In The Know

Impact of Non-GMO Trend in the U.S. Market – June 22, 2016

The public’s growing awareness of genetically modified (GM) ingredients may be placing food and beverage manufacturers in a tough position. According to survey conducted in 2014 by Pew Research Center, approximately 57 percent of Americans believe it is “unsafe to eat genetically modified food.” At the same time, many economically significant crops In the U.S., notably corn, soybean, and sugar beets, are largely or almost exclusively grown from biotech seed.

Although little scientific evidence supports the belief that consumption of products derived from genetically modified organisms (GMO) is less healthful, this has not lessened consumer uncertainty or interest in this topic. The issue is so ubiquitous that even late-night host Jimmy Kimmel took it up, interviewing people on the street to reveal their knowledge in this matter—or the lack thereof.

Percentage of Biotech Corn & Soybean Plantings in the U.S.Percentage of Biotech Corn & Soybean Plantings in the U.S.

Source: USDA

Federal, state, and local governments appear almost as uncertain about how to handle this issue. According to Euromonitor, surveys have found that 90 percent of U.S. consumers would prefer GM products to be clearly labeled. Vermont is the first state that will require labeling of products with GM ingredients; laws passed in other states would go into effect only if trigger conditions are met. Vermont’s labeling law will go into effect on July 1. Multiple states have labeling laws on the books—Alaska for example, is requiring labeling of GM salmon—and dozens of other states are contemplating such laws.

Among food manufacturers, General Mills and Campbell’s have stated their support for a federal labeling law, thus avoiding the confusion that might stem from competing state laws. Both companies, as well as Kellogg’s and Mars, have announced that they will voluntarily begin labeling their products for GMOs. Many companies argue that state-level labeling laws are too costly and cumbersome, as distribution systems are not set up to ship products to a particular state and would significantly drive up consumer costs.

Labeling aside, how is the food and beverage industry adapting to the non-GMO trend? Manufacturer response has varied widely; many producers already using non-GM ingredients have begun to trumpet that fact. Mintel reported that nearly 16 percent of new U.S. food and beverage products made non-GMO claims last year compared to less than 3 percent just four years ago. However, other companies more heavily reliant on GM ingredients will have to make a more complex and careful cost-benefit analysis. Switching their ingredients from GM sources will undoubtedly increase their costs, while there are no guarantees that sales will benefit appreciably from the switch to non-GM. Companies will have to assess whether consumers are willing to pay a premium to offset their higher costs.

The non-GMO trend is proving to be a challenge because—contrary to other trends such as gluten free—it is driven by a strong consumer fear of the unknown. Companies are facing numerous questions such as: Will the trend continue? What could be the impact on demand? Will not labeling be a disadvantage? Are people reading labels? Where can you source ingredients? Would there be enough supply? Manufacturers know that making the wrong decision could prove to be very costly.

Contact us at inquire@mckeany-flavell, or through your McKeany-Flavell account representative for more information.