Sustainability Market Intelligence in North America - November 14 - GMO

Date
21 May 2015

Consumers’ and retailers’ concerns about the sustainability of food and beverage products in New Zealand’s export markets can have a major impact on exporters. NZTE and MFAT collect information and market analysis on sustainability trends from our posts offshore to keep exporters informed.

While media interest in genetically modified organisms (GMO) has died down, “GMO-free” is still an issue that has wide recognition with consumers.

MFAT/NZTE were interested to know if “GMO-free” labelling impacts on consumers’ purchasing decisions in North America and if there is an opportunity for New Zealand food and beverage exporters to demand a premium price for their “GMO-free” products.

In this context, MFAT and NZTE’s North America posts were tasked with answering three questions related to GMO. These questions were:

  • How much interest are consumers showing in GMO-free products?
  • How is “GMO-free” communicated to consumers and does it command a price-premium?
  • How might New Zealand food and beverage exporters take advantage of this value-add from GMO-free production?

In addition to the above questions, our posts in Los Angeles have provided information on the recent efforts, via referendums, to require labelling of GMO foods. This supplemental provides useful insight into the debate in the United States and the likelihood of its impacts if implemented.

DISCLAIMER

While the Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise have verified the information in this document, we make no representation as to the completeness, correctness currency, accuracy or fitness for purpose of the information. The Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise will not be responsible for any damage or loss suffered by any person arising from the information contained in this document, whether that damage or loss arises from negligence or otherwise. 

How much interest are consumers showing in GMO-free products?

US: The most accurate indicator of consumer interest in GMO-free products in the US comes in the form of consumer research conducted by the Natural Marketing Institute (NMI). The NMI 2014 GMO Consumer Insight Report found that:

  • 69% of consumers were now aware of the term “genetically modified food,” a significant increase from the prior year, and almost as many believe GMOs can impact personal health (also up significantly this year).
  • About half this number (35%), indicated they were concerned about GMOs, again noting a significant increase from 2012 which crosses all generations.
  • Along with the significant increases in awareness and concern, there has been a corresponding significant increase in usage of Non-GMO labelled foods, up from 37% in 2012 to 53% in 2013. This too has occurred across generations, but with highest usage among Millennials (61%) and Gen X (60%).
  • This correlates to higher objection at retail for products that contain GMOs: In the past year, the importance of stores carrying products that do not contain genetically modified ingredients increased significantly across consumer groups, and now is true for 6 in 10 consumers. And brands are at risk of losing volume from a majority of consumers (65%) if they do not go GMO-free, with almost one-third saying they would completely stop buying the brand if it contained GMOs.

The high level of consumer interest in knowing whether food contains GMOs is also shown by the fact that that 21 States are actively looking at GMO labelling proposals.

The issue was prominent in the recent mid-term election where mandatory GMO labelling was on the ballot in a number of States (Vermont will be the first state to require Mandatory GM labelling come 2016 unless efforts to overturn the legislation is successful).

Mexico: There is no statistical information on consumer views regarding GMO vs GMO-free foods or surveys regarding consumer awareness of the difference between “GMO-free”, “organic”, and claims such as “natural” and “healthy”. As a generalisation, it could be said there is a relatively low-level of consumer awareness regarding the content of food products, including whether they are GMO-free or organic.

However, new food labelling legislation will be implemented in early 2015 and, although the objective of the legislation is to increase awareness of sugar content, a flow-on effect of the more explicit food labelling requirements may be to lift consumer awareness of food content and initiate a more critical interpretation of advertising claims that products are “healthy” and “natural”.

Currently no GMO crops or livestock are in commercial cultivation in Mexico. Given the absence of commercially cultivated GMO-crops in Mexico (all commercial-use applications are still subject to approval), technically all domestically produced food products are GMO-free. However, Mexico permits the import of GMO products, the most relevant crop being corn from US. Corn has received the most attention in the media because it is a traditional Mexican product and continues to form the basis of the Mexican diet.

Although not necessarily GMO-free, according to Impulso Orgánico Mexicano (the Association of Mexican producers of organic products), over the past 10 years demand for organic products in Mexico has grown 10% but represents only US $92.4 million - which is only 0.16% of total national food sales.

Canada: Genetically modified foods are very common in Canada. Over 50 types of genetically modified foods have been approved for consumption throughout Canada, including varieties of corn, soya, sugar beets and canola. Canada also imports a wide variety of GMO products (including cottonseed oil, papaya, squash and milk products) from the United States. In a recent TV interview, the Canadian Broadcasting Corporation (CBC) estimated that “close to 70% of processed foods available on Canadian supermarket shelves were GMO.”

Once GMO food products are within Canadian borders they are classified as a "novel food" and regulated by two government departments. Health Canada regulates the sale of ‘novel foods’ through a pre-market notification requirement (Manufacturers and importers who wish to sell or advertise a GM food in Canada, must submit data to Health Canada for a pre-market safety assessment, as required under Division 28 of Part B of the Food and Drugs Regulations (Novel Foods)) while the Canadian Food Inspection Agency (CFIA) sets federal policy on food labelling. Food labelling is only mandatory if there is a proven health or safety issue with a food (this includes novel foods) but there is no specific Canadian requirement to label food as having been ‘genetically modified.’ Any company that wishes to do so does it on a purely ‘voluntary’ basis.

In terms of consumer interest, a 2008 survey of 5,000 Canadian meat consumers revealed that 50% of consumers expressed relatively high levels of concern about genetically engineered feed given to animals. However, experts in Canada continue to argue that for the average Canadian consumer, the issue of genetically engineered foods barely registers. "These concerns among farmers and informed groups of consumers does not translate to the average consumer. They are too far removed from the concerns of the farming community," argues Andreas Boecker, an associate professor at the University of Guelph whose research includes studying consumer acceptance of GM foods. According to Boecker, most consumers are not well-informed when it comes to food science, but he is sceptical that mandatory labelling of GMOs would lead to any sort of sea change in the way Canadians shop.

"The average Canadian family is very busy … both parents work, so there's little time to be spent on food shopping and preparation," Boecker says. "Convenience and value for money are the biggest drivers of purchasing decisions."

How is “GMO-free” communicated to consumers and does it command a price-premium?

US & Canada: As a result of the growing public interest in GMO-free a number of supermarket chains and restaurants including Whole Foods, Chipotle and Ben & Jerry’s are now actively pushing voluntary GMO labelling to better inform customers. Safeway, one of the largest grocery stores on the East Coast, has also come under pressure recently from some shareholders for not doing more in terms of GMO labelling given the “unprecedented public demand” that now exists for GMO labelling.

While labelling food “GMO-free” is prohibited in the US, consumers wishing to know more about whether their foods contain GMOs have benefitted from the establishment of the ‘Non-GMO Project’, a non-profit group committed to preserving and building sources of non-GMO products, educating consumers, and providing verified non-GMO products.

Currently, the Non-GMO Project is the only organization in the US and Canada that provides third party verification for products produced according to rigorous best practices for GMO avoidance. Their verification mark is on more than 15,000 products.

Verification involves a multistep process and involves segregation, traceability, risk assessment and ongoing testing of all major GMO risk ingredients at critical control points. There is 0.9% threshold for any product that has been genetically modified in order to certify a product as ‘GMO-free’. Consumers can also avoid GMO foods by purchasing 100% organic products.

The Non-GMO Project Verified label now has over 3390 outlets selling produce bearing this seal and is by far the most recognized of its kind in the US for both consumers and retailers. It is noteworthy that a number of US companies using foreign sources of food (including New Zealand honey and beef to produce jerky) have chosen this program as a means to verify products as non-GMO.

Non-GMO Project Verified goods in US market...

...and Canada.

The Non-GMO Project has also been active in the expansion of social media promoting non-GMO foods as is evident in its www.nongmoshoppingguide.com website that not only promotes the reasons why non-GMO foods are in their opinion better for you, but also provides information on what and where GMO free foods can be sourced. The shopping guide is also available as a downloadable app for the tech savvy purchaser.

Despite this demand, it remains uncertain what price-premium consumers in the US and Canada are in fact willing to pay for GMO-free products. This will likely vary depending on the perceived level of GM risk for the product/category as well as the demographics around where they are distributed. However, as has been seen in the growth in the sales of organic product, we do know that more educated, affluent consumers and those who shop the natural channel and are more cognizant of outside sources of information regarding GMOs which suggests these products may indeed fetch a premium.

Mexico: GMO crops are regulated in Mexico by the Law of Biosecurity on Genetically Modified Organisms. While there is no national “GMO-Free” mark there is a national “Organic” mark which requires all organic products to be GMO-free. As such, the only information available relates to organic produce as a whole not the specific subset of GMO-free organic produce. Sales of organic produce are generally confined to a very niche markets such as The Green Corner (Spanish language source) that are dominated by imports from the US. These food stores are generally found in middle to upper socio-economic areas where fresh organic produce is sourced locally from niche suppliers.

According to Impulso Orgánico Mexicno, organic products typically command a price premium, ranging between 25% and 40% more than conventional products. The Association also notes that the organic products in highest demand in Mexico are fresh fruit, dairy, juices and marmalades (Spanihs language source here).

How might New Zealand food and beverage exporters take advantage of this value-add from GMO-free production?

US and Canada: New Zealand food and beverage exporters might consider aligning any attempts to tap into the value-add offered from GMO-free production in North America with those companies already active in the market place. As mentioned, Whole Foods, a leader in meeting the demand of growing consumer trends and a company that achieves a premium for the products it sells, has strongly endorsed the use of the Non-GMO Project verified “seal of approval” by its suppliers. The company boasts that it already has 3300 Non-GMO Project Verified products in its store and under its “Your Right to Know” programme, Whole Foods has announced that by 2018, all foods in its US and Canadian stores would be labelled to indicate whether they contain GMOs.

Safeway group also recently announced it would begin rolling out its own non-GMO brand under its “Open Range” product range in 2015, providing further evidence that there exists scope for New Zealand food producers to at least explore opportunities that might exist in the US market. Both Safeway and Whole Foods already stock a number of New Zealand food products in their aisles although these are either conventionally produced or organic rather than GMO-free.

One immediate avenue to enter into the US market for non-GMO food that New Zealand producers/exporter might also like to consider is via the USDA organic programme as any food produced organically and sold in the US must be GMO-free.

New Zealand exporters do however need to be cautious when making GMO-Free claims as New Zealand standards may not be as rigorous as the Non-GMO Project’s and there is a risk that competitor’s and/or consumer advocacy groups could identify any potential gaps. As the entire GMO-free landscape remains dynamic and susceptible to change, it would be sensible for New Zealand exporters to consult with appropriate government agencies (e.g. MPI, NZTE) before endeavouring to enter this market.

Mexico: Given the current low demand for GMO-Free products in Mexico, there is no clear advantage to be taken in the Mexican market. From NZTE’s Mexico perspective, current efforts to import New Zealand consumer-ready food products are difficult because of high tariffs. Promoting a ‘GMO-free-organic’ label could lift retail prices even higher in the Mexican domestic market because organic products would be sold in boutique stores. During the last 5 years, NZTE has been approached only once by a Mexican retailer store (Aires de Campo) regarding interest in importing New Zealand products. However, no deal was reached.

If applications for commercial cultivation of GMO food crops are approved and successfully implemented, there is likely to be an increase in anti-GMO social media campaigns which could result in an increased consumer demand for niche product GMO-free imports. Such demand is likely to be more relevant to staple products such as fruit, dairy and corn, and relevant to the higher-end consumers who shop in boutique stores, display greater interest in nutritional information and have more disposable income.

The most obvious area for New Zealand to investigate is in collaborating with Mexican primary producers to expand cultivation of organic produce/livestock for export to European and US markets. Mexico is the world’s leading producer and exporter of numerous fruit and vegetable crops, including tomatoes, avocados, berries, cucumbers, chilli, pepper and strawberries. Organic economics is becoming increasingly topical in Mexico (e.g. keynote speech to the National Agriculture Council Conference 2014 focused on the economic opportunities for SMEs in organic exports).

Supplemental from Los Angeles: Recent GMO Labelling Developments

This report outlines recent US developments in relation to the ongoing political debate on the labelling of food containing Genetically Modified Organisms (GMOs). Some food safety lobbyists are highly active trying to require States to pass regulations that require food manufacturers to label whether their products contain GMOs. The food industry is equally motivated in preventing these regulations. The focus of this report is how food lobbyists are using the Initiative/Proposition (binding referenda) to attempt to require legislative change at the State level.

The two most recent examples are California with Proposition 37 in 2012; and Washington State with Initiative 522 in 2013. Both referenda were defeated at the ballot box. The most important conclusion to draw from these two campaigns is that food lobbyists will continue to shop their anti-GMO campaigns around States seeking to find a US jurisdiction that will become the first bulwark against GMOs and will regulate for their labelling.

Nevertheless, the defeat in liberal/progressive-dominated States such as California and Washington are tough blows for the campaign, particularly California. California is regarded as the most influential State with respect to consumer protection laws and environmental and energy laws. The comparatively large population of California means manufacturers, producers and retailers, having to comply in California, often extend compliance across the United States even when they are not required to by State law.

For New Zealand producers there are potential consumer opportunities associated with GMO-free products and also potential costs if compulsory labelling is ever passed into a State’s law.

California Right to Know Genetically Modified Food Bill - California Proposition 37 (2012)

The propostion was drafted the measure because according to the sponsor, "since 50 countries around the world already require labelling of genetically engineered foods, it seemed time Americans get the same right."

The wording of the ballot was a hot topic leading up to the election with some commentators suggesting a change in wording could have had significant changes to the outcome. 504,760 valid signatures were required for qualification purposes. Supporters filed 970,000 signatures in early May and the measure was certified for the 6 November 2012 ballot.

At the end of August 2012, one poll showed 65 per cent in favour of Proposition 37 compared to 24 per cent opposed. On 14th September 2012, Monsanto, donated $2.89 million in an effort to defeat the measure - nearly doubling its total contributions heading into the homestretch of the election. The food companies’ campaign had two main key messages. The first was compulsory labelling would increase the cost of food products; and the second was the measure was totally unnecessary and the presence of the term “Contains GMOs” would inherently increase consumer anxiety, which would be unfair to producers.

Key elements of the debate were summed up in an LA Times editorial: “….In most cases, there is no requirement to inform consumers, via labels, about the use of pesticides, hormones or antibiotics, or about the inhumane conditions in which animals are often kept. But Proposition 37 would make an exception for genetically engineered food, requiring that it be labelled before being sold in California. Although we generally endorse people's right to know what goes into their food, this initiative is problematic on a number of levels and should be rejected….
Unfortunately, the initiative to require labelling of those ingredients is sloppily written. It contains language that, according to the nonpartisan Legislative Analyst's Office, could be construed by the courts to imply that processed foods could not be labelled as "natural" even if they weren't genetically engineered. Most of the burden for ensuring that foods are properly labelled would fall not on producers but on retailers, which would have to get written statements from their suppliers verifying that there were no bioengineered ingredients — a paperwork mandate that could make it hard for mom-and-pop groceries to stay in business.”

A GFC-weary Californian electorate swung dramatically against Proposition 37. On 6 November 2012, it was rejected by Californian voters 51.41% (6,442,370 against) to 48.59% (6,088,714 for).

The Washington Mandatory Labelling of Genetically Engineered Food Measure - Initiative 522 (I-522)

(I-522 was submitted to the Washington State Legislature in January 2013 with 340,000 signatures. The Legislature opted to place I-522 on the ballot at the next state general election.

Much of the text was uplifted from California’s Prop 37 wording. I-522 and Prop 37 were similar but there were key differences; for example, Prop 37 contained language intended to regulate the use of the term “natural”. That component was highly contentious and was arguably its weakest legal aspect. Such language was not included in I-522.

The following was the ballot measure summary of the proposal:

"This measure would require foods produced entirely or partly with genetic engineering, as defined, to be labeled as genetically engineered when offered for retail sale in Washington, beginning in July 2015. The labelling requirement would apply generally to raw agricultural commodities, processed foods, and seeds and seed stock, with some exceptions, but would not require that specific genetically-engineered ingredients be identified. The measure would authorize state enforcement and civil penalties, and allow private enforcement actions.”

In September the newspaper, the Olympian reported that the campaign to require packaging labels for genetically modified or engineered foods and seeds was leading by a 66 percent to 21 percent margin. By late October, “No On I-522” had set the all-time record for any initiative campaign with $21 million.

This funding appeared to be working by October, the Olympian was reporting that I-522 was favored by just 46 percent of voters while 42 percent opposed it. The pollster said it was the biggest momentum swing he had seen in an initiative after decades of polling.

On 5 November 2013, Initiative 522 was thrown out after 54.8 percent of the state's voters opposed the labelling while 45.2 percent voted in favour. The difference was 38,046 votes, meaning 19,024 more "yes" votes were needed to win.Even before the election, supporters of I-522 sensed they had lost.

However, they believed their losing a battle was part of a process aimed at winning the war. They aim to contest the issue again in 2016 (a Presidential election year that sees higher turnout from younger and more progressive voters).

 

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