With a new Food and Drug Administration labeling guideline just weeks away, Kellogg
Kellogg's plan is to initially use Vistive, a soybean oil derived from agricultural technology giant Monsanto
Kellogg's decision to use the soy oil definitely has advantages. Unlike palm oil, which some food makers are using, the new oil doesn't raise saturated fat levels as it cuts trans fats. Perhaps more importantly, the new oil doesn't significantly alter the taste of foods.
However, the switch could also constrain Kellogg's ability to sell internationally. Although Vistive was produced using conventional breeding techniques, it does contain the Roundup Ready trait, as does Nutrium. This makes both Vistive and Nutrium genetically modified (GM) products, and many Europeans, as well as people in other nations, remain squeamish about GM foods.
It's important to point out that the introduction of the new oil does not seem to threaten Kellogg's current sales in Europe. The lion's share of revenue there comes from cereals, and since Kellogg's cereals do not contain trans fats, there is no need to use the new soy oil in these products.
Still, should Kellogg want to expand sales of, say, Keebler cookies into the continent, treats containing the new oil would be labeled as GM foods under European regulations -- a definite turn-off for some buyers. Alternatively, Kellogg could produce special cookies for Europe with unhealthy non-GM oils. But this would be costly and would put the company in the strange position of selling Europeans a less healthy product to satisfy concerns over GM foods.
Kellogg's plan to use Vistive and Nutrium should be a plus for its competitive position in the U.S. But the decision also may be a drag on international expansion.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.