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Food Safety Innovation in the United States: Evidence from
the Meat Industry
Elise Golan, Tanya Roberts, Elisabete Salay, Julie
Caswell, Michael Ollinger, and Danna Moore
Agricultural Economic Report No. (AER-831), April 2004
Innovations in food safety help lower the cost of safe food.
While market incentives for food safety innovation are relatively
weak, some restaurant chains and large retailers are encouraging
processors to overcome these challenges. These large, savvy
meat and poultry buyers are setting and enforcing safety standards
and creating markets for food safety. As a result, food safety
investments are increasing throughout the meat supply chain.
Food Safety Innovation: Evidence from the U. S. Meat Industry,
is ERS’ first report on food safety innovation.
What Is the Issue?
The ability to control and exploit the benefits drives the
private market for innovation, according to economic theory.
Unfortunately, improved food safety is a difficult attribute
to sell to consumers; and companies have been reluctant to invest
in food safety innovations. Food safety is largely a credence
attribute, meaning that consumers cannot evaluate the existence
or quality of the attribute before purchase, or even after they
have consumed the food. Consumers cannot usually determine whether
a food was produced with the best or worst safety procedures,
or whether a food poses a health risk. For example, consumers
cannot detect by sight, smell, or price whether raw chicken
is contaminated with Salmonella.
Despite these market hurdles, food safety innovations have
occurred in the last decade. Industry has developed new pathogen
tests, high-tech equipment, and supply-chain management systems
to control foodborne pathogens.
How Was the Study Conducted?
To investigate the drivers for food safety innovations, ERS
researchers examined the theoretical literature, surveyed the
meat industry, and conducted two case studies of successful
food safety innovations in the beef industry. Three research
methods were used. The theoretical literature of innovation
was explored to discover the drivers for innovation in the private
marketplace.
The case study method was used to collect detailed data to
understand the steps in the innovation process, the collaborations
that made it possible, and the market and food safety impact
of the two innovations. One innovation was a high-tech piece
of equipment, the Beef Steam Pasteurization System. The second
innovation was a management system for producing safer hamburger
patties, the Bacterial Pathogen Sampling and Testing Program.
ERS’ survey of meat and poultry plants was the first
national survey to ask explicitly about changes in food safety
investments. In five broad categories, 40 questions asked about
changes in investments in food safety technologies and practices.
What Are the Major Findings?
Food safety innovations have increased, largely because of
the stringent standards for pathogen control demanded by large
meat and poultry buyers like Jack in the Box and many foreign
buyers. These companies are referred to as “channel captains”—savvy
buyers who monitor food safety up and down their supply chain.
These channel captains offer meat and poultry processors contracts
that allow payment of their investments in new food safety technologies.
ERS’ national survey confirmed that in the beef industry,
domestic buyer specifications and exports correlate with higher
levels of investment in food safety technologies and practices.
Thus channel captains were significant motivators of food safety
investment in the beef industry.
In the first case study, Jack in the Box cancelled all its
contracts with hamburger patty suppliers after an outbreak in
1993 of E. coli O157:H7. One of the two companies that agreed
to meet the more stringent testing and other food safety requirements
was Texas American Food Service Corporation. Texas American
worked with Jack in the Box to develop a superior food safety
control program with strict temperature control and rigorous
product testing. Texas American, in fact, collaborated with
Qualicon, a food safety business of the DuPont company, to fine-tune
a more sensitive and accurate test for E. coli O157:H7 in hamburger.
Texas American benefited from its food safety investments by
moving from the spot market to contracts for their hamburger
patties, permitting better capacity utilization and reduced
product spoilage.
In the second case study, the invention and commercialization
of Frigoscandia Equipment’s beef carcass steam pasteurization
system illustrates the ripple effect that the emergence of food
safety markets can have on the entire supply chain—all
the way down to equipment manufacturers. Frigoscandia Equipment
partnered with Excel, the second largest U.S. beef packing company
to assure commercial viability. When microbiologists at Kansas
State University studied various interventions to reduce pathogens
on the surface of freshly slaughtered beef, they found Frigoscandia
Equipment’s innovation to be superior to the other methods
tested. By 1997, both the largest and second largest beef packing
companies had ordered the equipment for all their beef slaughter
plants.
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