Many consumers and food distributors, including Whole Foods Market (NASDAQ:WFM) and WhiteWave Foods (NYSE:WWAV), have called on politicians and the food industry to label food products containing ingredients produced from genetically modified organisms, or GMOs. Despite the mountains of scientific evidence and the consensus among mainstream scientists that GMOs are just as safe as traditionally produced foods, a loud minority insists there are -- or could be -- health and environmental risks. Besides, why should genetic engineering have any place in the food system when sustainable and environmentally friendly organic foods are available for purchase?
Well, perhaps you should familiarize yourself with an important label: the U.S. Department of Agriculture Organic Seal.
As it turns out, the institution clings to a rather contradictory definition for organic foods. While it will be much easier to do nothing and maintain the current definition, a tidal wave of food products and ingredients enabled by recent advances in our ability to intentionally and rationally design biology will make inaction increasingly difficult. There are two potential solutions. The first is to allow specific genetically engineered organisms into the organic definition, which is unlikely in the near term. The second is for consumers and food distributors such as Whole Foods Market and WhiteWave Foods to realize that organic foods are far from the only way to protect the environment. They will inevitably be forced to choose between two divergent marketing strategies:
- Saying their foods are environmentally friendly.
- Saying their foods are organic.
And they can only choose one. Good luck.
The USDA defines organic word for word as the following three sentences:
Organic is a labeling term that indicates that the food or other agricultural product has been produced through approved methods. These methods integrate cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used.
Do you see it? The middle sentence and last sentence are blatantly at odds with each other. Production practices that "foster cycling of resources, promote ecological balance, and conserve biodiversity" don't necessarily exclude genetic engineering. And no, I'm not talking about biotech crops -- feel free to leave them out of the organic definition and continue to direct your anger at seed and pesticide companies.
I'm talking about food products created with "biology" that enhance the "cycling of resources, promote ecological balance, and conserve biodiversity" even more so than organic farming practices. Some may be more wholesome, too, which, as you can imagine, presents a major problem for the marketing machines and business models of Whole Foods Market and WhiteWave Foods.
Whole Foods, big problem
Investors pinning their hopes to the long-term growth of Whole Foods Market have stomached a 30% stock-price drop in the past year. Let's be honest, most of the fall can be chalked up to short-term, knee-jerk reactions. Whole Foods Market still wallops the competition when it comes to monetizing every square foot of its stores. Store expansion will inevitably push both the top and bottom lines higher, even if increased organic food offerings from competitors squeeze margins.
A potential longer-term problem arises when you consider that consumers looking for environmentally friendly food may soon be able to look beyond the organic food industry altogether. After all, the current USDA definition is immediately challenged by the growing field of synthetic biology, which will soon produce the exact same -- or enhanced -- food ingredients without the need for inefficient, land-hogging agricultural production systems. What better promotes resource cycling and biodiversity than reducing the number of farms?
Streamlined industrial fermentation processes powered by biology (similar to brewing) will yield food ingredients such as cocoa, vanilla flavoring, milk, sugar, and more in several weeks' time -- making the phrase "annual harvest" a relic of the past. How? Time, land, and energy will be saved by reducing the complexity of the biological production systems (plants and cows). The same building blocks of life-powering plants and cows will be transferred to microorganisms with the sole purpose of creating the products we want. Think about it: Yeast and bacteria don't need to exert energy (or a minimal amount at most) to power a brain, moderate body temperature, maintain an immune system, grow limbs and stems, or a host of other functions that aren't directly related to the food ingredient you crave.
Better yet, there will be no need for pesticides, massive quantities of water, or petroleum fuels to power tractors. Imagine that.
What's the solution?
The USDA Organic Seal promotes sustainable and ecologically beneficial production practices, but prohibits uses of genetic engineering that do the same. It may not be that unrealistic to expect an amendment to that definition in the long term, although it's much more realistic to expect a shift in marketing strategies for Whole Foods Market and WhiteWave Foods in the short term. You may think it's impossible today, but selling responsibly produced GMOs may be one of the best business decisions either company can make for investors, consumers, and the environment.
Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their nondividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.
John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Check out his personal portfolio, CAPS page, previous writing for The Motley Fool, or his work for SynBioBeta to keep up with developments in the synthetic biology industry.
Maxx Chatsko has no position in any stocks mentioned. The Motley Fool recommends WhiteWave Foods and Whole Foods Market. The Motley Fool owns shares of WhiteWave Foods 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.