Wall Street Predicts a Major Upheaval
over Genetically Engineered Foods in the USA

October 7, 1999

Hain Food's New Labeling May Prompt U.S. Shoppers to Demand


Will U.S. shoppers demand that the foods they eat be
"biotech-free," the
same way they want "fat-free" or "organic" items?

"The more press it gets, the more it will become an issue
for consumers," says Andrew Jacobson, a senior executive of
Hain Food Group Inc., which recently decided to slap labels
on its Little Bear line of natural snacks, assuring
consumers that no ingredients come from genetically modified

In the executive corridors of America's premier food and
drink companies, no issue is more urgent than whether Mr.
Jacobson is right. Although most U.S. consumers aren't aware
of it, ingredients made from genetically modified crops are
present in various products made by Coca-Cola Co., Kellogg
Co., General Mills Inc., H.J. Heinz Co., Hershey Foods
Corp., Quaker Oats Co., McDonald's Corp. -- and on and on.

European Uproar

Nothing would please these companies more than for Americans
to remain
oblivious or indifferent to this fact. But that's hardly
likely. Consumer uproar already has prompted the European
Union to begin imposing mandatory labeling for some foods
that contain genetically modified ingredients, and now
British supermarket chains are making biotechnology a
competitive issue, advertising their house brands as
"GMO-free" (no genetically modified organisms). Regulators
in Australia, New Zealand, Japan and Canada are devising
strategies for labeling such foods, and many other countries
are considering similar actions.

Increasing the likelihood that such concerns will spread to
the U.S., the same organizations that incited the GMO
consternation in Europe --
among them Greenpeace and Friends of the Earth -- are
considering ways to awaken Americans to the issue. Already,
the groups's efforts helped push two of the biggest
baby-food makers in America, Gerber and Heinz, to try to
keep their products free of genetically modified

Half of the soybean crop and a third of the corn crop in the
U.S. these
days contain transplanted genes. Those crops, in turn, are
used in countless food products: the syrup for Coke,
McDonald's hamburger buns, Heinz ketchup and General Mills'
Betty Crocker cake mixes, just to name a few.

What Consumer Benefit?

If pressure builds in the U.S. to label all genetically
modified foods, the impact on sales could be chilling. That
is because genetically modified products don't offer an
obvious benefit to consumers the way "organic" or "diet"
products do. At this point, "genetically modified" simply
means that the crops processed into ingredients were easier
for farmers to grow, because of resistance to bugs, disease
and weeds.

On the other hand, if food companies decide to eliminate
genetically altered ingredients from their products, farmers
harvesting their bumper
crops in Iowa this week could one day be left with a bounty
wants. Moreover, the grain industry has no system in place
for separating conventional crops from their genetically
engineered cousins.

Such a backlash also would be a devastating blow to U.S.
pioneers Monsanto Co. and DuPont Co. The premium prices they
charging farmers for genetically modified seed is only now
beginning to
help them recoup the billions of dollars they invested in
research and acquisitions.

Hardly Hysterical

At the moment, Americans are hardly hysterical about the
issue. McDonald's, Quaker Oats and Tyson Foods Inc. say only
a tiny fraction
of the calls they get from U.S. customers are about the
genetically modified crops they use to make their products.
Hershey says it has received fewer than 25 inquiries about
the issue so far this year, a period in which the candy
maker handled hundreds of thousands of calls.

But that could change in a flash -- the European backlash
almost overnight -- and for that reason it is a subject
industry executives have little willingness to discuss, for
fear that doing so will only generate more press. The list
of companies unwilling to make executives available to
discuss the matter for this story is long: Coca-Cola,
Procter & Gamble Co., Sara Lee Corp., Kellogg, BestFoods,
General Mills, and Pillsbury, the Minneapolis food division
of Diageo PLC, among others.

The food industry is commissioning surveys to track public
toward biotechnology. Hershey is among several companies
checking to
see how quickly they could switch their factories from
genetically modified ingredients if attitudes soured.

Some companies aren't waiting. "We're very concerned about
sentiment," says a spokeswoman at Heinz, which says it "will
seek to
avoid" genetically modified crops in all its U.S. products.
That is easy for the ketchup maker to do with tomatoes,
because the company's breeders were skeptical of
biotechnology from the beginning and stayed away. But a
complete ban at Heinz would hurt millers that supply it with
the sweetener used in its ketchup. A lot of that sweetener
is made from genetically modified corn.

After a Consumer Reports magazine article last month
identified several
soyburger brands as containing genetically modified
soybeans, Worthington Foods Inc., which makes Morningstar
Farms veggie burgers, swore off genetically modified
soybeans. Company executives, who believe altered
soybeans are perfectly safe to eat, have begun to remove
them from some products anyway, figuring many vegetarians
don't trust
modern food. "This is a technology they don't understand
yet," says Ronald L. McDermott, vice president of research
and technology at the
Worthington, Ohio, company.

Ben & Jerry's Homemade Inc. says it is making sure that the
going into its products are made from nongenetically
modified soybean
flour. It has taken to buying soybean flour from Natural
Products Inc., a small Grinnell, Iowa, company that
processes unmodified soybeans and
that expects its sales to triple next year to about $10

Two of the food companies doing the most to dodge
genetically modified
ingredients are closely tied to big-name brands. Worthington
is being
acquired by Kellogg, and Heinz is acquiring a 19.5% stake in
Hain Food
Group, the Uniondale, N.Y., firm that is putting nonbiotech
labels on its organic snacks. To make sure its new labels
are correct, Hain is switching the oil it uses in its fryers
from corn to safflower, a plant yet to be genetically

Trial Run

Most food executives are keeping their plans under wraps,
but a look at
Europe offers some insight into how they would respond to a
choice between the use of labeling or ditching genetically
modified ingredients.

American firms that export to Europe are going to great
lengths to avoid
the mandatory labels there. British McDonald's fast-food
restaurants, for example, have sworn off genetically
modified ingredients. Likewise,
Pillsbury changed the corn it uses to make the chips it
sells in Britain.

Just this week, the fear of a public backlash in the U.S.,
and what it might push food companies to do, prompted
Monsanto to swear off a promising area of research. Robert
Shapiro, chief executive officer of the St. Louis company,
announced Monday that Monsanto won't commercialize the
so-called terminator gene, an experimental technique that is
controversial because it would make seeds sterile. The
terminator gene is designed to prevent a black market in
high-priced genetically modified seeds, but rural advocacy
groups complained that it would prevent poor farmers from
saving seeds to plant the following year.

In another move to defuse public concerns, Mr. Shapiro
Wednesday communicated by satellite to a gathering of
Greenpeace leaders in London, saying "We're now publicly
committed to a dialogue with people and groups who have a
stake in this issue."

Seeking More Regulation

How often do companies request increased regulation? It's a
measure of
the concern of food executives that some are quietly
prodding the U.S.
Food and Drug Administration to greatly toughen its
oversight of altered
crops as a way to reassure consumers about the new science.

The FDA decided seven years ago to regard most genetically
crops as identical to conventional crops, which are
considered inherently safe to eat. In the FDA's book, a
genetically engineered tomato is just a tomato.

The food-safety agency doesn't require inventors to get its
approval or to put special labels on genetically modified
food, as long as they use genes that make proteins already
in the food supply. The only exceptions are when inventors
greatly change a crop's composition by, say, adding a
vitamin or introducing a protein known to trigger an
allergic reaction in some people.

So far, the biotechnology companies have voluntarily given
the FDA their
research, mostly data about the composition of their novel
crops; some
inventions don't even go through animal-feeding trials.

Some of the science around genetically modified foods is in

Critics, without the support of much research, say these
foods pose risks both to humans and the environment.
Proponents, without the support of much independent
research, say that tinkering with the genes of plants not
only doesn't hurt people, it has the potential to enhance
their health. In the future, food scientists envision
growing crops that have been modified to help the human body
combat cancer and other diseases.

Science vs. Marketing

But science could become less relevant than marketing. In
Europe, big
grocery chains such as J. Sainsbury PLC are touting their
house brands as free of genetically modified ingredients.
Store brands in England already account for a much larger
percentage of sales than in America, and the groceries see
the GMO issue as a way to boost sales even further.

But Nestle SA, the Swiss food giant, is complying with the
labeling law in Europe, informing buyers which of its
products contain genetically modified ingredients. Nestle
says it is seeing "surprisingly little reaction to the
labels in terms of sales figures."

Support for labeling appears to be growing in the U.S.
Secretary Dan Glickman is encouraging companies to
voluntarily label their products. The pro-biotech
Rockefeller Foundation, which finances
agricultural research, issued a statement saying, "Consumers
have a right to choose whether to eat GM foods or not." A
Gallup Organization poll released this week of 1,039 adults
found 68% want labels disclosing
genetically modified ingredients, even if it means a higher
price for foods.

"In a democracy, people want to feel like they have a
choice," says
Thomas J. Hoban, a North Carolina State University sociology
who tracks attitudes about crop biotechnology.

No food company stands to benefit more from biotechnology
than ConAgra Inc., the giant Omaha, Neb., conglomerate that
does everything from sell seed to farmers to make dozens of
brand products such as Wesson cooking oil and Healthy Choice
microwavable dinners. ConAgra scientists have looked at
plans to genetically engineer crops to do things such as
make a healthier cooking oil, for example, or a high-potency
sports bar.

But the company's official position on crop biotechnology is
"This is a marketing question only," says Bruce Rohde,
ConAgra's chief
executive officer, one of the few food executives willing to
talk about
genetic engineering and food. "I'm open-minded about
biotechnology. But
right now, the public certainly isn't clamoring for it."