J.R. Simplot won federal approval for a genetically modified potato on Nov. 7, and although it is a major supplier of french fries to McDonald's (NYSE:MCD), don't worry about some GMO spud showing up in your Happy Meal. The fast-food chain says it has no plans on adopting it anytime soon.
But that might not be the case for long.
Simplot says that because its new potato is made from genes derived from potatoes themselves and not bacteria or genes from other species, thus creating some sort of Frankenfood, it doesn't rise to the same level of concern activists would have over some crops, or when they thwarted Monsanto's (NYSE:MON) effort to propagate a GMO potato in the 1990's.
Back then, Monsanto got the FDA to approve its New Leaf potatoes that were resistant to disease and insects through the development of a synthetic version of the bacillus thuringiensis bacterium, or Bt.
After initial acclaim, the biotech charged high premiums for its seed, which limited adoption, and then ultimately went nowhere when McDonald's and the Frito-Lay division of PepsiCo (NASDAQ:PEP) were cowed by anti-GMO activists into rejecting them. J.R. Simplot, an early adopter of the GMO potato, instructed its farmers not to plant them. Monsanto eventually stopped developing the potato in 2001.
Simplot's new Innate potatoes was developed to be especially beneficial to fast-food restaurants that sell lots of french fries. It's a little science-y, but it's important to understanding what Simplot is doing.
When potatoes and other starchy foods like bread (and even coffee!) are processed at high temperatures, such as when they're deep-fried, a carcinogenic chemical compound called acrylamide if formed.
Manufacturers looking for that golden brown color found in french fries use dextrose to enhance its coloration, but that increases the level of acrylamide formed through what's know as the Maillard reaction. That's the browning that occurs on all foods cooked at high temps, including steaks, pretzels, and the malted hops used in beer.
J.R. Simplot's potato obviates the need for using additives like dextrose, but also otherwise reduces the level of acrylamide formed. The french fries will still have the same color, aroma, and taste of a regular potato, but with lower levels of the carcinogens.
To do so, they've been modified to reduce the amino acid asparagine, a naturally occurring amino acid that reacts with sugars at high temperatures to produce acrylamide. According to Simplot, the Innate potato resulted in a 69%-78% reduction in acrylamide in potatoes generally, and a 58%-72% reduction in fries and chips.
According to the National Potato Council, approximately half of all potatoes are used for frozen fries, potato chips, and so-called shoestring potatoes while 28% are not processed, but sold as fresh, 11% are dehydrated, and less than 2% are canned. Simplot, ConAgra's Lamb Weston, and the New Brunswick, Canada-based McCain Foods are estimated to control about 80% of the U.S. market for frozen French fries.
Located in Boise, Idaho, Simplot generated some $5.8 billion in revenues for its fiscal year ending in August, making it No. 63 on Forbes list of the 100 largest private companies. And though fast-food chains count on it for their french fries, it also has significant operations in phosphate mining, fertilizer manufacturing, farming, ranching, and cattle production.
While Simplot contends all it's doing is manipulating the potato's own genes and not introducing foreign bodies into the potato, GMO critics are still uneasy. They contend the spud processor is using a little understood technology called RNA interference, or RNAi, to suppress the amino acid, and because industry regulators rely upon the biotechs themselves for assurances of safety to human health it creates a black hole for worry.
And with McDonald's already seemingly putting the kibosh on accepting it, will Frito-Lay, or even Burger King Worldwide (UNKNOWN:BKW.DL) and Wendy's (NASDAQ:WEN) be the ones to face a potential consumer backlash.
"If you build it, they will come" might have been a good mantra for the movie Field of Dreams, but it doesn't necessarily hold sway when discussing the highly charged atmosphere around GMO foods. J.R. Simplot may have built a better potato, but it may still get fried if no one buys it.
Follow Rich Duprey's coverage of all the restaurant industry's most important news and developments He has no position in any stocks mentioned. The Motley Fool recommends McDonald's and PepsiCo. The Motley Fool owns shares of PepsiCo. 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.