While the low-carb diet trend may be on its way out, public pressure and government action continue to push food companies into making big changes. The process has been disruptive for many firms, but at least one food giant may stand to reap significant benefits.
At this point everyone is familiar with the obesity problem in the U.S. What's more, as has been widely reported, food companies are acting to improve the health profile of their products and help consumers find healthier items. Kraft (NYSE:KFT), for instance, is tying some of its offerings to the South Beach diet and working on clearer nutritional labeling. General Mills (NYSE:GIS), meanwhile, is now making all of its cereals with whole grains.
As it turns out, the federal government is also doing its part to battle the obesity scourge, although as is often the case with government actions, things have been moving slowly. Back in 1999, the Food and Drug Administration began considering a new rule requiring food makers to display trans-fatty acid, or trans-fat, content on packaging labels. Trans-fats, often showing up in ingredient lists as "partially-hydrogenated vegetable oils," have been shown to raise levels of LDL, or "bad" cholesterol. After a few years of debate and revision, the FDA finalized a rule mandating the inclusion of trans-fat information on labels by January 1, 2006.
As the regulation's due date approaches, trans-fats are becoming public enemy No. 1 for food makers. PepsiCo's (NYSE:PEP) Frito-Lay line, for example, has already reformulated its snacks to eliminate trans-fats, and other companies like Kellogg (NYSE:K) and Campbell Soup (NYSE:CPB) also want to eliminate such ingredients, according to TheNew York Times.
That's where Archer Daniels Midland (NYSE:ADM) comes in. The agricultural products giant's NovaLipid product line of zero- and low-trans-fat oils and margarines is designed to be a substitute for current trans-fats. Demand for NovaLipid is apparently on the upswing. In July 2004, the company announced that it would expand production capacity for NovaLipids at its Quincy, Illinois facility. Then, late last week, the firm disclosed that it will add more NovaLipid capacity at its Mankato, Minnesota site.
At the moment it's still too early to tell what the impact of NovaLipid will be for ADM's bottom line. But given the drive to eliminate trans-fats, NovaLipid may have a bright future.
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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.
