Robyn O’Brien is the co-founder of rePlant Capital, an impact investment firm, deploying integrated capital from soil to shelf in order to build soil health and financial resiliency for farmers. She is also the founder of Do Good, a strategic advisory firm, and the AllergyKids Foundation. Random House published Robyn’s book, The Unhealthy Truth, in 2009, and her TEDx talks have been translated into dozens of languages and viewed by millions around the world.
So we know that our food system is broken. Every day, another headline tells us that the FDA has changed its mind (trans fats), that food companies have changed their minds (dumping GMOs, artificial dyes, etc.), that consumers are changing their buying habits due to an increase in the rates of food allergies, diabetes, cancer and so much more.
As a result, companies, consumers and organizations are rethinking food. They are rethinking how we finance it and how we produce it. They are using the wisdom that we’ve acquired and marrying it with technology we’ve invented to create 21st century solutions.
The Plant is a great example of rethinking the financial and functional models of our food system.
Americans are quickly learning that industrial agriculture is not only not sustainable, but also increasingly responsible for a host of environmental problems. Meanwhile, urban farms are taking root in a big way.
We are reinventing the food system, dumping the junk, rethinking how food is formed and financed.
In Chicago, “The Plant” is located in a 93,500 square foot former pork packing facility. Built in 1925, the buildng was owned by Peer Foods, who operated onsite until 2006. Bubbly Dynamics, LLC purchased the building in 2010, and The Plant was born!
Bubbly Dynamics purchased the property for an extremely low price – about $5.00 per square foot. It was assumed that the new owner would simply strip the facility of an valuable metals, tear the building down, and build something new on the property. However, part of The Plant’s mission is to show that sustainable food production can happen inside of an existing, undervalued property such as this. To that end, instead of stripping the building and tearing it down, The Plant will reuse as much as possible of the building and internal materials.
We need a new food system, one that meets the needs of 21st century families and our changing world. It’s time to not just think outside the box, but to dump the box or build a better one. Take a look.
More news this week that Monsanto is upping its offer for Syngenta, in an effort to try and strengthen its image and its business. It’s no wonder. With the World Health Organization labeling glyphosate—RoundUp’s key ingredient—as a probable carcinogen, things aren’t looking so good for Monsanto lately. On top of that, the World Health Organization is now looking into another treatment that is used on our food crops. How many of these synthetic chemicals can our food supply withstand? What do they do in combination? And what is it doing to our farmers, their families, their farms and our food?
We tend to have a one-sided conversation in the press here. But in the U.K., it’s a different story. The Guardian recently ran a video that caught our attention. The gist of it? Why are we letting a company known for its deadly chemicals control our food?
The Undercurrent—an online news show billing itself as an antidote to the five-second soundbite—dives into the world of mass agriculture to ask how one company has such huge control over the world’s food supply. The name Monsanto was once synonymous with Agent Orange as well as other dangerous chemicals.
Right now, the company is doing everything it can to spin itself as a bee-loving, food loving entity. But one look into their financial statements and their forward looking statements tells another story.
Today it’s the dominance of the pesticide RoundUp—and GMO seeds designed to withstand RoundUp—which keeps the company on top of the financial heap.
With the World Health Organization labeling glyphosate—RoundUp’s key ingredient—as a probable carcinogen, things aren’t looking so good for Monsanto lately. Take a minute to watch the video below.
Transparency is sexy. Misleading people, not so much.
If you had no idea that ingredients, labeled by the EPA as pesticides, are hiding in your food, you’re not alone.
Here are nine dirty little secrets about GMOs that impact everyone from farmers to families to the financials of our economy:
Shh, don’t mention the food waste: “We need this technology to feed to world,” is the marketing cry of the big chemical companies. In truth, they do need this technology to feed the expectations of shareholders, but it turns out that more than one-third of the food produced in the world goes to waste. That amounts to 1.3 billion tons every year, costing us economically. In this country alone, we throw away 96 billion pounds of food every year, or 27 percent of the total amount of available food. That’s 3,000 pounds of food a second. With the United Nations on record saying that we need more than just genetically engineered food tools in the toolbox, it appears what we also need is a smarter distribution model to address this waste.
Forget Big Tobacco, it’s Big Razor’s playbook: Gillette will practically give away the razor to get people hooked on buying the razor blade. It’s a smart strategy for chemical companies, too. They offer the genetically engineered seed at a discount, then get farmers on the hook for buying the chemicals and suite of chemical products required to make their seeds grow. Pesticide application is up 527 million pounds since the introduction of these genetically engineered crops.
EPA now regulates this genetically engineered corn as a pesticide. Seriously, if you had the choice on your kitchen table or at a BBQ between a corn regulated by the EPA as a pesticide and one that wasn’t, which would you choose? No brainer. We should know which one is the pesticide and which foods it is going into.
Pre-treated seeds routinely coated with chemicals: It’s called an accelerating agent, and seeds are pretreated before they are ever even put in the ground. It’s been happening for generation, but it’s taken on a different meaning with the introduction of genetically engineered crops. Is it any wonder that farmers using these seeds are increasingly worried about what it is doing to the quality of their soil?
Pouring on the Pesticides: The latest analysis shows that genetically engineered crops have driven up overall pesticide use across the country, contributing to a 527 million pound increase in herbicide use between 1996 and 2011. And last year alone, genetically engineered crops used 20 percent more pesticides on average than non-GE crops. Who pays for that? Farmers and the people that eat them. Who benefits? The chemical companies selling the seeds engineered to withstand these increasing doses. It goes straight to the bottom line and into the bank. Is it working? Roundup resistant crops are now spreading across the country.
Patent the Chemicals as a Drug: The increasingly controversial weed killer, glyphosate, has been patented an antibiotic: Who knew that the patent had been filed? Apparently the US Patent and Trademark Office. As a growing number of farmers express concern over what this chemical is doing to their soil as headlines around the world express concern over what it is doing to humans, you have to ask yourself: given the 21st century technology we have today, is it time to make this 20th century, chemically intensive operating system, obsolete?
Patents protect intellectual property: “The development of genetic engineering of plants in the 1980s was accompanied by a sequence of increasingly specific confirmations of the patentability of various types of life forms, provided that they met the standard patent criteria of novelty, utility and nonobviousness.” Nonobviousness is pretty discreet. So let’s say a pediatric cancer or autism group wanted to study if these crops and chemicals are contributing to the rates of cancer or autism. They’d have to go to Monsanto or the other big chemical companies for permission. It’s worth considering that just as Big Tobacco did before it, these chemical companies just might possibly be relying upon concealment of its documents from the public under intellectual property law to avoid liabilities and to evade regulation.
Technology Stewardship Agreements lock farmers into contracts for genetically engineered seeds. Want to break the contract? They’ll sue you. Seed producers sign the agreement, farmers get a technology card. A farmer in Iowa is living testament to the way these lawsuits happen if a farmer wants out of a contract. Once he realized that the details of that contract locked him into purchasing Monsanto’s suite of products for the life of the farm, it felt like a noose. When he wanted out, they made a point of showing the farming world that it wasn’t an option and sued.
Labels mean liability: Right now the companies using these genetically engineered foods want a ban on state labeling and are trying to stop a growing call for mandatory national labeling. Why? Because without labels, this “GMO Buyers Club” can claim that there is no evidence that these crops have ever caused any harm. And guess what? Without labels, they are right, there is no evidence. Labels would bring accountability, traceability and liability. It’s no wonder that the food industry is so allergic to labeling these genetically engineered ingredients in the United States. An allergic reaction to food sends someone to the ER once every three minutes.
We label the inside parts of our cars, our cell phones and our computers, so why is the chemical industry so cloaked about what goes into our food?
Can you imagine if Intel operated this way? There would be no Intel Inside and no way of knowing which parts of the operating system were functioning as promised and which parts might be detrimental to the system.
We’ve got GMO Inside our food, but no label to tell us.
The chemical industry argues that labeling would drive up food costs, and they would have to pass these added expenses on to consumers. But it doesn’t ring true, especially when you look at how American food companies label these ingredients in the products that they sell overseas and at the number of label changes for pink ribbons, Easter Bunnies or holiday packaging.
Without labels on genetically engineered ingredients, the industry can claim “no evidence of harm.” And they are right. Without labels, there is no traceability, accountability and liability. No way for these companies to be held accountable for the costs that they are externalizing onto society, our farmers, their farms and our economy.
But if the tobacco industry is any indication, it is only a matter of time before these externalized costs come back onto the financial statements of the chemical companies. Farmers and families are being impacted, and there is an antecedent here: it is Medicaid Third Party Liability (TPL) recovery obtained from “Big Tobacco,” totaling $240 billion.
As the number of food companies opting out of these ingredients grows, so too, does the number of attorneys who have children that are impacted by food allergies and other conditions.
The food awakening is on, and the companies that are opting out of genetically engineered ingredients and willing to be transparent with the consumers are capturing market share.
That is sexy to shareholders. Hiding your ingredients and making food dirty with GMOs and lots of chemicals? Not so much.
I was on a call this morning with Applegate’s team, listening to the founder talk about his decision to sell the company to Hormel.
He spoke, as most founders do, of the personal story that inspired him into the business, of the near failure of the company and of his passion to persevere. He also spoke about the stroke that he had a few years ago that forced him to consider his leadership position and his struggle to find a replacement.
It takes a certain type of person to pioneer, and as he spoke about his decision to sell Applegate to Hormel for $775 million, I found myself wishing once again that we had financed a smarter food system.
What we call “organic,” other countries call “food”. Overseas, they label the new ingredients, the GMOs, the artificial growth hormones. In the U.S., we use the adjective “organic” to describe food that is free from these artificial ingredients. Pioneers like Stephen have fought for it.
The companies that are willing to be transparent in the U.S., to keep their products as clean and free-from artificial ingredients as possible, are the ones that earned the trust of a generation of parents. Most of those companies are in the organic space. I had no idea what “organic” meant at the time and dismissed it as a marketing gimmick, but I quickly learned that according to the USDA, by law, organic products are products that are produced without the use of artificial growth hormones, artificial dyes, sewage sludge, genetically engineered ingredients and the synthetic pesticides routinely sprayed on them.
In other words, food that is free-from certain artificial ingredients.
As I looked at the food industry that I’d once covered as an analyst, I saw both sides: organic and conventional. It was as divisive as any religious belief. On one side were the brands that we’d been raised on. We trusted them the way we trusted our own moms, our families that had used them. On the other side were brands we’d never heard of. Were they safe? Did they taste good? Could we trust them?
Over the last ten years, I’ve watched a lot of organic brands earn our trust. They’ve communicated non-stop on social media, connected, invited the dialogue and listened to us as we’ve shared concerns around the escalating rates of food allergies, cancer, autism, diabetes and obesity. We’ve broken up with older brands. We’ve dumped them. They weren’t good for us, so we moved on. We started relationships with these newer organic brands: they understood our concerns, our fears, our hopes. We worked together.
As that began to happen, and the organic industry began to grow: I looked at the two sides again and could see a very dividing line: on the one side were brands of the 20th century, built out of a food system defined in the 1970s and 1980s. On the other side were 21st century brands, companies that had grown into their own as we did, while the landscape of the health of our families changed.
In 2014, sales of organic food and non-food products in the United States broke through a record, totaling $39.1 billion, up 11.3 percent from the previous year. Organic sales are now near a milestone 5 percent share of the total food market. But that is still only 5% of a massive industry, and it made me step back. We don’t have enough farmland under organic management to meet this demand. We are outsourcing the opportunity to other countries.
But there is a huge problem: According to the Department of Agriculture, there’s around 915 million acres in cropland or pastures in the U.S., and of that, around 5.5 million are organic. That’s less than 1 percent of the total.
If we are truly going to change the food system, we have to acknowledge that the organic industry needs a stronger supply chain. 1% of farmland doesn’t meet the needs of the 5% share of the total food market. We have to recognize the risks that this presents, as well as the returns.
An industry that has a 5% share of the total food industry also means that the organic industry wide open and vulnerable to acquisition.
How so? The entire organic industry has a market capitalization of $39 billion. By comparison, the market cap of PepsiCo is $141.4 billion. The market cap of Coca Cola is $178.7 billion. Together, the market caps of Coca Cola and PepsiCo alone are ten times the size of the organic industry.
In others words, as much as the biotech industry would love to have everyone believe that there is a problem with “big organic” it is a misnomer, as the entire organic industry could be acquired by big soda.
With the announcement of Applegate’s acquisition by Hormel for $775 million, shares of White Wave started moving again on rumors that Coca Cola would acquire it. It would make sense. Coca Cola missed the opportunity to build out this section of their portfolio, so the fastest way to buy into the growth is through acquisition.
It’s not surprising, and it’s not unprecedented. When a seven or eight hundred million dollar offer is put on the table as it was with Annie’s and Applegate, it is hard to turn away, as that capital infusion represents access to growth, economies of scale and other ways to reach more consumers. Nowhere else is there access to that kind of capital for these companies at that cost.
In a perfect world, where there is an economic equilibrium between the production costs of organic and conventional, the goal would be to have companies like Hormel buy in without companies like Applegate selling out. But given the capital structure of our food system, it is increasingly tough.
We’ve financed a chemically intensive food system, built on genetically engineered crops designed to withstand increasing doses of weedkillers that the World Health Organization now deems “probably carcinogenic.” In other words, we’ve financed a food system with government subsidies that may cause cancer, while charging organic food companies and farmers fees to prove that their products are safe. It’s like getting fined to wear your seatbelt. On top of that, an IPO is more expensive than an acquisition: banks are paid fees to structure, shop and process the deal. As Applegate considered its next move, to IPO or to sell, the financials favored the sale because it is less expensive than the IPO in the short term.
But what about the long-term?
We’re staring down a barrel when it comes to our health. Ask anyone at work, on the sidelines of a soccer game or at the next classroom event what their health concerns are in their families, and they will have a list. Cancer, diabetes, autism, food allergies don’t care what side of the aisle we are on or where we land on the socio economic ladder. They steal people that we love regardless.
The beauty of the 21st century is that we have technology and tools that have never existed before.
The beauty of the 21st century is that we have technology and tools that have never existed before, and using innovation, strategy and creativity, we can design a smarter food system, a smarter capital system, a more efficient IPO process.
To build a better food system is critical for the health of our economy, our competitiveness in the global marketplace and for our families.
Did anyone expect to create value in the industry so that Hormel and others could come in and capitalize on it through acquisitions? Some did, but not everyone.
Companies like Hampton Creek are building an entirely different model, declining offers and looking towards an IPO process that allows stakeholders to buy in. It’s happening across the food system, from fast food restaurants like Lyfe Kitchen to those in the supply chain.
Companies like Target, Kroger, Similac, Panera, Taco Bell and even Pizza Hut are dumping ingredients that the FDA has told us are “generally” safe. In one day, Similac baby formula and Hellmann’s mayonnaise announced that they are launching GMO-free products, Jelly Belly announced they are launching organic jelly beans, and Taco Bell and Pizza Hut announced that they are dumping artificial ingredients, ingredients that the FDA has said are “generally” safe. So what purpose does that agency now serve if consumers and food companies are moving past it? Is it underfunded, overcommitted, sold to the highest bidder or simply broken? Should we have a food agency that is separate from the drug agencies like other countries?
There is a lot of work to be done. And it can’t happen quickly enough. With just 1% of U.S. farmland dedicated to organic farming, the industry is going to choke on its own growth if it doesn’t address supply constraints and capacity. An organic check-off program would begin to address is, but a reboot and refinancing of the entire system is needed.
Many believed that if we threw ourselves into this work to create a better food system, that 21st century iconic brands would replace the relic brands of the 20th century. The founders of Applegate and Annie’s believed it, just as the founders of the iconic 21st century brands do.
I truly believe that it will still happen and that this period of consolidation will be followed by a period in which these companies are either spun back out or in which they reinvent those that are acquiring them. And there will be a few that will be willing to go it alone, despite the jeers, the naysayers and non-believers, just as Apple did in the tech world and Tesla in the automotive industry, and there success, no doubt, will be enormous.
78 percent of organic buyers say they typically buy their organic foods at conventional food stores/supermarkets. Over half also shop organic at the “big box” stores, and some 30 percent also report that it’s not unusual to buy organic at one of the warehouse clubs in the country.
African American and Hispanic families have been steadily increasing among the ranks of organic-buying households.
Organic is not a fad because caring for the health of our families isn’t one either.
The health of our country depends on a healthy food system.
But right now, as new companies get started, we are in an intense stage of consolidation. Food allergy families have trusted some of these brands like Enjoy Life Foods with the lives of their children. Cancer families have done the same. The statistics driving this food awakening are powerful. They are not a trend: cancer is the leading cause of death by disease in U.S. kids and now impacts 1 in 2 men here and 1 in 3 women; a food allergic reaction sends someone to the emergency room once every three minutes in the United States.
The financial cards are stacked against the companies trying to deliver free-from food, “organic” if you want to use that adjective. Nothing is impossible, as Nature’s Path and Amy’s are fighting to prove, but it’s hard. It’s not impossible, again, just look to Apple.
But what will be harder is to look into the eyes of our kids when they ask what we did to build a better food system.
It is an all hands on deck time. The leadership teams of General Mills and Kraft are not immune to the conditions hammering our families and our country.
As these acquisitions continue, these smaller brands can serve as a compass inside the larger ones. The differences in cultures are great, but courage is contagious. The string of announcements over the last few weeks of food companies dumping the junk shows just that: from Panera, Kroger, to Target, Taco Bell and Pizza Hut, the desire for food that is free-from junk is no more of a fad than cancer is. They are not ignoring the science, they are responding to calls for more science, more evidence and more precaution in light of the escalating rates of diseases in our families. They are responding to the changing demands of the 21st century family.
Until we refinance the system, consolidation will continue. Market caps will be lost and gained by those that choose to do the right thing.
The divide between organic food brands and conventional ones may be deep. With the health of our country resting squarely on our shoulders, we have a choice: to make a bigger mess of our food system or to build a legacy.
As I listened to the founder of Applegate on the call, he spoke about scaling, because “it’s a decision to do something right.”
Can it be done by Applegate and others?
His response: “a resounding yes,” and then candidly, he said, “It is not without risk.”
Nothing worth doing ever has been without risk. It is an all hands on deck time. The organic industry is growing, perhaps not in the way that we might have imagined, but it is growing. To jump ship now concedes defeat. Now is the time to measure and manage the changes in the organic industry, to uphold standards and to create new ones.
The opportunity in front of us is enormous: 95% of the food industry.
The legacy of a better food system is ours to create.
Update: Applegate has been acquired by Hormel for $775 million. Rumors swirled back in February that Hormel is in talks to acquire Applegate Farms, the natural and organic meat company. As the news hit, the cry of “Nooooooooooooooo!” reverberated across the food movement.
Spam isn’t exactly a 21st century brand. Applegate very much is, meeting the needs of 21st century consumers who are looking for “free-from” foods.
But here is what I wrote back in February as those rumors hit, and here’s to Applegate helping Hormel to navigate this changing landscape.
So if Hormel can’t grow its mystery meat, is it any surprise that they are willing to purchase a company that is seeing 25% growth a year? These mega, 20th century brands, have one choice: embrace this new food economy or become obsolete.
And that embrace is increasingly looking like acquisitions.
Brands like Applegate have met the 21st century consumer where he or she stands: in the grocery store aisles with a family member battling any one of these conditions, looking for food that is “free from” artificial ingredients.
Many things are driving this food awakening and consumers’ quest for food that is free from things like allergens, artificial dyes, high fructose corn syrup and genetically engineered ingredients.
Our country is dealing with conditions like food allergies, asthma, diabetes, obesity and cancer at rates like never before.
And just as the announcement that General Mills would acquire Annie’s set off an emotional grenade, the news that Hormel might acquire Applegate has done the same.
There was an allergic reaction. The landscape of food is changing.
No one could have anticipated food ingredients designed by chemical companies that have been genetically engineered to produce their own insecticides. Nor could the industry have anticipated this food awakening, driven by the escalating rates of diseases and conditions like cancer, autism and food allergies and other conditions impacting the health of the people that we love.
Food allergies in our children are forcing us to read labels, as quickly as cancer diagnoses are forcing the same. No one would choose to be standing in the aisles of the grocery store, holding the hand of a child with food allergies or autism or managing a parent’s cancer diagnosis, yet that is where so many of us find ourselves today. We are being forced to read labels to protect the health of our loved ones, whether we want to read them or not. And sales of organic foods are soaring, as consumers try to eat a little bit better, a little bit cleaner and opt out of artificial ingredients. The U.S. branded organic and natural foods industry’s sales have been growing at a 12 percent compound rate over the last 10 years.
And while big food companies like Hormel and General Mills might have fought this for some time, they also aren’t stupid, and their job is to drive shareholder return. Sales of processed foods and conventional products that are pumped full of artificial growth hormones, artificial dyes and other artificial ingredients like GMOs are lackluster at best. The industry watches companies like Kellogg entrench and refuse to address this change in demand. What happens? Sales slump, and Kellogg’s reports a 136% plunge in profits.
It’s a slow death by artificial ingredients.
One look at the share price of Kroger or Chipotle tells the story of what happens to a company that expands into this ‘free from’ category: shareholders are rewarded.
Why wouldn’t a company want to enter this space in a meaningful way?
Change is hypocritical.
Hormel has been part of the anti-labeling brigade. Led by the Grocery Manufacturers Association, they have been a member of the team of companies that have spent millions to keep consumers in the dark.
That is their problem, as taking the position that a consumer does not have the right to know how her food is made, despite the fact that we are told if milk is pasteurized or if orange juice comes from concentrate, is undemocratic. It’s a freedom enjoyed by 60% of the world’s population.
So just as there was outrage over the marriage between General Mills and Annie’s, the same sentiment is out there as Hormel eyes Applegate.
The reaction that consumers are having to the announcement is the fear that Hormel wrangles Applegate into submission. And while Hormel can operate Applegate with an expansive economy of scale and get their price to manufacture down, it’s not all altruistic. Hormel also knows that people are willing to pay more for Applegate’s products. It’s a way to diversify their portfolio, get better, higher margin products to market and increase Applegate’s availability in the marketplace. It’s good for business. They also see the writing on the wall, and it doesn’t contain the letters “G-M-O.”
The fear is that Applegate will fold, but this is where leadership and personal stories step in. Applegate’s CEO is a dad who led the company through extraordinary change, saw it burn to the ground and built it back up. He knows the supply chain, animal welfare issues and knows the demands of the financial world. He also knows what it is like to see someone that you love face serious health challenges. He knows that families around the country are experiencing these challenges every day.
And like the CEO of Stonyfield did when he expanded the brand and the reach of the yogurt company through its Danone partnership, perhaps Applegate found a partner to expand and capture economies of scale that the company couldn’t on its own. Stonyfield’s founder never backed down.
Just like General Mills buying into the organic movement through the purchase of Annie’s provided distribution and access to capital, Hormel buying into the movement could do the same.
Is consolidation the best answer? “These big food companies aren’t going to let anything else happen,” said one of the portfolio managers that I used to work with when I spoke with him today.
And right now, our food system is currently structured in a way that the costs of production for organic ingredients are disproportionately higher. It is structured this way at the federal level. It is not a level playing field for the organic industry. And when a company goes public, the way that Annie’s did in 2012, it is opening itself for an acquisition.
Since 2012, Applegate has been talking about how to grow, either through a public offering or some other way.
Does it mean that it will always be this way? That policy will always be this way? Not at all. Policy follows the money, and right now, the organic industry is growing while conventional is stagnant. The landscape of the food industry is changing at every level. Amazon is entering the retail space, online distribution companies are entering, too. Farmers market and community supported agriculture are taking off. Why? Because the grocery retail structure makes it hard for smaller brands to compete. They either have to sell out or buy in. It requires capital.
To hit the scale and scope of distribution that makes a product accessible and affordable to all Americans, companies have repeatedly sold themselves to a larger company: Stonyfield to Danone, White Wave to Dean Foods, Happy Family again to Danone. The list goes on.
Have these brands sold out? Or have the bigger brands bought into the organic movement? Stonyfield didn’t sell out. Happy Family didn’t either. Both companies were founded by people who have personally known how autism or cancer can impact a family.
Do I wish there were other ways for these companies to scale? And that the food industry had a level playing field for organic companies? Absolutely. There is nothing that I would rather have seen then Annie’s, White Wave, Hain Celestial and other organic brands become the iconic brands of the 21st century. Our generation’s iterations of Kraft, General Mills and Pepsi. To see Applegate replace Hormel as the iconic brand.
Perhaps this is the first iteration towards that. But right now the cost structure is prohibitive. We haven’t financed a healthy food system at the federal level. If farmers want to grow organic crops, they lose the crop insurance protection programs, they lose subsidies and they lose marketing support. Is that financially viable? If you throw animal husbandry and animal welfare into that, you’ve got an even more complicated issue.
The food movement is not going away. Demand for food that is ‘free from’ artificial ingredients like food dyes, GMOs, high fructose corn syrup and other ingredients is not a fad, because cancer, autism and food allergies are not fads. We are seeing a fundamental shift in the way that Americans buy food, because we are sick.
General Mills obviously recognized that. Hormel does, too. They are hedging with these acquisitions, balancing their portfolio. The key is to not compromise the integrity of the Applegate’s brand in the process. Creative destruction is an economic term trumpeted by a man named Joseph Schumpeter. And change, in these early stages, often looks like hypocrisy. It often looks destructive. The question becomes: what is the long term objective here? Is it really to destroy a brand? No, it’s to capture its market share, its margins and expand into the category.
So how could this play out?
A look back at other historic acquisitions in the food industry gives us a feel for how this could play out, because if the share prices of White Wave and other organic companies are any indication today, this consolidation stage will continue.
In 1985, Philip Morris Cos. became a holding company and the parent of Philip Morris Inc. and bought General Foods. The acquisition of Kraft Foods came in 1988. In 2001, Kraft Foods spun out of Phillip Morris and launched an IPO for 11.1% of the company that raked in $8.7 billion, making it the 2nd largest IPO in American history at the time.
General Mills could spin Annie’s back out in a few years time, like Philip Morris did with Kraft or like Dean Foods did with White Wave. Hormel could do the same with Applegate. Maybe that IPO isn’t that far out, and we could see the ticker symbol “MEAT” in 2020. They would drive enormous shareholder value if they stay true to the brand.
If they don’t, there are plenty of examples of fallout in the food industry. From Kellogg’s, to the companies that made pink slime to those that put yoga mat material in their buns. Shareholders suffer if companies don’t response to the 21st century online consumer.
We live in a day and time where online bullying can take many forms. At the end of the day, no one misses a beat, and companies that think they can pull a fast one on the consumer are quickly proven wrong.
Refinance Food
We have financed a food system that gives food companies the incentive to use the cheaper ingredients. The cost of producing organic ingredients is disproportionately higher than producing conventional, genetically engineered crops. On top of that, farmers that choose to grow organic crops don’t get the crop insurance programs and marketing support programs. In other words, their entire cost of production is higher. That hammers all of us. It hammers food companies trying to do the right thing.
And as much as any of us want to romanticize food, right now, this is our current capitalist structure, and until we refinance the food system, this won’t be the first of these acquisitions.
What if the cost of production were the same? What if farmers, regardless of what they choose to plant on their farms, could receive crop insurance programs and marketing support? What if food companies, regardless of what they choose to use in their products, had to label their ingredients as genetically engineered or not.
Right now, there is economic discrimination. Costs are disproportionately higher for those who want organic food, from the farmers growing it to the food companies using it to the families eating it.
Does anyone want it this way? Does General Mills? Do our farmers? Do our families?
But we weren’t given a choice.
Right now, our taxpayer resources are used to support the food system dependent on GMOs and chemicals. What if at the voting booth, we got to check a box?
Do you want your taxpayer resources to support the food system? And if yes, which would you rather see support given to farmers growing organic ingredients? To food companies using them?
How do we want our tax dollars to work in the food system?
What would Hormel choose if price weren’t an issue? If there were an economic equilibrium, which ingredients would Hormel choose? What livestock feed? Genetically engineered or organic? And why haven’t we structured our food system with this kind of pricing parity?
Right now, no one has been given the choice because of the financial structure executed at the federal level through the crop subsidy programs, the crop insurance programs and the marketing support programs. They only go one way.
Is this acquisition a symptom of that unhealthy financial structure?
It wouldn’t be a hostile takeover. Applegate would enter into it like Stonyfield did with Danone or White Wave did with Dean Foods.
The question is whose compass is stronger? What will consumers do to send the message to Hormel that being part of the anti-labeling campaign is detrimental to shareholders?
Like Annie’s did, Applegate has the wind at its back. Hormel knows that. Consumers want “free from” food. Food that is “free from” artificial ingredients, artificial dyes, growth hormones and genetically engineered ingredients. One look at the share price of Chipotle tells that story.
As more and more companies enter the organic space, either through new products or through acquisitions, it again begs the question: is the Grocery Manufacturers Association a relic of the 20th century? If this organization is not working to meet the needs of its member companies, should it still exist in its current form? Or should a new organization, let’s call it the Food Production Association, be formed to meet the evolving needs of these brands in the 21st century?
Change at its very core begins with hypocrisy.
If Hormel chooses to make a strategic shift and follow Applegate into an industry with a 12% compound annual growth rate, capitalizing on Applegate’s 25% growth, delivering a portfolio increasing full of “free from” foods, shareholders will be rewarded. The rates of cancer, autism, food allergies and other conditions aren’t declining. This food awakening isn’t a fad.
Applegate has the potential to be a powerful compass for Hormel. If the companies are serious about their commitment to the 21st century consumer and their shareholders, they should step away from the Grocery Manufacturers Association’s anti-labeling campaign and join the consumer where she stands: in the grocery store aisles, reading food labels while holding the hand of a loved one with allergies, autism, EoE, cancer, diabetes or any one of the conditions impacting our families today and deliver exactly what she wants: food that is “free from” artificial ingredients and information about how she can protect the health of her family.
It’s up to Hormel if they continue to operate with a 20th century mentality or if they will move into the 21st century with the consumer and Applegate as a compass. It’s a big ask, but it’s important to look at what can happen if they don’t follow Applegate’s lead. With a 136% profit slump, Kellogg has an entrenched story to tell.
Applegate’s goal is to change the way we eat. It’s already happening.
It’s up to Hormel to decide what story will be theirs.
The smartest thing Hormel could do for its shareholders is to use Applegate as a compass and dump the junk. Instead of spamming Applegate, shareholders should pay attention to why this acquisition makes sense in the first place: demand is shifting. 21st century consumers want “free-from” food. No amount of Spam is going to change that.
Today’s announcement that Similac will offer a GMO-free baby formula exclusively at Target speaks to the changing landscape of the health of our children. Similac announced the change in response to consumer demand.
The landscape of childhood has changed. No longer are our children guaranteed a childhood free from diabetes, obesity or food allergies, and parents are standing on the front line.
Parents are looking for food that is free from artificial ingredients: artificial dyes, artificial growth hormones and the newly patented genetically engineered ingredients, engineered to be “Roundup Read” and resistant to a weed killer that contains glyphosate, an ingredient that the World Health Organization recently declared a “probably carcinogen.”
The escalating rates of childhood cancers, increasing diagnoses for conditions like autism and food allergies, and the rates of obesity and diabetes have earned this generation of children the title of “Generation Rx”. They are the first generation of kids expected to have a shorter lifespan than their parents.
According to the Centers for Disease Control, cancer is the leading cause of death by disease in children under the age of 15. The journal Pediatrics has reported that 15% of American girls are expected to begin puberty by the age of 7 (with the number closer to 25% for African American girls) and a growing number of American children struggle with obesity. On top of that, the rate for having food allergies is 59% higher for obese children, with the Centers for Disease Control reporting a 265% increase in hospitalizations related to food allergic reactions. And while not all of those hospitalizations are for our children, what is becoming increasingly obvious is that the health of our children is under siege.
U.S.-born children have a 34.5 percent chance of developing asthma, hay fever, eczema and food allergies, compared with just 20.3 percent of foreign-born children. In addition, children born outside the U.S. but then moved here were more likely to develop allergies the longer they lived in the country.
When I shared this data with a journalist, she was speechless, and I found myself again wondering: What have our children possibly done to deserve this? And more importantly, what can we do to protect them?
This changing landscape of childhood is changing the face of American families and our economy. We already spend almost 18 cents of every dollar on health care, managing disease. The pharmaceutical companies can’t keep up with demand, and now there are shortages for drugs used to treat cancers and ADHD.
But more often than not, the solution is not found in the medicine cabinet, but in the kitchen, and parents are doing everything they can to protect the health of their children.
Writers that are fortunate enough to not be dealing with conditions like autism, food allergies and pediatric cancer have begun to refer to these parents as the “tyranny of the organic mommy mafia.” Tyranny is a strong word. Merriam Webster defines it as “cruel and unfair treatment by people with power over others.”
Parents that do unexpectedly find themselves on unfamiliar territory are doing everything they can to protect the health of their children. There are others who are fortunate to not know what it feels like to watch your son have a blood disease that literally renders him unable to walk or to have a child suddenly stop talking or to have something as simple as a sandwich be so life threatening. No parent would choose to have these things happen to their child. No parent would choose autism. No parent would choose food allergies and the burden it places on a family every day.
But too many of us now find ourselves staring down these conditions. Food allergies affect 1 in 13 children in the U.S., autism affects 1 in 68, asthma 1 in 10 children, and cancer is impacting 41% of Americans. The conditions themselves can at times feel cruel and tyrannical.
And as scientific evidence continues to mount, courageously presented by doctors like Mark Hyman, MD, in his groundbreaking book, The Blood Sugar Solution, and pediatric specialists like Dr. Joel Fuhrman and Dr. Alan Greene, about the role that diet and nutrition plays in the health of our children, parents are beginning to take notice. Doctors are taking notice, too. M.D. Anderson researchers have even gone so far as to name it, “the doorknob syndrome.” When patients are standing in their offices, having been diagnosed with cancer and given the details about what lies ahead, as they turn to leave the office, with their hand on the doorknob, will turn back in towards the doctor and ask, “Is there anything that I can be doing differently with what I eat?”
The President’s Cancer Panel, formed under the Bush administration and releasing its report under the Obama administration, says yes. The report, Reducing Environmental Cancer Risk, encourages Americans to reduce exposure to certain ingredients now being used in and on our food supply and to eat organic when you can, especially if you have children.
And as we introduce new foods that are nutrient-dense ( full of vitamins and minerals) and try to reduce our loved ones’ exposure to the foods that are nutrient-void (packing mostly artificial ingredients that have been synthetically engineered in laboratories), we are realizing that we have the power to affect remarkable change in the health of our children and families, so that together, we can stem this tide of children flowing into pediatric hospitals being built across the country.
Diet is a lot like religion, it is not one size fits all. And learning that our food contains ingredients for which no long term human health studies have been conducted can cause heartache, a heartache deeply felt by a mother of a child with autism or allergies, as these conditions can so dominate the life of a family, impact its freedom and flexibility.
To then learn that other countries have not allowed these new ingredients, introduced into our food supply in the last ten to twenty years, because of this lack of evidence of safety can then trigger more than just an adjustment in what you put into your shopping cart, it can change how you view our system.
It takes tremendous courage and strength to show up every day when you have a child with autism, allergies or cancer. It is not something anyone would wish for. It is something that writers, fortunate enough to not experience these conditions, could not possibly understand. It is far easier to shoot the messenger.
How do I know? Because I did the same until the epidemics were too close and too destabilizing to dismiss.
If our current spending on health care and disease management is a leading economic indicator, then exercising precaution, the way we do when we buckle our children into a car seat or strap a helmet on their heads, is one of the most conservative things that we could be doing.
From Kroger to Wal Mart, companies are recognizing this shift in consumer demand and responding to this food awakening. They are expanding their offerings so that moms in all socioeconomic categories have access to organic food at an affordable price. They recognize that moms are not trying to create problems, they are simply looking for solutions, standing in the grocery store aisles, holding onto the hand of a child with allergies or autism or diabetes, knowing that they represent the future of our country – our future soldiers, entrepreneurs, educators and innovators.
If you think about it, there is nothing more conservative or patriotic that we could be doing.
Last week, business leaders came together in DC to urge members of Congress to join key U.S. trading partners and pass mandatory labeling of genetically engineered ingredients in our foods.
As expected, the founders of Stonyfield Yogurt, Ben and Jerry’s and leaders from other food companies were there. But so was Rose Marcario, the CEO of Patagonia, Inc. So what do fleece, outdoor apparel and genetically engineered foods have in common?
In the article below, Patagonia’s CEO gives us her take on the importance of labeling GMOs and countering the biochemical lobby’s attempts to block the basic human right to know what is in our foods.
The answer, he said: “Not enough.” And neither does anyone else. In the proliferation of GMOs, Yvon saw a serious threat to wildness and biodiversity.
More than 10 years later, the prevalence of GMOs in everyday food products has risen sharply—but basic consumer awareness remains low.
An alarming bill before Congress aims to keep it that way. The Safe and Accurate Food Labeling Act of 2014 (H.R. 4432) will remove any requirements for manufacturers to label foods containing GMOs. Even the misleading name of the bill suggests an intention to leave us in the dark.
We all have a right to know what’s in our food. The manufacturers of GMO seeds maintain that GMO corn and soy, found in many everyday food products, are safe. But if they are safe, why not label them?
Currently, 64 countries around the world require labeling of foods containing GMOs. Most other developed countries—including 28 nations in the European Union, as well as Japan, Australia, Brazil, Russia and China—require labeling.
Yet, in the United States, various food companies joined together to sue the state of Vermont, the first state to pass legislation requiring labeling of GMO food. (Last month, a district judge ruled in favor of labeling GMO food.)
Sometimes a new technology puts us up against an edge that’s hard to see, feel or even define. New technologies, like genetically engineered food, should be labeled, so you can decide whether you want to risk ingesting them.
That seems like common sense to us—so it’s not clear why there is so much resistance to labeling GMOs. Among other arguments, large corporations pushing against labeling say the cost of new labels will be great and passed along to the consumer. But an independent study has shown this is unlikely as manufacturers routinely update labels for marketing reasons.
Further, we have a good, time-tested alternative to GMOs on a global scale: organic farming. Modern organic farming can be highly productive—as good as conventional systems but safer and more sustainable. It can produce high yields from small acreage through the use of locally adapted plants, intercropping, improved nutrient recycling and new techniques to minimize leaching, soil erosion and water consumption.
Claims that genetically engineered seeds will provide significant increases in agricultural production worldwide are probably true—but only in the very short term. In a comparison of organic and conventional yields, Rodale Institute discovered that after an initial decline in yields during the first few years of transition, the organic system soon rebounded to match or surpass the conventional system.
Organic farming puts food on the table (and clothing on our backs) without poisoning the earth.
Patagonia switched to organic cotton in 1996 because we found out how many pesticides are used in growing conventional cotton. In our new food line, Patagonia Provisions, we only use organic ingredients.
Business is responding with positive steps forward: In the last six months, several food and restaurant businesses have announced plans to reformulate products to eliminate artificial ingredients, including GMOs.
But even if people don’t buy organic, a majority say they want to know what’s in the food they eat. We should be informed and make our own choices about what we feed our families and ourselves.
So, as a clothing company that recently got into the food business, we believe it would be irresponsible not to push hard for transparency and other imperatives that will shape our ability to keep the planet and all its inhabitants alive and healthy in the future.
I was proud to join with other business leaders on May 20 in Washington, D.C., to talk to lawmakers about the critical need for transparency in food labeling. I encourage you to visit JustLabelIt.org to learn more about how to protect your right to know.
As more and more leaders begin to speak to the need to label these products, it prompts the question, yet again: with 60% of the world’s population already enjoying this transparency, why have Americans been kept in the dark?
Wal-Mart’s announcement that it is urging its thousands of U.S. suppliers to curb the use of antibiotics in farm animals shines a light on a practice that the meat industry would rather not discuss: the use of drugs on the meat that we eat.
80% of the antibiotics used in the U.S. are used on the animals we eat: injected into them, fed to them and many of the drugs are banned or restricted around the world.
As Wal-Mart steps into this issue, it brings to light one of the most controversial drugs in our food system: ractopamine.
Here in the US, the FDA approved ractopamine and allows the drug to be used widely in U.S. factory farm operations.
There are 196 countries in the world, and it is estimated that 160 countries them ban or restrict ractopamine. But the US? We are not one of them.
The U.K., China, Russia, Taiwan and the European Union ban or limit the use of ractopamine, a drug that promotes growth in pigs, cattle and turkeys. Ractopamine is linked with serious health and behavioral problems in animals, and human studies are limited but evoke concerns, according to the Center for Food Safety.
The U.S. meat industry uses ractopamine to accelerate weight gain and promote feed efficiency and leanness in pigs, cattle, and turkeys. The drug mimics stress hormones.
So how did this drug wind up in our food supply?
The FDA’s approval of the drug relied primarily on the drug-makers’ studies.
No problem, right? Who else would have access to that kind of proprietary information. But if you think about it, it’s kind of like the tobacco industry telling us that we didn’t need to worry about cigarettes. Industry-funded science tends to favor industry.
So what does independent research tell us?
Fed to an estimated 60 to 80 percent of pigs in the U.S. meat industry, ractopamine use has resulted in more reports of sickened or dead pigs than any other livestock drug on the market. According to FDA’s own calculations, more pigs have been adversely affected by ractopamine than by any other animal drug—more than 160,000.
So what exactly does this drug do to the animals that we are eating?
Ractopamine’s effects include toxicity and other exposure risks, such as behavioral changes and cardiovascular, musculoskeletal, reproductive and endocrine problems. It is also associated with high stress levels in animals, “downer” or lame animals, hyperactivity, broken limbs and death.
Based on a lack of available evidence of ractopamine’s safety, most countries have taken a cautionary approach to the presence of ractopamine in their national food systems.
In other words, with the jury still out, they have opted out.
Currently, it is estimated that 160 countries of the 196 in the world ban or restrict ractopamine.
Other countries seem to understand the importance of exercising precaution for stakeholders while the emphasis in our food system tends to focus on the importance of return to shareholders.
While our shareholder-focused food system may have worked for the last twenty years, with the landscape of health changing so dramatically, perhaps it’s time to examine consider the liability it now presents to stakeholders.
The twenty-seven European Union member states, for example, have banned ractopamine. Taiwan severely restricts it.
Russia has announced a ban of imported beef, pork and turkey that is not certified ractopamine-free, and China announced it would stop importing U.S. pork effective March 1, 2013 unless it is certified ractopamine-free by a third party.
As if that isn’t bad enough, while we are eating it, the U.S. has a certified ractopamine-free program in place to sell pork products to the E.U.
In other words, to meet this drug-free demand in other countries, we certify ractopamine-free meat for eaters in other countries, but we just aren’t yet doing it here.
According to the Center for Food Safety, “the U.S. argues that international bans on ractopamine are not based on scientific reasons, but are based on protectionist approaches to enable China, the E.U., and other countries to obtain greater market share. What the U.S. fails to acknowledge is that other countries are taking the lack of human health and animal welfare studies very seriously; ractopamine has not been conclusively determined as safe for humans and animals.”
While few consumers are aware of ractopamine’s use in meat production, the drug has been at the center of international trade disputes for several years, reported NBC News.
It’s not the first time that we’ve seen this, with other ingredients like genetically engineered organisms recently added to our food supply, those long-term human health studies flat out don’t exist. So the industry can conclude “no evidence of harm.” But that’s not the same thing as “evidence of no harm” which is why most countries either ban or label a lot of these new ingredients. It’s called the precautionary principal.
In light of the escalating rates of diseases in the United States and the concern over antibiotic resistance we are now seeing, isn’t it time to ask: What price are we paying for a meat supply so hopped up on drugs? And isn’t it time to join the 160 other countries around the world and begin to do something about it?
Smithfield, one of the largest U.S. pork producers, has at least one production plant that is 100% ractopamine-free and was expected to have its largest plant 100% ractopamine-free by March 1, 2013. These two plants likely service Smithfield’s E.U. and Chinese customers. However, Smithfield said that it will continue to produce pork with ractopamine for other customers. This means Americans. But in a twist, an Asian meat giant struck a $4.7 billion deal and acquired the Virginia based company in September 2013, according to the Wall Street Journal.
So while China makes acquisitions to ensure that its pork supply is free of ractopamine and public interest groups sue the FDA, demanding records of this controversial drug, consumers have a choice: to simply eat less meat or to purchase organic meat, which by law is not allowed to use this drug in production, until our own American corporations decide to make our meat ractopamine-free here in the United States, too.
As Wal-Mart steps into this issue, it’s time for other companies to follow. It’s time to build a food system that meets the needs of 21st century consumers, not just the corporations feeding them.
In October 2014, I interviewed Thierry Vrain, Ph.D. for the Colordado Right to Know GMO Labeling campaign. Dr. Vrain is a former soil biologist and genetic scientist who now speaks out against the risks of genetically engineered foods. Dr. Vrain’s career has spanned the full range of agriculture—from being a proponent of “chemical” agriculture and genetic engineering to being an advocate for organic farming and an opponent of GMOs.
While the video was originally done for the Colorado Right to Know Campaign, it bears even more relevance today since glyphosate has now been labeled as a probable carcinogen by the World Health Organization.
The result is a deeper understanding for us of just how pervasive and dangerous glyphosate, the key component of Monsanto’s RoundUp, is to human and animal health. Monsanto’s sales of RoundUp have exploded over the years since the introduction of genetically altered seeds designed designed to withstand the ravages of this dangerous chemical.
Monsanto’s claims that glyphosate itself poses no danger to human health are put into sharp focus by this video.
The world’s most widely-used herbicide, glyphosate, has been in the headlines a lot lately. It’s not good news for its manufacturer, Monsanto, who is currently trying to ink a deal with Syngenta.
Glyphosate is used in Roundup, a weed killer used to treat Monsanto’s Roundup Ready crops, crops that have been genetically engineered to withstand the synthetic chemical. The chemical company is now facing headwinds, as countries issue bans on the product, restrict its use after the World Health Organization declared it a “probable carcinogen” and halt aerial spraying.
Monsanto continues to face headwinds, not only in the field but in financing: the company was recently downgraded amid earnings disappointments and concerns around its capital structure after a series of debt financings were used for share buybacks.
A quick wrap up of the headlines around this controversial product shows that it may be on the verge of changing from an icon into a relic.
According to National Geographic, “introduced commercially by Monsanto in 1974, glyphosate kills weeds by blocking proteins essential to plant growth…more than 1.4 billion pounds (are) applied per year. Its use skyrocketed after seeds were genetically engineered to tolerate the chemical…. Between 1987 and 2012, annual U.S. farm use grew from less than 11 million pounds to nearly 300 million pounds.
If the concerns around glyphosate prove to be true, it represents a huge liability for the company.
Is Monsanto looking to divest of its glyphosate division through a Syngenta acquisition? Only time will tell, but this is what they are currently up against:
Last month, an international agency declared glyphosate, the primary ingredient in the popular product Roundup, a “probable human carcinogen.”
Glyphosate is not included in the U.S. government’s testing of food for pesticide residues or the monitoring of chemicals in human blood and tissues.
In Europe, there are similar concerns: “If one of the world’s wealthiest nations (Germany) does not have sufficient resources to conduct its own independent evaluations of toxicological evidence we might well ask what are the practices in regulatory institutions elsewhere?”
There is no information on how much people are exposed to from using it in their yards, living near farms or eating foods from treated fields.
Glyphosate was found in about 70 percent of rainfall samples.
90 percent of 300 soybean samples contained traces of glyphosate.
The weed killer also has made recent headlines for its widespread use on genetically modified seeds and research that links it to antibiotics resistance and hormone disruption.
Columbia President Calls for Suspension of Aerial Spraying of Glyphosate
German Retail Giant Removes Glyphosate (Monsanto Roundup) from 350 Stores
These are just the headlines from the last few weeks. In October 2014, Monsanto said on an earnings’ call that they anticipated some “headwinds” when it came to glyphosate and their Roundup product line.
