At first, it doesn't seem to be very relevant issue outside aisles of natural foods stores. But debate over genetically modified foods is broadening to point where even purveyors of relatively mainstream foods and bevs are starting to develop GMO strategies. In many ways it resembles debate over high-fructose corn syrup: to date, there's been no conclusive scientific evidence to prove HFCS items are worse for you than other forms of sugar, but it's become purchasing criterion for some consumers anyway, particularly at higher end of income/brand spectrum. Ditto with GMO, where safety concerns of GMO critics so far haven't been borne out by science, even if some GMO defenders themselves acknowledge that cos often have proffered flimsy data in self-verifying their GMO items. (Most don't need pre-approval from govt agencies.)

Meanwhile, new developments are putting issue ever-higher on the public's radar. So far this year, Whole Foods made waves with commitment to label all GMO foods/bevs in its stores by 2018 and Chipotle said it would ban GM ingredients outright. In much-publicized scare, GMO wheat was discovered in Oregon - presumably a result of GMO plants from tests undertaken years earlier that may have infected other fields - and market for US wheat promptly took a dive on fears that commodity would be shunned by GMO-averse trading partners in Europe and elsewhere. On other side of balance, NY Times report last week made case that domestic orange-growing industry may evaporate if GMO breeds don't come to rescue. All this on heels of defeat last year of Proposition 37 in Calif following media blitz by big food/bev and agribiz interests. That was really a victory for anti-GMO forces, argues UNFI exec Melody Meyer, "because it brought awareness on a national level" to point where 37 states now are looking at legislation. Bills have passed in Conn and Maine, ballot initiative is brewing for Nov in Wash State to "Just label it," and Sen Barbara Boxer and Rep Pete DeFazio have proposed legislation at national level. Note that while corn and soy are most ID'ed with GMO, at levels exceeding 80% of total crop, as much as 50% of papaya acreage is GM and even items like radicchio and alfalfa are turning up as GMO.

So how important is issue to bev marketers? At organic soda mainstay Reed's, founder Chris Reed believes it's of growing importance to his consumers and retailer customers, as well as a personal passion. But at natural soda brand Grown Up Soda, co-founder Steve Hersh say it's not been a hot-button issue so far. (Most consumers only expect so much from their soda, he guesses.) Organic marketer Honest Tea has made it priority - and was stung at backlash it suffered after its parent Coca-Cola helped fund ad blitz that sent Prop 37 down to defeat last year. Even on beer side, issue has reared its head. This month, blogger who goes by Food Babe and is known for researching ingredients and alerting readers to products she deems unsafe, posted "Shocking Ingredients in Beer." Among them: GMO corn and other genetically modified items, a big no-no for the Food Babe and her anti-GMO constituents. Would some geeks abandon their beers just because of GMO corn, which is prevalent in everything else they eat? Hard to say, but issue bears watching.

Issue was batted around recently at Fancy Food Show during panel discussion that extended well beyond allotted hour slot. Presented by Specialty Food Association's Natural & Organic Council, panel included Helen Kor of Hain Celestial Group, Melody Meyer of UNFI and Errol Schweizer of Whole Foods Markets, with Natural Products Consulting Institute's Bob Burke the moderator. Given outsize influence of Whole Foods on issue, Schweizer was particular focus of questions from attendees.

So for starters, is legislation even necessary? Even GMO skeptics worry about fractured regs from state to state, and groups like United Natural Products Alliance have argued that, to extent that consumers really care about issue, labeling that you're non-GMO should provide meaningful enough competitive advantage that outright legislation may not be warranted. That's how things currently play out in organic arena, with items voluntarily winning organic certification enjoying an edge with certain consumers. At Whole Foods, for instance, Schweizer said non-GMO products are selling at 2-3X the rate of overall store growth. "It's about doing the right thing," averred Burke - but it can also yield a competitive advantage, he added.

Given nature of panel, no surprise all its members support disclosure. "UNFI absolutely supports full disclosure," declared Mayer, vp for policy and industrial relations at natural-foods distrib which works hand-in-hand with Whole Foods. Use of GM ingredients "is contrary to our vision of a sustainable food system." UNFI founder Michael Funk was at forefront of verification movement, she reminded. Further, consumer polls suggest broad support for disclosure, across party lines, she noted. Ditto at Hain Celestial, which has substantial UK biz and has long had to comply with more stringent EU labeling requirements. Despite absence of conclusive evidence of danger, "we feel consumers do have the right to know," said Hain's Kor. Hain published its policy back in 04 and currently can boast that 99% of its 2,000+ natural and organic-certified products are made from non-GMO ingredients. It's got 500 items across 10 brands (25% of US portfolio) currently enrolled in certifying org Non-GMO Project.

To Kor, there's no question that issue is of bottom-line significance to large natural foods retailers. At largest of those customers, non-GMO items are growing by double digits, she said. Whole Foods' Schweizer said its non-GMO items are growing at 2-3X the co's overall growth rate. (Further, items labeled as both organic and non-GMO enjoy an even faster growth rate, despite fact that organic by definition is non-GMO. Tho that seems like belt-and-suspenders approach, even informed consumers presumably appreciate extra layer of verification. Among major organic marketers, Hain Celestial and Garden of Eden are employing both.)

How Whole Foods Is Approaching Issue Tho target for full disclosure is 2018, within 2 years "we expect many categories with full transparency," especially those made with "high-risk ingredients," Schweizer said. That means not just ingredients used directly in WF items but also what animals were fed, etc. To expand supply, WF is working with feed mills, seed cos and others, on what Schweizer acknowledges is "Sisyphean task" given vast web of supply layers and subsidies involved in ag biz. To avoid label confusion, WF has decided to stick with Non-GMO Group as certifying agent, confining store items to 3 classes: organic, organic and Non-GMO, and just Non-GMO. While there's little question WF announcement jolted biz, Schweizer insisted that suppliers "have pushed us as much as we've pushed them" on issue. Even in categories that have not been GM-approved, such as wheat, WF is encouraging testing anyway, to deal with cases like the wheat incident in Ore. But Schweizer acknowledged that even simple setup is subject to abuse by unscrupulous marketers - say, by labeling as "non-GMO" items like almond butter that are not at risk. Retailer will deal with those on case-by-case basis, he said. (In cases of non-GMO foods like those, Hain's Kor suggested, phrases like "a non-GMO food" may be helpful so shoppers understand this is not a GMO category.)

Pragmatics are complex, Schweizer said, and "we got ahead of ourselves a little bit" with announcement, he acknowledged. Co hasn't yet figured out how to handle complex categories like cheese from point of view of evaluating GMO content. And while some consumers may be willing to pay a premium for items certified as non-GMO, WF recognizes that it can't allow non-GMO items to get too close in price to organics, because non-GMO items may still employ pesticides. Indeed, WF views non-GMO as "tactical" step toward retailer's true goal of organic foods. Errol noted that retailer is trying to migrate to organic from "natural" food, concept widely deemed too watered-down to be meaningful. Schweizer also emphasized that retailer "is not making a scientific judgment on GMOs - it's just your right to know."

PepsiCo's reporting of solid Q2 despite volume declines on both CSD and noncarb sides of N Amer bev biz, which it views as vindicating Power of One strategy of maintaining integrated snacks and bevs conglomerate, drew some interesting comment from Wall Street watchers. At Wells Fargo, Bonnie Herzog acknowledged "solid quarter, above expectations," but said that with activist investor Nelson Peltz rattling cage for splitup of snacks and bevs units, "we believe the clock is ticking for management to turn the Beverages business around and prove the integrated model does more than simply subsidize ongoing weakness in N Amer Beverages." Meanwhile, returning to point she'd made upon release of her regular Beverage Buzz retailer survey, Herzog added: "While PEP has been able to offset volume declines with pricing, this strategy may fall apart if KO maintains its heavy promotions, which we suspect could accelerate PEP volume declines and lead to the acceleration of negative top-line growth."

Meanwhile, over at Stifel Nicolaus, Mark Swartzberg made case that "structural" changes that PEP has said it's evaluating for disclosure in early 2014 may mean more than refranchising of some bottler operations, as many have presumed. "If PepsiCo management's view prevails (that is, only North America Beverages is subject to structural change), we see a good chance PepsiCo will choose Dr Pepper Snapple's course rather than Coke's course (that is, separate entire business - brands, manufacturing, distribution - rather than distribution or manufacturing & distribution)." In other words, complete separation of snacks and bevs, much as Cadbury split confectionery and bevs in creating Dr Pepper Snapple. As for Peltz's demand for global splitup of snacks/bevs, "we continue to see merit to splitting PepsiCo into Global Beverages and Global Snacks," Mark wrote, but "think this is likely only if Mr Peltz significantly influences board members and membership." So N Amer split-up seems to be another real option under consideration by PEP board, from what Swartzberg's hearing.