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How Will GMO Labeling Hurt Beverage Companies?

By Motley Fool Staff – Jul 26, 2016 at 3:00PM

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New legislation in Vermont already has Coca-Cola scrambling to find solutions.

You may be surprised to learn that Coca-Cola (KO 0.10%) and PepsiCo (PEP -0.52%) spend millions of dollars each year to lobby against the identification of genetically modified ingredients on food and beverage labels. Why?

Motley Fool analysts Asit Sharma and Vincent Shen discuss the numbers, as well as other ways the companies could minimize this potential headwind, on this segment from Industry Focus: Consumer Goods.

A full transcript follows the video. 

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This podcast was recorded on July 19, 2016. 

Vincent Shen: Something else that they're kind of fighting off is just the little bit more of their labeling in terms of their ingredients and on the back of the bottle and the back of the can when you turn it, that's with GMO stuff, right?  

Asit Sharma: Yeah, that's true. There's a lot of legislation in the works or potential legislation I should say, both on the federal and the state level, to require labeling. It's called mandatory GMO labeling. It will show on any product if you're using genetically modified ingredients. On one hand, Coke and Pepsi are adamantly against this, because corn and corn syrup obviously is a big part of sodas. They really want to defeat these on a state level before they reach the federal level.

They weren't successful in Vermont which just passed a law. Coke has actually said: "Hey, we're going to have to lower volumes temporarily because of this law, because some of our less profitable stuff, it's almost not worth it for us to go thought this long ramp of relabeling." They're looking through their inventory in Vermont and seeing what can be done there.  

What's really interesting to me is if you look at what they've spent. Coke and Pepsi, last year, were the third and sixth biggest lobbying spenders to defeat this GMO labeling on the state and federal level. They spent $14 million -- that was Coke -- and about $9 million -- that was Pepsi. They are leaders in trying to repel this legislation, but at the same time, again, left brain, right brain, Pepsi last year introduced snack machines called Hello Goodness which vend out Naked Juice, they vend out hummus.  

The marketing push is very much: we're going to offer healthy alternatives. This year, they're coming out with organic Gatorade, and they're also coming out with a line that will emphasize that Tropicana orange juice doesn't have genetically modified ingredients.

Asit Sharma has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends PepsiCo. The Motley Fool recommends Coca-Cola. 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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