Grocery Manufacturers Spend to Defeat Food Label Efforts

NEW YORK (TheStreet) -- Although the battles over labeling genetically modified foods are hardly new, the current spending by the Grocery Manufacturers Association to defeat the federal labeling drive is unprecedented.

The Grocery Manufacturers Association, representing more than 300 food and beverage entities, reported its largest spending increase in federal lobbying from the previous quarter. The trade association, which lists Coca-Cola (KO), General Mills (GIS), Campbell Soup (CPB) and Hillshire Brands (HSH) among its members, spent about $7.4 million from July 1 through Sept. 30 on lobbying efforts in Washington.

That amount was an increase from the second quarter of more than $6.2 million. For the first three quarters of 2012, the Grocery Manufacturers Association spent about $2.6 million. In toto, there has been $9.3 million expended this year. That is an increase of over 500% for the quarter, more than twice the next biggest increase for a group seeking to influence Congress and others in the nation's capital.

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What is bringing the torrents of cash to Washington is the labeling of genetically modified food issue. The impact of genetically modified foods on health and the environment, including pesticides resistance, is also a major item for the industry. So is the role of government regulators. The impact of genetically modified crops for farmers and its role in feeding the growing population of the world are also vital. Another Washington, the state, was also critical due to a food labeling measure. For that campaign, the Grocery Manufacturers Association raised over $11 million. To defeat a similar labeling effort in California a year ago required about $44 million. The Grocery Manufacturers Association contends that any genetically modified organism (GMO) labeling would end up costing the consumer hundreds of dollars a year in higher costs at the supermarket.

Here's a statement from Brian Kennedy, the spokesman for the GMA, about the win in the state of Washington:

"It [the bill] would require tens of thousands of common food and beverage products to be relabeled exclusively for Washington state unless they are remade with higher-priced, specially developed ingredients. The measure will increase grocery costs for a typical Washington family by hundreds of dollars per year... that these products are not safe or that they are somehow different."

Those supporting food labeling regulations such as Greenpeace and the Organic Consumers Association claim the risks of GMOs are not adequately known. Doubts persist about the objectivity and effectiveness of regulatory authorities. There are also concerns about the regulatory process, contamination of the food supply, the effects on the environment and nature and about the consolidation of control and protection of the food supply in companies that make and sell these products. 

Not all grocers are opposed to those goals of food labeling supporters, however. Whole Foods (WFM) recently announced that all products in its U.S. and Canadian stores containing genetically modified organisms would be labeled as such by 2018.  At the Natural Products Expo West, Walter Robb, the co-chief executive, stated that Whole Foods was "setting a stake in the ground on GMO labeling to support the consumer's right to know." He also reminded the audience that the private label products of Whole Foods have been certified as non-GMO since 2009. The upscale grocer currently sells 250 brands that have 3,300 non-GMO products. Last year, in an interview with  Bloomberg Businessweek, Robb contended that transparency is becoming more in demand by consumers for health and environmental concerns: "I suppose there will always be a market for the cheapest possible food, but issues around water quality, farm workers, all that stuff, keep surfacing. There will be no place to hide in terms of what your practices are and what you're doing."  

It has, however, been determined by highly regarded groups such as the American Medical Association, the World Health Organization, the British Royal Society and the U.S. Academy of Sciences that genetically modified products are not any riskier than conventional items. But anything codified into law brings much greater risks of legal liability to the food sector: No group wants to become the next tobacco industry, constantly being sued and on the defensive in courtrooms and legislative bodies across the country with huge legal expenses impacting the bottom line, as just happened with JPMorgan Chase (JPM) in its earnings for the most recent quarter.

Campbell, Trader Joe's, and Ben & Jerry's are all defendants in class-action suits for allegations about food labels misrepresenting the ingredients in products that were sold to the public. If food labeling legislation becomes law increasing disclosure requirements for companies, so will the potential legal liability. At the time of publication the author had no position in any of the stocks mentioned. This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Yates is a financial writer who has had thousands of articles appear in periodicals and Web sites such as TheStreet, Newsweek, The Washington Post and many others. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University. He does not have a position in any of the stocks mentioned in this article.