General Mills (NYSE:GIS) has caved to consumer activists who have promised to avoid foods containing ingredients produced from biotech crops and genetically modified organisms, or GMOs. Just don't expect a trend.
The decision to "clean up" Cheerios will get plenty of press and undoubtedly boost the morale of those strongly opposed to consuming GMO foods, but supply chain realities that dominate the industry will make it difficult for other major cereal brands from General Mills or Kellogg (NYSE:K) to follow suit. Additionally, the simple ingredients of Original Cheerios made the switch possible (but only after a big investment over the course of one year). Taking that into account -- along with several admissions by General Mills -- points to this being more of a marketing stunt than a statement against GMO foods. That doesn't bode well for GMO-free Froot Loops.
Consumer power vs. supply chain logistics
Consumers may demand organic or non-engineered ingredients, but the market for organic food is constrained by the limited reach of certified organic cropland in the United States, which tallied just 2.97 million acres in 2011. Although coverage has grown steadily from just 920,000 acres in 1997, only 0.3% of corn, 0.2% of soybeans, and 0.6% of wheat -- all major ingredients in cereal -- were certified organic in 2011. There are varieties of corn and soybeans that are neither certified organic nor GM (GM wheat is not grown commercially), but the latter easily dominates the marketplace.
Consider that biotech crops covered nearly 172 million acres of American farmland in 2012 (roughly 40% of the global total) and produced approximately 90% of the nation's corn and soy. The giant discrepancy between certified organic or non-engineered crop acreage and that of their engineered counterparts is why GMO ingredients are present in 70%-80% of all foods consumed in the country. It's also why you shouldn't expect many more cereal brands to make the switch.
Don't take my word for it. Read what General Mills had to say when asked, "Will you make all varieties of Cheerios with non-GM ingredients?"
It's the unique and simple nature of original Cheerios that made this possible -- and even that required significant investment over nearly a year. Cheerios' principal ingredient has always been whole grain oats, and there are no GMO oats. We use just a small amount of corn starch in cooking, and just one gram of sugar per serving for taste. So we were able to change how we source and handle ingredients to ensure that the corn starch for original Cheerios comes only from non-GMO corn, and our sugar is only non-GMO pure cane sugar. For our other cereals, the widespread use of GM seed in crops such as corn, soy, or beet sugar would make reliably moving to non-GM ingredients difficult, if not impossible. General Mills produces several organic cereals that by definition cannot use GM ingredients -- and sell those products nationally -- so we already offer consumers a wide range of non-GM cereal choices.
So while it's powerful to create headlines about having a national brand such as Cheerios going GMO-free, it helps to quantify how small of a change was actually made. Consider that only the first Cheerios variety will be GMO-free; the remaining 11 of these 12 won't change their supply chains:
That's just the lineup for Cheerios. It doesn't include other popular cereal brands offered by General Mills such as Wheaties, Lucky Charms, Kix, Trix, or others. Cereal brands from Kellogg are in the same boat. If you browse through the ingredients list of most major cereals you'll find sugar, various corn and soy products, and canola oil. Not only is it expensive and logistically difficult to separate engineered ingredients from supply chains, but the market for such ingredients remains too small for reliable production.
Foolish bottom line
The difficulty in sourcing completely non-engineered ingredients for products, especially cereals, will make it impossible for many major cereal brands to make a similar transition. Of course, there are organic cereal brands to choose from, including those offered by General Mills. Given that the company is still opposed to statewide GMO labeling and accepts that GMO foods are safe, the decision to make Original Cheerios GMO-free appears to be more of a marketing move than any statement against GMO foods. Sorry, but GMO-free Froot Loops won't be hitting the shelves anytime soon.