In the face of mass demonstrations, documentaries like
and a torrent of irate consumers who have inundated the blogosphere
with complaints and criticism of genetically modified organisms
(GMOs), food giants are responding with concessions.
Whole Foods Market, Inc.
) announced that by 2018, it will require the labeling of
genetically engineered ingredients in its American and Canadian
stores. In the UK, it's already mandatory. Whole Foods' competitors
are expected to follow suit.
Americans are showing clear support for the
Right to Choose
movement by buying more of the few products that are already
labeled non-GMO. Whole Foods President, A. C. Gallo told the
New York Times
, "We've seen how our customers have responded to the products we
do have labeled. Some of our manufacturers say they've seen a 15%
increase in sales of products they have labeled non-GMO."
Despite all of the controversy surrounding the GMO issue, however,
it has been business as usual during the past year or so for big
food companies like
Wal-Mart Stores, Inc.
) and Whole Foods, and biotech engineering companies like
), where earnings and share prices have been relatively stable.
Companies like Monsanto -- the dominant producer of most
genetically modified corn, soybean, and cotton seeds -- see its
revenues tied to extreme weather conditions that affect crop
yields, not consumer sentiment. In fact, analysts predict a rise in
corn seed pricing in fiscal 2014, which will likely lead to higher
Yet when Monsanto slipped below its 200-day moving day average of
$97.94 in late May, following the announcement of this fall's
"March Against Monsanto,"
scheduled for October 12, 2013
in 250 cities and 36 countries, some analysts said that the drop
was a result of the extreme negative sentiment. Others pointed to
the fact that it was also a time when the market as a whole was
weak. Either way, the stock never recovered and is currently
trading at around $95.10 as of August 15. Some predict that
momentum has weakened in the face of negative press, which
continues to escalate. The company is also subject to a court
ruling against it in Brazil where it stands accused of
overcollecting royalties. Currently the decision is under appeal,
but if it fails, the case could result in a $2 billion payout due
Worldwide, Monsanto is under fire from critics who say that
genetically modified organisms upset the natural environmental
balance and can lead to serious health conditions. Anti-GMO
activists point to animal studies that they say show organ damage,
gastrointestinal and immune system disorders, accelerated aging,
and infertility as a result of diets containing GMO foods. They
also say that human studies seem to show that the human body is
unable to process and rid itself of some genetically modified (GM)
foods. However, the federal government and other supporters of GMOs
maintain that scientific studies to date have been inconclusive. On
the other hand,
New York Times
investigative reporter Michael Moss, author of
Salt, Sugar, Fat: How the Food Giants Hooked Us
, says that in the US, the agency in charge of GMOs is "the FDA,
which has a real spotty record on food safety." Genetically
modified crops are already banned in many countries and shunned
internationally by consumers who are unwilling to incur potential
health risks and angered by possible environmental hazards.
Originally a chemical company that produced plastics and
pesticides, Monsanto entered the biotech market in the 1980s. It
began by developing genetic traits and licensing them to companies
that handled the actual breeding of seeds and sales to farmers. By
the mid-1990s, Monsanto shifted its strategy and began acquiring
many of the independent seed businesses that had been its
customers. Over the next decade, the company spent more than $12
billion buying at least 30 of these companies.
Currently, genetically modified crops are grown on 420 million
acres by 17.3 million farmers worldwide. Monsanto maintains that
its seeds improve agriculture by helping farmers to maximize
farmland production while conserving resources such as water and
energy. Advocates of GMO-free farming contend that other methods,
like organic farming, are just as effective without damaging the
environmental balance or posing dangers to human health.
The European Union is divided on the GMO issue. Eight member states
-- France, Germany, Poland, Italy, Luxemburg, Austria, Hungary, and
Greece -- have outlawed the cultivation of Monsanto's genetically
modified maize (MON810). However, the ban was legally challenged
recently in France, and a high court overturned the ruling on
August 2. But then a few days later, President Francois Hollande
vowed that France would continue its moratorium on the GM maize.
Hollande said that the ban on GM crops would continue "not because
we refuse progress, but in the name of progress. We cannot accept
that a product -- corn -- has bad consequences on other produce."
He added that it would be necessary to "secure this decision
legally, at a national level and especially at a European level."
One of the pioneers in the GMO conflagration, journalist and
one-time high profile activist Mark Lymas, has changed his
radically anti-GMO position. In an attention-getting reversal, he
retracted many of his initial criticisms and came out as a
full-fledged advocate of genetic crop modification. In January
2013, he told a farming audience in the UK, "The GM debate is
over... You are more likely to get hit by an asteroid than to get
hurt by GM food. More to the point, people have died from choosing
organic, but no one has died from eating GM." He said, "[T]he risk
today is not that anyone will be harmed by GM food, but that
millions will be harmed by not having enough food, because a vocal
minority of people in rich countries want their meals to be what
they consider natural."
So far, despite the flood of anti-GMO sentiment, Monsanto's
fortunes seem relatively unaffected. Its financial strength is
currently derived from a strong balance sheet with cash and cash
equivalents of $2.9 billion. Since 2010, it has been rigorously
taking steps to increase shareholder value. In June, it announced a
$2 billion share repurchase program ending in 2016 and its fourth
dividend hike in three years took effect, resulting in a cumulative
increase of about 60%. The company also has strong political
connections and many former employees in high places. Among them
are Supreme Court Justice Clarence Thomas (who worked for Monsanto
in the '70s) and Michael Taylor, deputy commissioner for foods at
the FDA (who worked for a law firm that represented Monsanto),
along with several other notable figures.
Recently Monsanto joined with five other big crop biotechnology and
agricultural chemical companies --
The Dow Chemical Company
(OTCMKTS:BASFY) -- in a campaign to support better transparency.
The campaign's focus is its new website, GMOAnswers.com, which
responds to questions about genetically engineered crops. The site
also includes crop safety data similar to that which is submitted
to regulatory agencies.
"We have not done a very good job communicating about GMOs," said
Cathleen Enright, executive director of the Council for
Biotechnology Information, which runs the site. "We want to get
into the conversation."
The coalition of big biotech seed companies sponsoring
will clearly use the site as a platform to counter negative
consumer perception. However, in light of negative health findings
regarding GMOs, it looks like escalating global negative sentiment
will continue to hurt and could eventually doom the company. Yet
there is still considerable institutional support; many five-star
mutual funds currently hold Monsanto.