The Hershey Chocolate Company announced that they will be taking steps to manufacture certain products free of any GMO containing ingredients by the end of 2015. The specific products mentioned in the press release are the original Hershey’s Chocolate bars, and the Hershey’s Kisses product line.
This is the next step in a series of production changes made by the company in the past several months to focus on the manufacturing of their products with an emphasis on more natural ingredients. This shift is part of a larger food industry trend to satisfy the increasing demand by a more informed consumer base for products that are made from components of natural origin.
The Hershey Company had previously announced the removal of high fructose corn syrup from certain product formulations by replacing it with sugar. The company has been focused internally on a review of all of their product lines with the focal point being the replacement, when feasible, of certain ingredients with their natural counterparts. The basis for these formulaic changes is not just strictly along the lines of cost effectiveness. The ingredient substitutions have to make sense from a variety of perspectives in order to be instituted.
Saying No To GMO
The food industry has been much maligned within the mainstream media for their use of GMO containing ingredients in their respective products. The move today by Hershey has been met with praise by many groups with vested interest in the fight against GMOs in our food supply.
However, some reports mentioned that certain groups are pressing Hershey about whether they will stop using GMOs in more products. The three main areas were genetically modified sugar beets, milk from cows that has not been modified, and modified forms of vanilla. Hershey will also be removing the lactose present from these two product lines which is great news for Americans who are intolerant to that naturally occurring sugar present in milk derived products. I have written about this controversial topic in the past based upon my professional experience in the food industry for an ingredients supplier.
The main issue here for large multinational food producing companies is that the non-GM supply of certain ingredients is not large enough globally to meet the demand for the product. Therefore, the formula cannot be “scaled up” to meet the required amounts in order to be produced GMO free. It is what they would term in the food industry as a “production reality”.
Nevertheless, in my view, I think the Hershey Company should get credit for their announcement today and for taking steps to move toward producing some of their iconic confectionary products in a GMO free manner. Only a handful of companies in the industry have taken such a pro-active stance towards the potential revision of product formulations with the goal of removing GMO containing components. Hershey is an industry giant and this action will push others in the confectionary segment to follow suit.
The public perception of GMOs is a hot button topic. I have covered the debate on this issue for a couple of years now and it is only intensifying in the forum of American public opinion. The end of 2014 featured the latest chapter in the public backlash against agricultural chemical giant, Monsanto, which won a court decision in Hawaii. The people of the island of Maui had voted in a referendum measure on Election Day to have the use of any GMO products for farming banned from use on that island.
Monsanto appealed the results of the referendum measure by arguing that the law of the State of Hawaii super ceded the public voting mechanism on the island of Maui, and they won the decision. The people in Maui and in other parts of Hawaii remain divided on the issue. Some feel that the GMO ban would have caused the end of farming jobs in an already slow economy in the island state. The converse side of the debate was the belief by some that the use of GMO agricultural chemical products is harmful to the land, water, and environment in Hawaii and there is a growing sentiment there in the public that these products should be eliminated.
Hitting The Wallet
The public backlash against GMOs, hormones, and artificial ingredients in food products coupled with the trend toward health and wellness is forcing more and more food companies to review their supply chain sourcing methods as well as their product formulations. The objective of those reviews being to determine if alternative natural and/or GMO free ingredients could be substituted into the formulation and scaled up effectively.
This anti-GMO sentiment and the emphasis on wellness, what I refer to as the “natural foods” phenomenon, is also shaping the methodology for the research and development of new product line offerings for food companies. The recent product line announcements by General Mills are a good example of this response by a major food manufacturer to these trend lines.
The company announced new products in 2015 which focus on the incorporation of ancient grains and protein into their cereal lines. They also will roll out gluten free cereal formulations, and other products with a focus on wellness and natural ingredients.
The American consumer has been very vocal about their opposition to GMO products and artificial ingredients. The consumer public is much more informed than it was even 10-15 years ago because of the increased amounts of information available via the internet, and the rate in which that information spreads via social media platforms is unparalleled. Consequently, that same American consumer has to be prepared to face the facts that they will have to most likely face higher costs for those food products when they are made with healthier ingredients. The long and short of the matter is that these healthier products or GMO free versions of products will be more costly for the manufacturer and they will pass along that increase to the consumer.
In the case of the Hershey Company, they have most certainly studied the impact of the costs of making this formulation change with the products I mentioned earlier. In my experience, some commodity products, especially items like cocoa and vanilla, are highly sensitive to cost fluctuations based on a variety of factors. In the case of confectionary products in general, there are other key ingredients that must be sourced very carefully to avoid further cost increases for the finished consumer product. In my view, these factors drove the decision to phase in the GMO free production change at Hershey in a limited fashion to those two product areas.
The confection industry just recently completed a program to increase prices based on the changes in the market price of key ingredients such as cocoa. The Hershey Company specifically used a very intelligent approach by phasing in the cost increase to the consumer in stages over a period of several months instead of giving the consumer “sticker shock” by introducing the price increases in one large jump. I have written previously about this strategy, and all consumer feedback being considered, it was a successful method by Hershey to employ these increases in the pricing of their products.
Whether or not the American public will continue to pay higher prices for healthier food product choices remains to be seen. In the short term, it appears that it is not slowing down anytime soon. I would look for other food companies to follow Hershey and their lead from their announcement regarding the removal of GMOs from certain products where it is feasible. The continuation of that trend will lead to potentially higher prices, but in the end it is a “win-win” both for the food companies and for the consumer when it comes to this trend toward healthier or more natural food products.