Vietnam’s cooking oil crisis: a £250m food fraud scam

We hear of food fraud scandals from time to time, often from commentators like myself. Here’s another one that is probably new to many readers but is on a level in terms of breadth and severity that surprises even me.

Vietnam is currently coming to terms with a scandal of truly unprecedented scale.  Many thousands of tonnes of livestock‑grade vegetable oil, intended for animal feed, have been found to have been repackaged and sold as edible cooking oil into the markets. The fraud is centred around a local brand known as O‑Food, which is owned by a medium sized Vietnamese company, but the fraud itself was very large in scale and involved a highly organised criminal network. The authorities have estimated that tens of thousands of tonnes were sold over a three-year period, netting the company over 8 trillion Vietnamese dollars (approximately £250 million) in illicit revenue.  Using shell companies they forged large amounts of documentation to hide their criminal activities, which involved the purchase of crude animal oil that they moved through a series of underground pipes and pumped directly into containers labelled ‘cooking oil’. The rogue traders also added a further spurious claim to the labels – that it was Vitamin-A enriched.

How Vietnam’s cooking oil scam exploited loopholes in law and supply chains

The big fraud opportunity that had been identified by the criminals was the price difference between feed-grade and edible oil and realising they could sell the repackaged product at a 17 percent premium. They could also avoid paying VAT on what they had bought, as animal-feed oil is tax-exempt. 

The company sold their fake oil through a wide range of channels; industrial buyers, food service companies and local producers of a range of snacks that are often consumed by children. The Ministry of Health in Vietnam alerted many businesses and consumers of the potential public health risks from consuming the fake products. Its warnings range from “possibly containing toxins, impurities and chemicals not safe for humans” to “long-term consumption can cause poisoning, organ damage and increased risk for chronic diseases.” 

The huge concerns and high levels of anger expressed by many Vietnamese consumers is far from surprising – it’s considered a national scandal. In an effort to reassure the public the Ministry of Industry and Trade has launched large-scale inspections of all cooking‑oil manufacturers across the country. For some, this is too little, too late and the loss of trust in the government will take a long time to repair. Such is always the case after a major food fraud incident given the possibility that this is just the tip of a very ugly iceberg and other serious shortcomings may be found when the national food system is analysed more rigorously.

Could fake cooking oil threaten international supply chains?

While the crude feed-grade oil was imported and the companies that were responsible are under investigation, there is currently no evidence suggesting that any of the fake cooking oil was exported. However, if one criminal network can set up such a complex operation and evade detection of their activities for years, it begs the question of what else might be going on that does involve exports? If I was a buyer of any food commodity or ingredient from Vietnam, I would be giving this question serious consideration.