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The fight against genetically modified organisms, otherwise known as GMOs, has found an unlikely ally. Food giant Campbell Soup Co. (NYSE: CPB) recently announced it will begin disclosing the use of GMOs in all of its products in the United States.
Campbell has struggled to meet the changing consumer landscape. The boom in organic food has taken the company by surprise, and its earnings are stagnating. But the Campbell Soup GMO stance could once again put Campbell back in consumers’ good graces.
While most giant food corporations have remained silent on the GMO issue, Campbell is breaking away from the pack by taking a firm stand. In the process, it may earn back the positive public image that has eluded the company for the past few years.
Campbell Takes a Stand
Campbell Soup Co. formally announced it supports federal regulation to establish a single, mandatory labeling requirement for foods with GMO ingredients, as well as a national standard for non-GMO claims made on food labels.
Taking it one step further, Campbell also said it would end any support for groups opposed to these initiatives.
In doing so, Campbell is breaking ranks. Many of its food and beverage peers, including PepsiCo (NYSE: PEP) and Kellogg Co. (NYSE: K), have utilized a great deal of financial resources in an effort to squash GMO labeling regulations across several U.S. states.
The food industry has lobbied hard to defeat such measures, saying that the proposed regulations would add significant and unnecessary costs. But Campbell has taken a different position; it believes the costs would be manageable, assuming a national standard is put in place.
Campbell has a dog in this fight. The most commonly genetically engineered crops, including soybeans and corn, are found in several key product categories for the company. To be clear, Campbell reiterated its belief that GMO foods are safe, and that the scientific evidence indicates foods using GMOs are not nutritionally different than other foods.
Reheating a Stagnant Brand
Over the course of its 150-year existence, Campbell Soup Co. became known mostly for its canned goods, including its namesake soups. But in recent years, it has made a big effort to branch out into new food categories. The reason is simple. Consumers – particularly in developed markets like the United States – are shunning canned, prepackaged meals in favor of fresher foods, like organics.
Campbell has already demonstrated a willingness to try new things. For instance, in 2014 it released its first batch of Campbell’s branded organic soups. It re-released old favorites, like chicken noodle and tomato soup, but also expanded into new organic varieties. And the ready-to-serve soups were packaged in cartons, instead of cans.
Campbell has also expanded into organics. It acquired the Plum Organics brand in 2012 for $1.5 billion. Its other brands that suit the rising demand for fresher, organic foods are Bolthouse Farms and Kelsen. Getting Kelsen was a twofold win: it also boosted Campbell’s presence in faster-growing geographic markets like China.
The problem is that these measures have not been enough to move the needle, because Campbell’s financial results continue to be dominated by its traditional core brands. Continued slowdown in its key categories is why the company’s net sales fell 2% in fiscal 2015, and by another 2% in the first quarter of the current fiscal year.
Campbell has been behind the curve when it comes to consumers’ newfound focus on healthy eating and fresh ingredients. But by breaking ranks and taking a stand against GMOs, the company stands a good chance of recapturing some of the customers it lost over the past few years.
DISCLOSURE: Bob Ciura personally owns shares of PepsiCo (NYSE: PEP).