Putting trust in blockchain

As Chinese consumers place a premium on food safety, a technological tool is providing the answer

sumer dairy products, but we are not ready for that. Processing facilities are designed for the local consumer market, but not for export in terms of the packaging, the research and development, and the capacity.”

Lee reckons the Chinese market offers very good opportunities for New Zealand dairy processing companies to make premium products with good margins. Companies like Alibaba — which is the largest online channel with about 70 per cent of the Chinese e-commerce market — have also invested heavily in the supply chain and efficiency has improved dramatically, with low wastage and improved customer experience.

New Zealand Milk is also developing a trust system through its relationship with China Certification and Inspection Group (CCIC) laboratories in New Zealand. (CCIC is the Chinese regulatory quality testing agency).

Theland Farm Fresh Milk is the first fresh milk product to be exported to China without bureaucratic problems because of the new working methods and an established trust system using QR Code technology and the CCIC testing laboratory

Alibaba also has an offline channel (through majority shareholding investments in supermarket chains) which will sell the New Zealand product. “This model will attract a lot of suppliers like Milk New Zealand to bring more and better products into the supply chain,” says Lee.

“Another benefit from the new retail is to get recommendations from suppliers to say this is the right product for the family, this is the best package for you. For us, this is accurate brand, product and sales promotions.”

Milk New Zealand is the first customer of AsureQuality to adopt their QR code system to trace the provenance of Theland Farm Fresh Milk products exported to China. .

Lee says Milk New Zealand has not adopted blockchain technologies for food traceability. It is waiting for Fonterra and Alibaba to trial the technology.

The use of traceability and blockchain is not confined to the dairy industry. JD.com’s Gartner highlights two additional factors: “Because of our business model, there we do a lot of direct sales; when we work directly with suppliers and brands, we have big flexibility in that supply chain and it is easier for us to implement some of these technologies and make sure we have visibility all the way to the farms.

“We’ve mainly talked about agricultural products. I think there a wide range of other products that this applicable to like every day consumer goods like New Zealand wines because there’s been an issue of counterfeit wines in the market. It’s just something people don’t generally think of first.”

“There’s 100 5-star hotels. They serve food. That food comes from somewhere. People who eat there want to know where that food comes from, so that’s an obvious case. You have 300 malls selling products, same type of thing.”

Centrality has quite a big Chinese team. “Probably 25 per cent of our developers are New Zealanders with Chinese parents or have recently emigrated to New Zealand. So we’ve got a good internal Chinese community and they have relationships in China and in the case of Wanda,” says McDonald.

Wanda Internet Technology is a tech spin-off from giant Chinese Conglomerate Dalian Wanda Group, which was ranked 380th on the Fortune Global 500 list in 2017 with revenue of US$28.45 billion and assets of US $152.7b.

Centrality is a blockchain venture studio partnering with industry to create a marketplace of blockchain applications. The venture now employs 75 staff in Auckland and is the first blockchain company Callaghan Innovation has got behind through an R&D Growth Grant worth 20 per cent of eligible R&D expenditure, capped at $5m per annum.

So far, the start-up has raised US$160m through three token sales in the past six months (despite the cryptocurrency markets being down since December).

“This is the cool thing about it,” says McDonald. “We’re a little Kiwi company exporting to one of the biggest businesses in that market at a relatively early stage in our development.”