Hain Food's New Labeling May Prompt
U.S. Shoppers to Demand 'Biotech-Free'

By Scott Kilman, staff reporter of the Wall Street Journal
Copyright 1999 Wall Street Journal
October 7, 1999


Will U.S. shoppers demand that the foods they eat be "biotech-free," the same way they want "fat-free" or "organic" items?

"The more press it gets, the more it will become an issue for consumers," says Andrew Jacobson, a senior executive of Hain Food Group Inc., which recently decided to slap labels on its Little Bear line of natural snacks, assuring consumers that no ingredients come from genetically modified plants.

In the executive corridors of America's premier food and drink companies, no issue is more urgent than whether Mr. Jacobson is right. Although most U.S. consumers aren't aware of it, ingredients made from genetically modified crops are present in various products made by Coca-Cola Co., Kellogg Co., General Mills Inc., H.J. Heinz Co., Hershey Foods Corp., Quaker Oats Co., McDonald's Corp. -- and on and on.

European Uproar

Nothing would please these companies more than for Americans to remain oblivious or indifferent to this fact. But that's hardly likely. Consumer uproar already has prompted the European Union to begin imposing mandatory labeling for some foods that contain genetically modified ingredients, and now British supermarket chains are making biotechnology a competitive issue, advertising their house brands as "GMO-free" (no genetically modified organisms). Regulators in Australia, New Zealand, Japan and Canada are devising strategies for labeling such foods, and many other countries are considering similar actions.

Increasing the likelihood that such concerns will spread to the U.S., the same organizations that incited the GMO consternation in Europe -- among them Greenpeace and Friends of the Earth -- are considering ways to awaken Americans to the issue. Already, the groups's efforts helped push two of the biggest baby-food makers in America, Gerber and Heinz, to try to keep their products free of genetically modified ingredients.

Half of the soybean crop and a third of the corn crop in the U.S. these days contain transplanted genes. Those crops, in turn, are used in countless food products: the syrup for Coke, McDonald's hamburger buns, Heinz ketchup and General Mills' Betty Crocker cake mixes, just to name a few.

What Consumer Benefit?

If pressure builds in the U.S. to label all genetically modified foods, the impact on sales could be chilling. That is because genetically modified products don't offer an obvious benefit to consumers the way "organic" or "diet" products do. At this point, "genetically modified" simply means that the crops processed into ingredients were easier for farmers to grow, because of resistance to bugs, disease and weeds.

On the other hand, if food companies decide to eliminate genetically altered ingredients from their products, farmers harvesting their bumper crops in Iowa this week could one day be left with a bounty nobody wants. Moreover, the grain industry has no system in place for separating conventional crops from their genetically engineered cousins.

Such a backlash also would be a devastating blow to U.S. biotechnology pioneers Monsanto Co. and DuPont Co. The premium prices they are charging farmers for genetically modified seed is only now beginning to help them recoup the billions of dollars they invested in biotechnology research and acquisitions.

Hardly Hysterical

At the moment, Americans are hardly hysterical about the issue. McDonald's, Quaker Oats and Tyson Foods Inc. say only a tiny fraction of the calls they get from U.S. customers are about the genetically modified crops they use to make their products. Hershey says it has received fewer than 25 inquiries about the issue so far this year, a period in which the candy maker handled hundreds of thousands of calls.

But that could change in a flash -- the European backlash developed almost overnight -- and for that reason it is a subject industry executives have little willingness to discuss, for fear that doing so will only generate more press. The list of companies unwilling to make executives available to discuss the matter for this story is long: Coca-Cola,Procter & Gamble Co., Sara Lee Corp., Kellogg, BestFoods, General Mills, and Pillsbury, the Minneapolis food division of Diageo PLC, among others.

The food industry is commissioning surveys to track public sentiment toward biotechnology. Hershey is among several companies checking to see how quickly they could switch their factories from genetically modified ingredients if attitudes soured.

Some companies aren't waiting. "We're very concerned about consumer sentiment," says a spokeswoman at Heinz, which says it "will seek to avoid" genetically modified crops in all its U.S. products. That is easy for the ketchup maker to do with tomatoes, because the company's breeders were skeptical of biotechnology from the beginning and stayed away. But a complete ban at Heinz would hurt millers that supply it with the sweetener used in its ketchup. A lot of that sweetener is made from genetically modified corn.

After a Consumer Reports magazine article last month identified several soyburger brands as containing genetically modified soybeans, Worthington Foods Inc., which makes Morningstar Farms veggie burgers, swore off genetically modified soybeans. Company executives, who believe altered soybeans are perfectly safe to eat, have begun to remove them from some products anyway, figuring many vegetarians don't trust modern food. "This is a technology they don't understand yet," says Ronald L. McDermott, vice president of research and technology at the Worthington, Ohio, company.

Ben & Jerry's Homemade Inc. says it is making sure that the brownies going into its products are made from nongenetically modified soybean flour. It has taken to buying soybean flour from Natural Products Inc., a small Grinnell, Iowa, company that processes unmodified soybeans and that expects its sales to triple next year to about $10 million.

Two of the food companies doing the most to dodge genetically modified ingredients are closely tied to big-name brands. Worthington is being acquired by Kellogg, and Heinz is acquiring a 19.5% stake in Hain Food Group, the Uniondale, N.Y., firm that is putting nonbiotech labels on its organic snacks. To make sure its new labels are correct, Hain is switching the oil it uses in its fryers from corn to safflower, a plant yet to be genetically modified.

Trial Run

Most food executives are keeping their plans under wraps, but a look at Europe offers some insight into how they would respond to a choice between the use of labeling or ditching genetically modified ingredients. American firms that export to Europe are going to great lengths to avoid the mandatory labels there. British McDonald's fast-food restaurants, for example, have sworn off genetically modified ingredients. Likewise, Pillsbury changed the corn it uses to make the chips it sells in Britain.

Just this week, the fear of a public backlash in the U.S., and what it might push food companies to do, prompted Monsanto to swear off a promising area of research. Robert Shapiro, chief executive officer of the St. Louis company, announced Monday that Monsanto won't commercialize the so-called terminator gene, an experimental technique that is controversial because it would make seeds sterile. The terminator gene is designed to prevent a black market in high-priced genetically modified seeds, but rural advocacy groups complained that it would prevent poor farmers from saving seeds to plant the following year.

In another move to defuse public concerns, Mr. Shapiro Wednesday communicated by satellite to a gathering of Greenpeace leaders in London, saying "We're now publicly committed to a dialogue with people and groups who have a stake in this issue."

Seeking More Regulation

How often do companies request increased regulation? It's a measure of the concern of food executives that some are quietly prodding the U.S. Food and Drug Administration to greatly toughen its oversight of altered crops as a way to reassure consumers about the new science.

The FDA decided seven years ago to regard most genetically modified crops as identical to conventional crops, which are considered inherently safe to eat. In the FDA's book, a genetically engineered tomato is just a tomato.

The food-safety agency doesn't require inventors to get its approval or to put special labels on genetically modified food, as long as they use genes that make proteins already in the food supply. The only exceptions are when inventors greatly change a crop's composition by, say, adding a vitamin or introducing a protein known to trigger an allergic reaction in some people.

So far, the biotechnology companies have voluntarily given the FDA their research, mostly data about the composition of their novel crops; some inventions don't even go through animal-feeding trials.

Some of the science around genetically modified foods is in dispute.

Critics, without the support of much research, say these foods pose risks both to humans and the environment. Proponents, without the support of much independent research, say that tinkering with the genes of plants not only doesn't hurt people, it has the potential to enhance their health. In the future, food scientists envision growing crops that have been modified to help the human body combat cancer and other diseases.

Science vs. Marketing

But science could become less relevant than marketing. In Europe, big grocery chains such as J. Sainsbury PLC are touting their house brands as free of genetically modified ingredients. Store brands in England already account for a much larger percentage of sales than in America, and the groceries see the GMO issue as a way to boost sales even further.

But Nestle SA, the Swiss food giant, is complying with the labeling law in Europe, informing buyers which of its products contain genetically modified ingredients. Nestle says it is seeing "surprisingly little reaction to the labels in terms of sales figures."

Support for labeling appears to be growing in the U.S. Agriculture Secretary Dan Glickman is encouraging companies to voluntarily label their products. The pro-biotech Rockefeller Foundation, which finances agricultural research, issued a statement saying, "Consumers have a right to choose whether to eat GM foods or not." A Gallup Organization poll released this week of 1,039 adults found 68% want labels disclosing genetically modified ingredients, even if it means a higher price for foods.

"In a democracy, people want to feel like they have a choice," says Thomas J. Hoban, a North Carolina State University sociology professor who tracks attitudes about crop biotechnology.

No food company stands to benefit more from biotechnology than ConAgra Inc., the giant Omaha, Neb., conglomerate that does everything from sell seed to farmers to make dozens of brand products such as Wesson cooking oil and Healthy Choice microwavable dinners. ConAgra scientists have looked at plans to genetically engineer crops to do things such as make a healthier cooking oil, for example, or a high-potency sports bar.

But the company's official position on crop biotechnology is neutrality. "This is a marketing question only," says Bruce Rohde, ConAgra's chief executive officer, one of the few food executives willing to talk about genetic engineering and food. "I'm open-minded about biotechnology. But right now, the public certainly isn't clamoring for it."


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