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Leading US Food Giants Fear Mounting Consumer Opposition toFrankenfoods

Modified Foods Put Companies in a Quandary
By DAVID BARBOZA
The New York Times--June 3, 2000

CHICAGO, June 3 -- Frito-Lay announced in January that it would stop using
biotechnology-based corn in its chips. Gerber Products has banned
genetically modified ingredients from its baby food. And McDonald's has
asked its suppliers not to ship it genetically altered potatoes.

But despite these recent announcements, all made in response to public
concerns over genetically altered foods, none of these companies is actually
abandoning biotechnology.

PepsiCo, Frito-Lay's parent company, continues to use corn syrup made from
genetically altered crops in its soft drinks. Novartis, the parent of
Gerber, remains one of the leading producers of genetically altered seeds.
And McDonald's cooks French fries in vegetable oil made from genetically
altered corn and soybeans.

These seeming contradictions reflect the marketing quandary facing the
nation's biggest food companies in the debate over genetically altered
crops, which environmentalists contend are potentially dangerous but which
the Food and Drug Administration has deemed entirely safe.

Though nearly all the big food producers publicly support biotechnology, a
growing number of companies are quietly limiting its use. But many say that
biotechnology crops are so pervasive that it would be prohibitively
expensive, and in some cases, nearly impossible, to eliminate them entirely.

"I guarantee you, the food companies wish this issue would go away," said
Robert Goldin at Technomics Inc. in Chicago, a food industry consulting and
research firm. "They're being very cautious. They're trying to find out how
much of this is just noise, and frankly, they don't want to get caught with
their pants down."

Over the last few years, biotechnology crops have come to dominate the food
industry. Genetically altered corn and soybeans -- the nation's two biggest
crops -- were planted on more than 60 million acres of farmland last year.
These grains are used in the processing of snacks, breakfast cereal,
vegetable oil and countless other products.

As a result, the Grocery Manufacturers of America estimates that about 70
percent of grocery-store food may have been made with biotechnology crops.

The industry says that ridding the nation of biotechnology-based ingredients
would require a huge and costly reform of the agriculture system.

"There is no system in the U.S. to segregate G.M from non-G.M.," said Mark
Dollins, a spokesman at Quaker Oats in Chicago, referring to genetically
modified foods. "Any company that says it can segregate, we'd like to know
how they do it. Do they have separate silos? Separate train tracks? There's
literally not a system in place to do that."

At the same time, some food giants are investing in organic or natural food
units. Last year, Kellogg bought Worthington Foods, which makes vegetarian
dishes. Earlier this year, Kraft Foods bought companies that make nutrition
bars and soy burgers, while General Mills, the cereal maker, and Mars, the
candy maker, now offer organic foods.

Many big food companies, meanwhile, are avoiding public comment on
genetically modified foods, while others are engaging in a seemingly
contradictory marketing gambit. They announce that one line of products is
not genetically altered while continuing to produce many other items from
genetically altered crops.

"We don't have a position; we're not for it, we're not against it," said
Walt Riker, a spokesman at McDonald's, which last month said it went along
with other fast-food chains in asking farmers not to plant genetically
altered potatoes. "This issue is way beyond McDonald's."

Asked whether McDonald's continues to make food from genetically altered
crops, Mr. Riker said: "Yes, because it's in the food stream. So we're like
consumers who use all these things. We're not saying we're G.M.-free."

Most of the major food companies are reading from the same script. They
insist that the science behind biotechnology is valid and safe, and that
they have faith in the Federal regulatory authorities.

"We feel the regulatory agencies have done a good job in this area and we
support their work," said Christine Ervin, a Kellogg spokeswoman.

Although many European consumers appear to be troubled by genetically
modified foods, American companies say consumers here are not alarmed.

"Consumer sentiment is pretty supportive," said Betsy D. Holden, the new
chief executive at Kraft Foods in Northfield, Ill. "Consumer calls here are
very low. We get more calls about Aspartame."

But Michael Mudd, a Kraft spokesman, added: "Don't think of this as Kraft
leading the charge for biotechnology. We're more neutral."

Many big food producers are betting heavily on the success and future
profitability of genetically modified corn and soybeans. Today such crops
are typically altered to resist pests and chemicals. Someday the industry
expects that crops will be manipulated to create new, more nutritious foods,
even foods that deliver drugs, proteins and vitamins.

Still, some companies are dropping genetically modified foods from their
products, trying to avoid what could be a public relations disaster.

"We wanted to eliminate ourselves from the debate," said Sheldon Jones, a
Gerber spokesman in Summit, N.J. Gerber dropped genetically modified
ingredients from its products last summer. "We don't think it's fair to our
customers -- the parents -- to have this issue fought out over baby food."

Gerber officials say Novartis, its Switzerland-based parent and the maker of
genetically altered seeds, understood the subsidiary's position.

H. J. Heinz has also dropped genetically altered crops from its baby food,
but not from its other products.

"This is still fairly limited in scope," said Mr. Goldin at Technomics,
referring to companies that have dropped genetically altered foods. "With
Heinz, baby food is small. Ask them if they're going to go G.M.-free in
ketchup. Tomatoes are highly genetically engineered."

McCain Foods, the world's largest maker of french fries, said it had decided
to drop genetically engineered potatoes.

"Our position is simple: we believe it's very good science," said Frank Van
Schaayk, a spokesman at McCain Foods USA, in Oak Brook, Ill. "The difficulty
is that consumer acceptance of this science was not complete. We're in the
business of giving consumers what they want, not what we want them to eat.."

There are scientific disputes about what constitutes genetically altered
foods. The industry says that even when hogs have been fed grain grown from
modified seeds, the meat has not been genetically altered because the
genetic material has been dissolved. Pepsi insists its soft drinks do not
contain genetically altered foods because the corn syrup that is made from
genetically altered corn has been similarly broken down.

Others disagree. Dr. Michael Hansen at Consumers Union says that whether or
not genetic material can be detected in soft drinks, they are genetically
altered foods.

Some companies say they have detected the beginnings of a backlash against
such food among American consumers.

"This is a very difficult question that food companies are facing," said
Lynn Markley, a spokeswoman at Frito-Lay. "In late '99, we did see
increasing questions from our consumers, and we're a consumer products
company, so we said, 'This year, let's not do it.' "

Those that have dropped genetically altered foods, however, are those that
were able to do so. Gerber said that its baby food contained only tiny
amounts of corn and soybeans, and that the company could therefore control
its supply channels. McDonald's and some of its suppliers said that fewer
than 6 percent of potatoes grown in the United States were genetically
altered -- so it was not difficult to drop them. And Frito-Lay, which
contracts with corn growers who plant to the company's specifications,
simply told them to use traditional corn.

But for the biggest companies, steering clear of genetically altered corn
and soybeans is very difficult. The companies buy largely on the open market
and most commodity suppliers do not separate out biotechnology grains.

In fact, many food companies say they do not even know whether or not their
products contain genetically altered crops. They suspect, simply based on
the odds, that their products do, but they are not sure.

"It's possible some of the ingredients in our food are from genetically
modified sources," said Theresa Herlevsen, a spokeswoman at Sara Lee. "But
we don't know which products those are."

Critics are pressing regulators and lawmakers to push for mandatory labeling
of genetically altered foods, so that consumers will know what they are
buying and eating.

"There should be mandatory labeling because the consumer ought to know if
G.M. is in their food," said Jeremy Rifkin, a longtime opponent of
biotechnology. "It's the most radical food experiment we've ever engaged in.
Is it safe? We don't know."

Most of the food industry opposes labeling, however, saying it might alarm
consumers.

Indeed, Gene Grabowski, a spokesman for the Grocery Manufacturers
Association, which represents most major food companies, says the decision
by several companies not to use genetically altered foods is evidence that
the food industry is finding a way to sort out the issue for itself.

"This is proof there is choice in the market," he said. "You don't need
government interference. The worst thing you can do is mandatory labeling or
government action."

J. Winston Porter, a consultant to McDonald's, says the debate is not going
to go away.

"This is going to be a real internal struggle between the public relations
people and the scientific people," Mr. Porter said. "Many of the companies
are in a conundrum. They think there's bad public relations in the short
term, but great promise in the long run."

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