The Trade Impacts of a Food Scare: The Fonterra Contamination Incident

This paper examines the impact of a food contamination scare in the dairy sector on dairy exports. We investigate this question in the context of the 2013 Whey Protein Concentrate contamination incident in New Zealand. We assess the impact of this incident on dairy exports using synthetic control methods. A synthetic counterfactual scenario where the incident did not occur is developed using weighted information from other countries unaffected by the scare. We find that there was an initial negative shock to the exports of products that were thought to have been contaminated, but that there were no significant sustained impacts on other dairy products. The affected products made up only a small proportion of New Zealand dairy exports, with the vast majority of dairy exports being unaffected. Infant formula exports appear to have recovered more than a year after the scare. However, whey product exports (the contaminated product) remain lower than they otherwise would have been.

Food scare crisis: the effect on Serbian dairy market

The increasing trend of food scandal crises is not well followed in recent studies of spatial price transmission. This paper analyses the impact on the domestic market of an Aflatoxin M1 outbreak in the Serbian dairy sector during 2013/2014 using a spatial price transmission approach. Monthly farm milk prices in Serbia for the period 2007/2014 were contrasted with leading dairy exporting countries New Zealand, USA and Germany, which did not have a food scare in their dairy sectors. To estimate the impacts a Markov-switching vector error-correction model was utilized. For all four dairy markets the model identified two price change regimes: standard and extreme. Although it was predictable, an extreme regime was not identified during the Aflatoxin M1 crises in Serbia because of some specific characteristics of its dairy production. The results suggest that the Aflatoxin M1 outbreak ‘froze’ the Serbian dairy market and temporally disconnected it from the world milk market. Farmer’s prices fell below their long-run equilibrium levels. The total loss of the Serbian farm-level dairy sector during the crisis reached up to 96.2 million EUR. These ‘missed opportunity’ significantly slowed investment in the dairy sector.

Food scares: a comprehensive categorisation

Purpose The purpose of this paper is to describe the development of a comprehensive categorisation of food scares. Design/methodology/approach Following an initial desktop study, the categorisation was developed collaboratively with industry experts through a workshop and series of semi-structured interviews. Findings The new categorisation developed is in Venn diagram format allowing overlapping categories. It is organised around the two major types of contamination (biological, and chemical/physical contaminants) and the two major causes of contamination (wilful deception, and transparency and awareness issues). Practical implications The long and complex supply chains characteristic of current food production systems have resulted in a rising number of food scares. There is thus an increased emphasis on developing strategies to reduce both the number of incidents of food scares, and their associated economic, social and environmental impacts. The new categorisation developed in this study enables experts to address categories of food scares. Inclusion of the cause of contamination is particularly important as the method through which contamination occurs is key in devising food scare prevention strategies. Originality/value The new categorisation, unlike previous categorisations, enables food scares to fall into multiple categories, as appropriate. Also, again in contrast to previous categorisations, it takes into account not only the physical problem of a food scare but also the mechanism through which it arises.

Which Consumers Are Most Responsive to Media-Induced Food Scares?

In understanding decreases in demand after exposure to media-induced food scares, aggregate data are almost exclusively presented without taking into consideration potential confounding variables. However, a better approach may be to use an experimental design coupled with targeting homogeneous willingness-to-pay (WTP) subgroups based on similarities in behavioral, psychological, and demographic characteristics of those who are most vulnerable to food scare information. This is accomplished through experimental economics and an analysis strategy called a classification and regression tree (CART). A stigma framework—which guides conceptual understanding of effects of media-induced food scares—suggests controlling contextual variables to better approximate ceteris paribus. To this end, we conducted an experiment that exposed people to information about mad cow disease and then asked them to bid their willingness-to-pay for an actual hamburger. The CART found distinct homogeneous WTP subgroups of individuals that could be used by government and industry professionals to create interventions to reduce potential consumer concern and producer losses.