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 Italian confectionery firm Ferrero has taken a public stand in
defense of an ingredient that some other food companies in the
country are boycotting. It has launched an advertising campaign to
assure the public about the safety of Nutella, its flagship product
which makes up about a fifth of its sales.
The hazelnut and chocolate spread, one of Italy's best-known food
brands and a popular breakfast treat for children, relies on palm
oil for its smooth texture and shelf life. Other substitutes, such
as sunflower oil, would change its character, according to Ferrero.
"Making Nutella without palm oil would produce an inferior
substitute for the real product, it would be a step backward,"
Ferrero's purchasing manager Vincenzo Tapella told Reuters. He
features in a TV commercial aired in Italy over the past three
months that has drawn criticism from some politicians.
Any move away from palm oil would also have economic implications as
it is the cheapest vegetable oil, costing around $800 a ton,
compared with $845 for sunflower oil and $920 for rapeseed oil,
another possible substitute.
Ferrero uses about 185,000 tonnes of palm oil a year, so replacing
it with those substitutes could cost the firm an extra $8-22 million
annually, at those prices. The company declined to comment on these
calculations.
The European Food Safety Authority (EFSA) said in May that palm oil
generated more of a potentially carcinogenic contaminant than other
vegetable oils when refined at temperatures above 200 degrees
Celsius. It did not, however, recommend consumers stop eating it and
said further study was needed to assess the level of risk.
The detailed research into the contaminant - known as GE - was
commissioned by the European Commission in 2014 after an EFSA study
the year before, into substances generated during industrial
refining, identified it as being potentially harmful.
EFSA does not have the power to make regulations, though the issue
is under review by the European Commission. The spokesman for Health
and Food Safety, Enrico Brivio, said guidance would be issued by the
end of this year. Measures could include regulations to limit the
level of GE in food products, but there will not be a ban on the use
of palm oil, he added.
The World Health Organization and the U.N. Food and Agriculture
Organization flagged the same potential risk that EFSA had warned of
regarding GE, but did not recommend consumers stop eating palm oil.
The U.S. Food and Drug Administration also has not banned the use of
palm oil in food.
The issue became a hot consumer topic in Italy after the largest
supermarket chain, Coop, boycotted palm oil in all its own-brand
products following the EFSA study, describing the move as a
"precaution". Italy's biggest baker, Barilla, also eliminated it and
put "palm oil-free" labels on its wares.
The retailers' decisions followed pressure from activists, including
Italy's main farming association Coldiretti and online food magazine
Il Fatto Alimentare, which called on all food firms to stop using
palm oil.
High temperatures are used to remove palm oil's natural red color
and neutralize its smell, but Ferrero says it uses an industrial
process that combines a temperature of just below 200C and extremely
low pressure to minimize contaminants.
The process takes longer and costs 20 percent more than
high-temperature refining, Ferrero told Reuters. But it said this
had allowed it to bring GE levels so low that scientific instruments
find it hard to trace the chemical.
"The palm oil used by Ferrero is safe because it comes from freshly
squeezed fruits and is processed at controlled temperatures,"
Tapella says in the TV ad, which was filmed at the firm's factory in
the northern town of Alba and was accompanied by full-page ads in
newspapers carrying the same message.
EFSA declined to comment on the possible risks of refining palm oil
at lower temperatures.
ITALIAN SALES HIT
Ferrero is by no means the only big European food firm to keep using
palm oil in its products since the EFSA report. The likes of
Unilever and Nestle use it in products including chocolate, snacks
and margarine.
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The two companies said they were monitoring the contaminant issue
and were working with their suppliers to keep GE at lowest possible
levels.
Ferrero is the only big European food company to mount such a public
defense of the use of the ingredient in its products following the
EFSA opinion.
The company told Reuters it carried out "hundreds of thousands of
tests" on contaminants in both the palm oil it uses and finished
products.
Retail sales of Nutella in Italy fell by about 3 percent in the 12
months to the end of August, which Ferrero partly blamed on rivals
promoting products as palm oil-free.
To address consumer concern the company launched its advertising
campaign in September and says it is now showing results.
Nutella sales in Italy rose 4 percent in the last four months of
2016, said Alessandro D'Este, the head of Ferrero's Italy business.
Global Nutella sales have been unaffected by the EFSA opinion and
are growing at 5-6 percent annually, the company said. Family owned
Ferrero, which is not publicly listed, did not disclose its sales
for Europe outside its home market.
The group ended its fiscal year to August with total revenue of 10
billion euros ($10.5 billion), of which around 2 billion euros came
from Nutella sales.
ENVIRONMENT CONCERNS
EFSA's 284-page study comes on top of environmental concerns that
have dogged the palm oil industry for several years. Green groups
have accused the industry of causing deforestation.
Several firms using the ingredient, including Ferrero, say they buy
palm oil certified by the Roundtable on Sustainable Palm Oil, which
works with producers to reduce the negative impacts of cultivation
on the environment.
Tapella told Reuters that Nutella had contained palm oil since its
creation in the 1960s and that the group relied only on palm
plantations certified as sustainable.
Ferrero's advertising campaign has drawn some political fire.
The anti-establishment 5-Star Movement, which is running
neck-and-neck with the ruling Democratic Party in opinion polls, has
asked the Italian advertising authority to block Ferrero's campaign
and fine it for misleading consumers on both health and
environmental risks.
A spokeswoman for the advertising authority said it had yet to
decide whether to reject the 5-Star complaint or take measures
against Ferrero, adding that the process could take several more
weeks.
The palm oil industry, dominated by producers in Malaysia and
Indonesia, believes Ferrero is playing an important role in
addressing what it regards as misconceptions among consumers.
"It is good that Ferrero has clarified that the palm oil they use is
safe and sustainable," said Yusof Basiron, chief executive of the
Malaysian Palm Oil Council.
He said Malaysian producers had not suffered any impact on their
European exports after the EFSA opinion. The Indonesian Palm Oil
Association also said there had been no impact.
(Additional reporting by Emily Chow in Kuala Lumpur, Paul Sandle in
London and Silke Koltrowitz in Zurich; Editing by Mark Bendeich and
Pravin Char)
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