eggs, 16p on a pint of beer and 28p on a bottle of wine.
“Like other industries, the food and drink sector is affected by fraud and is fast learning that it needs to protect itself.”
Addressing fraud could cut the cost of fraud by up to 40% and increase profitability significantly, he claimed.
Report findings
Of the 58 listed food and drink companies which reported profits:
- Six would increase their profitability by between one and 9% by tackling fraud.
- 31 would do so by between 10 – 49%
- 15 would do so by between 50 – 99%
- Six would by more than 100%.
Of the 15 companies which made losses:
- Three would make a profit not a loss
- Eight would reduce their losses by up to 10%
- Four would reduce by over 10%
Source: University of Portsmouth