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How Lead Levels in Cinnamon Point to Need for Accountability, Incentives

As the FDA looks at whether a recent case of lead contamination in applesauce was economically motivated, a UCLA supply chain expert explains how to deter such suppliers.

Tests of the cinnamon supplied for these applesauce pouches was found to have 'extremely high' levels of lead contamination.
Tests of the cinnamon supplied for these applesauce pouches was found to have 'extremely high' levels of lead contamination.

Early last month, the U.S. Food & Drug Administration (FDA) announced WanaBana USA’s voluntary recall of all lots of its WanaBana Apple Cinnamon Fruit Purée pouches because of elevated levels of lead found in some of its product. Now, the FDA is investigating whether the poisoning of dozens of children could’ve been caused by deliberate additives in the cinnamon flavoring of the product, which was also distributed independently in the U.S. as Schnucks Apple Sauce pouches with cinnamon and Weis Cinnamon Apple Sauce.

The product was manufactured by Austrofoods in Ecuador, but the cinnamon was provided further down the supply chain, by Negasmart. With almost 70 confirmed cases of children—all under the age of 6—adversely affected by consuming the applesauces, the FDA announced Friday that it would be inspecting Austrofoods’ facility.

During that onsite inspection, now complete, investigators collected samples of cinnamon supplied by Negasmart, finding “extremely high” levels of lead contamination—5,110 and 2,270 ppm. As a point of reference, international standard-setting body Codex Alimentarius Commission is considering adopting a maximum level of 2.5 ppm for lead in cinnamon and other bark spices in 2024.

Economically motivated

The FDA is looking into “the potential that the cinnamon contamination occurred as a possible result of economically motivated adulteration,” according to a statement.

Economically motivated adulteration (EMA), or food fraud, can occur by leaving out or substituting valuable ingredients, or adding something to food to make it appear of higher value. In this case, lead could have been added to the cinnamon to give it a higher weight, for example, or to enhance its color. Expert estimates put the cost of global food fraud at $10 billion to $15 billion a year, according to the FDA, although more recent estimates put the cost at as much as $40 billion a year.

This sort of adulteration is certainly not new. In 2007, more than 150 brands of pet food were recalled because of contamination from melamine, an industrial chemical, in an imported supply of wheat gluten. Another example comes from the toy industry, where, also in 2007, Mattel had to recall millions of toys because they were tainted with lead. Although Mattel’s contract manufacturer, Lee Der, was implicated almost immediately, the initial culprit Dongxing, the company supplying paint to Lee Der. An employee at Dongxing was replacing expensive unleaded paint with cheap leaded paint to then sell the more expensive product for a profit.

“This is really about money,” says Christopher Tang, a professor at the UCLA Anderson School of Management who has been researching supply chain risks for more than 30 years. Such adulteration is often driven by a customer’s refusal to pay higher prices despite the rising cost of labor or materials. “They may push the supplier and say, ‘Hey, I don’t care what you do. Just don’t increase the price.’” Suppliers, in turn, find themselves forced to cut corners.

Push for stricter standards

The FDA does not have strict standards for allowable amounts of lead in foods, but is making some moves in that direction, according to a report from the New York Times. In 2017, the agency set recommendations for the amount of lead in children’s candies, the article notes. And earlier this year, it proposed maximum limits for lead in baby foods such as mashed fruits and dry cereals. In its legislative proposals for 2024, the FDA has also asked Congress for more power to address the issue, the New York Times notes.

When it comes to testing products for safety, there appears to be a lot of finger pointing, with brand owners pointing at manufacturers and manufacturers pointing at ingredient suppliers. Weis Markets, for example, said in a statement that it was the manufacturer’s responsibility to test the applesauce for contamination.

Tang points again to the motivations from various companies in the supply to cut costs—whether because of competition pressures or increased labor costs or what have you—perhaps by inspecting less than they had in the past. “But then when things go wrong, it goes really bad,” he says. “I think that is where the company needs to rethink and to be more honest in terms of what they can do.”

That’s exactly the sort of thing that Mattel did after its incident with the leaded paint. The breakdown was able to occur in the supply chain because Mattel’s supplier did not inspect the product for lead and neither did Mattel, both trusting the supplier further down the chain to provide an unadulterated product, Tang says. Now, Mattel requires its direct suppliers to make sure incoming ingredients are inspected, the products are inspected again before they’re shipped to Mattel, and Mattel also inspects again at its facility, he says.

“So they do three tiers of inspections to make sure it’s safe. Especially for children’s products, consumers are very concerned about that safety,” Tang says. “I think that manufacturers can do that. The costs will go up, but on the other hand, for safety, we cannot compromise.”

Incentive model

Besides conducting their own tests and inspections, manufacturers need to take responsibility for ensuring that their suppliers are reputable, Tang adds. “They need to come up with a carrot and stick and say, ‘Hey, if you continue to produce and ship us good products, we’ll give you a premium.’ But if you find it, then OK, you have to do something, so maybe you hold the payments until the product is safe,” he explains. “You need to give them some incentive so they will not cheat.”

Tang, along with Georgetown University’s Volodymyr Babich, published a paper in the INFORMS journal Manufacturing & Service Operations Management (M&SOM) that looks at how manufacturers might deter foreign suppliers from cutting corners. They studied three mechanisms for dealing with product adulteration: 1) deferred payment, where the buyer pays the supplier after the deferred payment period only if no adulteration has been discovered by the customer; 2) inspection, where the buyer pays the supplier immediately, contingent on product passing the inspection; and 3) a combination of the deferred payment and inspection mechanisms.

What they found is that the inspection mechanism cannot completely deter the suppliers from product adulteration, whereas the deferred payment mechanism can.

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