Do General Mills' Cheerios Sales Suggest GMO-Free Foods Are Doomed to Fail?

You could almost read the disdain dripping from the lips of General Mills (NYSE: GIS  ) CEO Ken Powell over the failure of his GMO-free Cheerios cereal to "move the needle" on sales. Having given in to pressure applied by the activist group Green America to eliminate genetically modified ingredients from the popular brand, Powell said, in a phone interview with the AP, that there was no discernible boost in sales, they may even have fallen slightly, and it was "what I expected." Moreover, he said, most customers don't even care about the GMO issue.

Because the main ingredient in the cereal is oats, which are already GMO-free, the changes General Mills had to make were in sourcing GMO-free sugar and corn starch. More than half of the U.S. sugar supply comes from sugar beets, 95% of which is grown from Monsanto's GM stock, and 86% of all corn grown in the U.S. is from lab-altered seed as well, so it's not surprising that General Mills says it took more than a year to find replacements for the ingredients in Cheerios.

Yet considering the cereal maker has seemingly since only given grudging support to the initiative, it's also not surprising the results are what they are. While there was a lot of fanfare over the non-GMO claim initially, the cereal maker has done little since to market that fact. It slapped a note on the side of the box that says Cheerios are not made with genetically modified ingredients, but immediately undermined it with an asterisk that says that it still might have some GM contaminants in it because of "cross contact" in manufacturing and shipping. And General Mills also refuses to have any independent, third-party organization certify the cereal is GMO-free.

So consumers may still be leery about buying into the cereal giant's claims, because, as President Ronald Reagan once said, "Trust but verify."

Source: Post Holdings.

Thus, compare Cheerios' packaging to that of Post Holdings (NYSE: POST  )  Original Grape-Nuts, which also got a lot of media play for its announcement that it was GMO-free. First, right on the front of the box the cereal maker displays the Non-GMO Project seal, confirming at once that no lab-altered ingredients are used, that its suppliers are GMO-free as well, and they've been independently verified as such. It will be interesting to see whether prominently touting the clean supply chain "moves the needle" for Post Holdings when it next reports earnings.

Whereas Powell reiterated that General Mills has no intention of reformulating any of its other brands, other companies are embracing non-GMO food products. Boulder Brands, for example, announced earlier this month it was converting its Smart Balance buttery spreads to being GMO-free and was exploring ways to make its entire line of products free from such ingredients, while Kellogg says its two biggest Kashi products will be verified by the Non-GMO Project by the end of the year and that all the new foods introduced under the Kashi brand next year will be similarly certified. They'll also be at least 70% organic.

So in essence one can say General Mills set up its experiment to fail. With no belief in the move's importance to customers, a grudging commitment to comply, and marketing that is halfhearted at best -- strange, considering its other high-profile promotional efforts for causes that arouse much more controversy -- it's not surprising the cereal maker hasn't seen the needle move.

But General Mills' failure is not the failure of the GMO-free campaign, and we'll likely continue seeing more food producers excluding ingredients that are increasingly viewed as suspect. Consumer support, not disdain, will be the watchwords for food manufacturers going forward.

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  • Report this Comment On March 22, 2014, at 6:16 PM, lannit wrote:

    Sales of non-GMO Original Cheerios haven't gone up for several reasons. First, it's too soon to tell if the needle moved. The boycott targeting GMO Cheerios left a lot of unsold stock in supermarkets, so until that goes away many stores won't have the non-GMO version on their shelves. Second, savvy consumers don't trust General Mills, so when the non-GMO version came out lacking third party non-GMO verification, people boycotting GMO Cheerios specifically were unlikely start buying the "non-GMO" version. Products with the Non-GMO Verified label can still be contaminated with pesticide residues, and it's recently come to light that many non-GMO crops like oats, wheat and others are routinely sprayed with Roundup and other herbicides used as a desiccant to kill and dry out the crop in order to make harvesting easier. Third, since General Mills and many other food manufacturers contributed millions to defeat mandatory labeling laws in CA, WA and elsewhere, there are continuing national boycotts of *all* of General Mills products and brands, even its organic brands like Cascadian Farm, Muir Glen, and Larabar. These boycotts were started in CA by consumers irate that the defeat of Proposition 37 was fueled by major food company contributions. This boycott went nationwide when consumers learned that General Mills and 33 other companies were caught last fall trying to hide illegal contributions to defeat the I-522 GMO labeling law in WA. And finally, since a growing proportion of consumers are trying to avoid foods with GMO ingredients, they won't return to buy a single non-GMO offering like non-GMO Cheerios when General Mills uses GMO ingredients extensively in *all* of its other Cheerios cereals and other products. In essence, the non-GMO Orginal Cheerios announcement backfired by alerting a whole new segment of American consumers to the presence of GMO ingredients in General Mills cereals and other products. Consequently, these consumers are now avoiding not only the Cheerios brand, but the General Mills brand as well. This new wave of concern about GMO ingredients in General Mills food products is also spreading quickly to other brands. Doubt this analysis? Check out the declining sales of General Mills cereals and other products. The same thing is happening to sales at Kellogg's, Pepsico, Coca-Cola and many other companies continuing to utilize GMO ingredients and funding efforts to defeat mandatory GMO labeling laws.

  • Report this Comment On March 22, 2014, at 9:10 PM, PEStudent wrote:

    "This new wave of concern about GMO ingredients in General Mills food products is also spreading quickly to other brands. Doubt this analysis? Check out the declining sales of General Mills cereals and other products."

    General Mills annual sales are up 7% this year. 2013's earnings were $2.69, are projected to be $2.88 (up 7.0%) in 2014, and a expected to be $3.10 (up 7.6%) in 2015.

    There's no "wave" of concern for genetically modified foods. The proteins, etc. are broken up by the body during digestion and are as natural as anything else. And yes, I have two degrees in Chemistry.

  • Report this Comment On March 23, 2014, at 3:28 PM, lannit wrote:

    Most readers realize that this is issue pertaining to U.S. sales, not global sales (where many General Mills food products don't contain GMO ingredients at all, as throughout Europe, where sales are brisk).

    "[For the third quarter] General Mills said U.S. retail sales declined 2% to $2.62 billion, compared with a 2% rise in international revenue to $1.32 billion":

    It wasn't the weather that dented sales...people stock up on food when bad weather threatens, not buy less of it. In reality, it was more consumers avoiding General Mills' GMO food products and national boycotts of General Mills brands, strong consumer trends that General Mills is unwilling or unable to acknowledge. Kellogg's has the same why Kashi is dead as a brand...and check its current U.S. sales figures...

    And by the way, in 2013 over half of U.S. consumers expressed concern about GMO food ingredients, up from 43% in 2002:

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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

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