Food Safety and Brand Protection through Technology November 2011 Process Expo

© Siemens AG 2011. All rights reserved.Page 1

Food Safety and Brand Protection

through Technology

November 2011Process Expo


“Will the defendant please rise…”

CEO’s from Con Agra Foods, Bumble Bee Foods, Dole Foods,

Butterball and Westland Hallmark Meat Co. in front of

the House Energy and Commerce committee

hearing, titled: “Contaminated Food:

Private Sector Accountability”.

2/26/2008


A new level of Executive accountability?


A new level of Executive accountability…Round II


Food Safety in China, and the Risk to the U.S.From the FDA’s “special report” Pathway to Global Product Safety and Quality (June 2011)

Imports from China =

*10-15% of all food eaten in US households*60% of fruits and vegetables*80% of seafood*50% of medical devices*80% of active pharma ingredients in medications

The FDA cannot keep up:


The new instances of Brand imagery…

Peter Hurley comforts his son Jacob at the House Energy and Commerce Committee hearing on the salmonella outbreak.

(Mark Wilson/Getty Images) Associated Press / February 12, 2009



Risk communication and control are now key elements of Brand Protection

Risk = Hazard + Outrage problems are worse than they actually are…reputation problems are better than they actually are…L/T damage problems blamed on others… “a plague on both your houses!”

“A brand promise can be unmasked as a shallow boast at almost any point during a customer experience…”Making Every Employee a Brand Manager, Heaton & Guzzo

“Brand damage is one of the major business risks of the 21st. Century”Lloyds of North America

Actionable info is needed, especially to leverage “Ownable Elements” that consumers can see & hear as well as taste…



ththtiFood Safety Has Become A Serious Public Health Issue That Isn’t Going Away

Statistics at-a-glance Food recalls have increased 76 million Americans get sick per year 5,000 deaths per year 89% of voters support food safety legislation

More government attention than ever before:

FDA Office of Foods – enhancing ability to address food and feed safety.

Federal Trade Commission – increased enforcement and monitoring of Quality claims.

Better cooperation between federal, state, and local governments and agencies.


ththtiOne Incident Can Be Crippling

The Numbers Speak For Themselves Average cost of one recall is $10 million There are immediate and long-term impacts on

share price

One bad apple spoils the whole bunch After the spinach recall, consumers stopped eating

all bagged spinach, not just the impacted brand. Lag effect: Some consumers never return to the

category. Spinach eaters: 5% said "never again"* Many consumers stopped all bagged salad items.^

Sources:

* DailyFinance.Com August 20, 2010.

^ Food Institute Policy Report 2007.

1,470 reported illnesses- actual cases probably higher

500 million eggs recalled 3 law suits

Aug 2010Nationwide Egg Recall Salmonella Enteritidis


Detect, assess and respond to demand and supply altering events:

Process shift or upset

Quality issue or material shortage

Customer preference or pricing concerns

New customer or supplier

Emerging market opportunities

New product introduction

Delay in response time

Rel

ativ

e Im

pact

The longer it takes to respond to such an event, the greater the magnitude of impact

of that event on the business

Speed with Confidence


ththtiTime is a Critical Factor in Every Recall

The Time-Value Factor On Day 1 after recall announcement: 2.3% decline

in share price compared to sector index On Day 14 after poor handling of recall: 22%

decline compared to sector index


ththtiNew Food Safety Legislation is here

Hurry Up and Wait Broad agreement in Congress that

food and feed supply must be safer. Opinions differ on best approach and

right timing.

Key Components of Major Federal Draft Legislation

Reporting of Test Results Performance Standards HACCP

Protection Against Intentional Adulteration Traceability Inspection Frequency

Produce Safety Standards Imports Notification and Reporting

Mandatory Recall Authority Civil Penalties Fees

Record Keeping Records Access Security


ththtiNew Food Safety Legislation is here

Hurry Up and Wait Broad agreement in Congress that

food and feed supply must be safer. Opinions differ on best approach and

right timing.

Key Components of Major Federal Draft Legislation

Reporting of Test Results Performance Standards HACCP

Protection Against Intentional Adulteration Traceability Inspection Frequency

Produce Safety Standards Imports Notification and Reporting

Mandatory Recall Authority Civil Penalties Fees

Record Keeping Records Access Security

Areas addressed by existing Siemens

technology


“Un-Common” Food Supply Security Challenges

• Employee Violence• Tracking of contractors & visitors within the facility• Disaster response • Identifying and protecting Sensitive areas of the facility• Protecting the employee, vendors, contractors and visitors to the facility• Protecting the assets of the company• Protecting the brand• Etc.


Additional Questions for Establishing a Food Defense Program

• How do we Control of Facility and Personnel (establish a secure perimeter)

• Have we Checked the background and character of those who work in the facility

• Have we taken the steps required to identify and control additional potential vulnerabilities

• Do we have the tools required to investigate, report and mitigate security breaches

• Have we developed plans, policies, procedures and training to support these goals

• Are our mitigation strategies consistent across our organization


Level of Integration

Solu

tion

Com

plex

ity

Food Defense: Levels of Integration

Level 1 Installation Limited physical

security May include burglar

alarm

May include multiple standalone security systems

Security systems integrated with business systems (e.g., Human resources, production)

Managed centrally from Command & Control

Multiple brands and technologies

Systems managed from one location

Level 1 Integration

Level 2 Integration

Level 3 Integration

Level 4 Integration

Limited or no physical security

Keyed entry

Level 0 Integration

Organizations balance their risks, their impact and the cost to mitigate


Results: TraditionalSecurity & Risk Mitigation

Result: Business ProductivityImprovement

Level of Integration

Solu

tion

Com

plex

ity

ROI

Food Defense: Business Impact

Limited physical security

May include burglar alarm

May include multiple standalone security systems

Security systems integrated with business systems (e.g., Human resources, production)

Managed centrally from Command & Control

Multiple brands and technologies

Systems managed from one location

Level 1 Integration

Level 2 Integration

Level 3 Integration

Level 4 Integration

Limited or no physical security

Keyed entry

Level 0 Integration


Call to Action: ththtiCall to Action: Focus on Protecting the Franchise

Taking Food Safety to the Next Level Speed: Reduction in time to root cause Transparency: All points in the supply chain Integration: All plant operations can be rapidly and

accurately associated with production events

Siemens brings intelligence to the food and beverage manufacturing process to help make food production safer to begin with and help customers solve problems more quickly and save precious resources in the event of contamination.


Appendix


Food Safety: The “Mandate” Conundrum

GMA

Consumers

Congress

IndustryA. RegulatoryB. Secy’s: FDA

Agr.

Do Something: Eroded confidence

“I won’t buy” is a mandate!

when self-regulation ≠ successful

Brand Mgt. approach

“Don’t mandate to me!”

More than compliance is needed

It’s going to cost you!

“We will mandate!”

Election year

Industry must step up

We don’t want to mandate, but we will if necessary!

Hearings & Publicity

“Will the defendant please rise…”

11

3A

3A

5

2 32

3

4

3

5

3


Key Requirements of Each Component

Protection Against Intentional Adulteration All registered food facilities would be required to have a "written Food Defense Plan."

TraceabilityFDA establishes a tracing system for all food, to identify each person who grows, produces, manufacturers, processes, packs, transports, holds, or sells food within 2 business days.

Record Keeping and Record Access

During an inspection, FDA would have access to and the ability to copy all records relating to the production, manufacture, processing, packing, distribution, receipt, holding or importation of an article of food needed to determine whether such article of food is adulterated or misbranded, or in violation of the Act, including all records relating to preventive controls and food safety plans and product and environmental testing. A written request for records would not be required.

HACCP

Each registered facility would be required to conduct a hazard evaluation to identify known or reasonably foreseeable hazards,” including “biological, chemical, physical, and radiological hazards, natural toxins, pesticides, drug residues, decomposition, parasites, and unapproved food and color additives,” as well as “hazards that occur naturally, may be unintentionally introduced, or may be intentionally introduced by acts of terrorism” and implement preventive controls (including at critical control points, if any) to provide assurances that the identified hazards would be significantly minimized and that the food would not be adulterated or contain an undeclared allergen.

Security The physical security of food production facilities must maintained at all times.

Documents

Food Safety and Brand Protection through Technology November 2011 Process Expo