IBM Survey Reveals Erosion of Trust and Confidence in Food Retailers and Manufacturers Grows Internationally
84 Percent of Chinese Consumers Are More Concerned With Food Quality Issues Than They Were Two Years Ago; Two-Thirds Want More Information About Source/Contents
ARMONK, NY .- A new IBM (NYSE: IBM) study revealed that concern over food safety has dramatically increased in markets around the world. The new study shows that over the last two years in China, distrust with food retailers and manufacturers has grown even more than it has in the United States (U.S.) and United Kingdom (UK). The study, titled “Full Value Traceability,” examines Chinese consumer values and confidence related to food and product safety.
Product contaminations and food recalls have become more commonplace across the globe. Melamine -- a toxic chemical widely used to make plastics and glue -- was recently found in Chinese infant formula and sickened more than 294,000 people, according to reports from China’s Ministry of Health. The scope of the problem quickly multiplied to include a wide range of products containing milk sourced from China. As a result, sales of staple products, such as milk, chocolate, ice cream, candy and more, have plunged worldwide. Food safety and traceability issues are addressed this week in a guest blog post by Guy Blissett, co-author of the study, on the “Building a Smarter Planet” blog.
According to the new IBM telephone survey of 300 consumers across China, the rise in recalls and contaminations has eroded consumer confidence in food and product safety, as well as with the companies that manufacture, distribute and sell these products. 84 percent of Chinese consumers claimed that their level of concern about food safety has increased over the last two years. In contrast, IBM’s recent survey of 1,676 consumers in the U.S. and UK found that 50 percent and 47 percent of respondents respectively have indicated an increased concern about food safety during that same time period.
Mounting Distrust of Food and Product Safety
The majority of Chinese consumers do not trust either the manufacturer (65 percent) or the retailer (59 percent) in the event of a recall. Many Chinese consumers, compared to their Western counterparts, are just forming brand associations as they search for new, sophisticated, trendy, higher-value products and services.
Consumers in the U.S. and UK are generally more trusting of food manufacturers and retailers and believe they will handle food recalls more responsibly. In the U.S. and UK, only 39 percent of respondents cited a lack of trust in manufacturers, while 25 percent said they are wary of retailers in the event of recalls.
Chinese and U.S./UK consumers shared very similar views on wanting to know more about the products they buy. 65 percent of Chinese consumers and 68 percent of U.S./UK consumers expressed more interest in uncovering information about product sources and background. This relates to a key finding of the IBM 2008 CEO Study which emphasizes the rise of “the informed and collaborative customer.”
Increased Preference for Environmental Sustainability
China’s middle-class is expanding in total volume and increasingly more disposable income. Economic growth in China is fostering the development of the informed, enlightened and empowered consumer. The combination of increased purchasing freedom and choice is empowering Chinese consumers, and they are demanding safety and quality.
As a result, awareness and understanding of environmental factors is increasing, and 65 percent of Chinese consumers are willing to pay more for environmentally sustainable food.
Tracing Food Product Origins
Consumer demand and support for socially and environmentally responsible corporations are viewed positively by consumer products companies, but an overwhelming majority admit they don’t understand their customers’ expectations. A 2008 Retail report by the IBM Institute for Business Value of 6,000 grocery customers found that 73 percent of U.S. grocery customers felt no loyalty to the store. IBM research shows that providing more information to consumers will help them feel better about their decisions and can boost customer loyalty and advocacy.
The Power of Full Value Traceability (FVT)
Full Value Traceability (FVT) solutions offer consumer product companies a way to trace ingredients, packaging and products through all stages of production, processing and distribution. Through the use of transparent traceability systems, consumer product companies can ensure and honor their commitments to consumer safety.
“Consumer Product companies have a responsibility to protect their brands,” said J. Chris Harreld, of the Institute for Business Value, IBM China. “A part of that responsibility involves winning and earning the trust of consumers. IBM can help businesses implement integrated traceability solutions to collect transparent and trustworthy information to track a product from farm all the way to fork.”
Key recommendations for consumer products companies to achieve a fully transparent system include:
* Leverage traceability to empower and protect the brand -- FVT addresses both protection and empowerment of the brand. Traceability improves a company’s ability to deliver creditable information, which contributes to overall brand trust.
* Integrate the physical and informational supply chain -- consumer product companies that can capture, store, analyze, and communicate information about product sourcing, processing and movement across their supply chain will have a strategic advantage in the marketplace.
* Proactively engage the stakeholders -- reaching beyond direct supply chain participants to engage a broad set of stakeholders will move consumer product companies away from the traditional defensive posture toward a whole value chain perspective that is opportunistic and expansive.
The opportunity to improve the safety and sustainability of the world’s food systems requires a combination of technology innovation, policy changes and behavioral adjustments. The following light hearted video portrays some of the issues facing world food systems:
To find out more about this issue, what IBM and others are doing to help address it, and to discuss your views on how to build a smarter food system, visit http://www.ibm.com/think.
The IBM Full Value Traceability study is based on the findings of a phone survey that was conducted among 300 adults across Beijing, Shanghai, Guangzhou, Wuhan and Chongging, China. The results reported are at the 95 percent confidence level with a margin of error of +/- 6 percent.
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