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 The hurdles are so high that the growing "GMO-free" trend could
result in a price spike for consumers, industry experts say.
Eighteen years after GMO crops were introduced to help farmers fight
weeds and bugs, they are so pervasive in the supply chain that
securing large and reliable supplies of non-GMO ingredients is
nearly impossible in some cases.
Just ask General Mills <GIS.N>.
As one of the world's largest makers of consumer food products, the
Minneapolis-based company has hefty buying power in the marketplace
for corn, soy, sugar, oats, and other commodities needed for its
packaged food products.
But when the company announced last month that its 70-year-old
"yellow box" Cheerios would be made free of genetically modified
ingredients, the effort capped more than a year spent tracking down
ingredients that have undergone no genetic modification. Cheerios is
primarily made with oats, for which there are no GMO varieties. But
even securing small amounts of non-GMO corn and sugar used to
sweeten the cereal was a challenge, officials said.
General Mills said it spent millions of dollars installing new
equipment for processing non-GMO ingredients and setting up distinct
transportation and handling facilities to keep non-GMO supplies from
mixing with biotech supplies.
General Mills is not raising prices for its non-GMO Cheerios right
now. But the company sees labeling the cereal as free of ingredients
that many consumers associate with health or environmental risks as
helping gain market share.
The change came after outside pressure from activist groups who
oppose biotech crops. But Tom Forsythe, General Mills' global
communication executive who met with the critics about their
concerns, said the company's decision was an independent one.
"We did it because we think consumers may embrace it," said
Forsythe. "But it is a sizeable investment. And it wasn't as easy as
people think. It would be difficult, if not impossible, to do the
same with our other products."
NON-GMO SURGE
General Mills is only the latest of many food companies making the
shift. Post Foods said last month that it was altering ingredient
sourcing for its Grape-Nuts cereal. Companies making baby foods,
baked goods, frozen dinners and pet food are among those offering
non-GMO versions.
"A lot of food manufacturers are looking at switching over to non-GMO.
The demand is out there," said Aaron Skyberg, director of SK Food
International, a North Dakota-based bulk ingredient supplier to U.S.
and foreign food companies. "But it is a huge learning curve for
them."
There is no federal standard for non-GMO labeling, so many
companies, like Post, are signing up for a third-party verification
program known as the Non-GMO Project.
The Non-GMO Project, started by natural and organic food retailers
in 2007 in Bellingham, Washington, grants manufacturers a license to
use a seal signifying their products have been audited to assure
that they contain no more than 0.9 percent GMO.
The number of such non-GMO "verified" products surged to 14,800 in
2013, up from 4,000 in 2011, and 1,000 more products are in the
verification pipeline, according to the Non-GMO Project Executive
Director Megan Westgate. Sales last year of verified products hit $5
billion, up from $1.7 billion in 2011, she said.
"We get about 80 new companies enrollment inquiries every week.
People want non-GMO," Westgate said.
A key catalyst for the growth, Westgate said, was grocer Whole Foods
Market <WFM.O>. The eighth largest U.S. food and drug store said
last year that food sold in its North American stores must contain
labeling about GMO content by 2018.
Another push came when Chipotle Mexican Grill Inc <CMG.N>, said last
year that it was switching to non-GMO ingredients in its chain of
1,550 restaurants.
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PRICE SPIKE AHEAD?
More than 90 percent of the corn and soybeans now grown in the
United States are GMO strains. This means the pipelines for
harvesting, storing, transporting, mixing and purchasing the
commodities are awash in the biotech supplies.
To supply conventional crops, farmers must plant non-GMO seeds,
prevent pollen or other contaminants from drifting in from
neighboring fields, and store and transport the grain separately
from GMO crops. The separation must be maintained all the way to the
finished product.
Partly because of the pipeline headaches, non-GMOs typically come at
premium prices. Non-GMO corn, a key ingredient in many packaged
foods, is especially scarce because virtually all corn in the United
States likely has at least some slight contamination, experts say.
"All the non-GMO seed we sell has some level of GMO in it," said Mac
Ehrhardt, president of the Minnesota-based Albert Lea Seed company.
"Corn is a big problem. It is really really difficult to produce
seed corn that would meet the current non-GMO verified label."
Indeed, even as General Mills labels its Cheerios as "not made with
genetically modified ingredients," it adds a disclaimer that "trace
amounts" of genetically modified material "may be present." The
company would not say how much GMO it allows in the corn and sugar
for its non-GMO Cheerios.
The difficulty of supplying large quantities of non-GMO commodities
is such an urgent problem that in December three dozen
representatives of grain and food groups formed the "Non-GMO Working
Group" to try to expand the non-GMO commodity supply chain.
"If you want to secure your supply of non-GMO corn or corn syrup,
you really need to be contracting ... lock in your supply," said
Russ Gaskin, a consultant to the working group.
The supply crunch spells a likely spike in prices for consumers,
Gaskin said.
Chipotle officials have already said they are planning to pass along
the higher costs they are seeing when switching from GMO soy oil to
non-GMO sunflower and rice bran oil by midyear.
The market moves have caught the eye of some investors. One, San
Francisco-based Equilibrium Capital Group, is looking at investment
opportunities in grain storage, transportation and converting
farmland to non-GMO crop production.
"There are significant infrastructure issues, but there is real
demand," said Equilibrium principal Rob Hurlbut, a former food
industry executive.
As the supply chain seeks its own solutions, many say the federal
government must set a national standard to apply evenly across state
lines and products. Companies like General Mills say a federal
standard would level the playing field and provide consistent
expectations for consumers.
"We need a national solution," said General Mills' Forsythe.
(Reporting by Carey Gillam in Kansas
City; additional reporting by Lisa Baertlein in Los Angeles; editing
by David Greising, Christine Stebbins and Jonathan Oatis)
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