The One and Only GMO-Free Cheerios

General Mills has just announced that its flagship cereal, Cheerios, will no longer use genetically modified ingredients. It's an unprecedented move which could have industrywide implications.

Jan 5, 2014 at 7:00AM

For years there has been a debate raging around the use of genetically modified organisms in consumer products. GMOs are plants and animals "whose cells have been inserted with a gene from an unrelated species in order to take on specific characteristics."

The most common GMOs include corn, canola, soybean, and cotton; all of which are genetically engineered to develop a resistance against insects or to increase nutrient content.

GMOs have been a part of our food for the past 20 years, and even though three government agencies -- The U.S. Food and Drug Administration, U.S. Department of Agriculture, and U.S. Environmental Protection Agency -- all regulate GMO safety, there are some critics.

These critics say that there are potential health and environmental concerns linked to the use of GMOs. GMO critics claim genetically engineering a food can affect its nutritional value and create allergens or toxins within the food, claims which have been disputed by federal regulators. Nevertheless, major companies are taking notice of the growing outcry for GMO-free products.

Two of the leaders in the organic-food industry, Chipotle Mexican Grill (NYSE:CMG) and Whole Foods Market (NASDAQ:WFM), have both taken action. Chipotle has committed to removing GMO ingredients from its menu, while Whole Foods said by 2018 it will label all GMO products at its U.S. and Canadian stores.

And now there is yet another chapter in the GMO saga.

The one and only GMO-free Cheerios
In a Thursday night blog post, General Mills (NYSE:GIS) announced that it has stopped using GMOs in its flagship Cheerios cereal as a result of growing opposition to the use of such products.

General Mills said the decision was not driven by the safety concerns surrounding GMOs; merely that the company saw the move as a potential opportunity to firm up customer loyalty. Tom Forsythe, vice president of global communications for General Mills, said this in the blog post regarding the company's motive:

"It's not about safety. Biotech seeds, also known as genetically modified seeds, have been approved by global food safety agencies and widely used by farmers in global food crops for almost 20 years. And it was never about pressure. In fact, this change is not much of a change at all."

What is rather ironic is that General Mills, which makes products ranging from Betty Crocker dessert mixes to Yoplait yogurt, still plans to utilize GMOs in all of its other products, including different variations of Cheerios.

Even more shocking is that General Mills was among several other companies, including Monsanto (NYSE:MON) and DuPont (NYSE:DD), to contribute to a $22 million fund which was used to campaign against a Washington state ballot measure that would have required the labeling of foods containing genetically modified crops. In the end, this measure did not win approval.

Who are the winners and losers of a GMO-free world?
GMO Inside, a campaign that advocates GMO labeling, says that Cheerios is the first major brand of packaged food in the U.S. to make the switch to being GMO-free. Yet in some countries outside of the U.S., especially in Europe, GMOs are already banned.

However, a totally GMO-free America is simply out of reach present day. Kashi, a leading GMO-free cereal and snack brand, says on its website that only 1% of U.S. cropland is organic and around 70% of packaged foods contain GMOs.

Switching over completely to GMO-free products would require a lengthy and expensive process, which most companies are simply not willing to voluntarily undergo.

Additionally, there are still no government studies which indicate that GMOs pose any health or environmental threats. Nevertheless, the anti-GMO cause is expanding rapidly, and with no indication that this expansion is coming to an end, more and more food and beverage companies are likely to at the very least label GMO products as such.

This is not great news for Monsanto and DuPont, both of which have sizable stakes in the GMO market. In 2013, 69.5% of Monsanto's $14.9 billion in revenue was generated from its seeds and genomics segment, while in 2012 29.3% of DuPont's $35.4 billion in revenue was generated from its agro-science segment.

My Foolish conclusion
Despite the growing objections to the use of them, GMOs are the future of food. With a burgeoning global population and a lack of productive farmland, GMOs provide solutions to many of the problems caused by these circumstances.

Some companies may use the anti-GMO wave to strengthen customer loyalty, much like General Mills has with its Cheerios move, but in the end the GMO-free market is going to be small and niche-like.  

For Monsanto and DuPont, there is nothing to fear, as turning away from GMOs in the United States is simply not a plausible reality for many, many years. 

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John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Whole Foods Market. The Motley Fool owns shares of Chipotle Mexican Grill and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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