Around the world, a huge number of consumers now actively avoid food products with GMO ingredients. As more governments move to imposing restrictions on GMO products, food and beverages, procurement teams must adapt their strategies in order to sustainably and cost-effectively source the non-GMO ingredients their customers demand.
- GMOs: Genetically Modified Organisms. The broad term used to describe plants and vegetation genetically conditioned to build up a strong resistance to pesticides.
- Corn-based Non-GMO Glucose Syrup: Syrup used as a sweetener, texturiser, preservative, and fermentation feedstock, yielded from non-GMO corn.
Once heralded as the agricultural breakthrough that could end world hunger, Genetically Modified Organisms (GMOs) and the food products harvested from them have been marred by controversy and an almost unending stream of questions about their potential impacts on human health.
Despite widespread opinions and hundreds of reports from the global scientific community agreeing that food produced from GMO crops is completely safe for human consumption, consumer demand for them continues to fall – largely fuelled by misinformation.
A 2018 study of US consumers by the International Food Information Council Foundation found that 41% of those surveyed consider the presence of GMOs when purchasing foods, and almost half avoid at least somewhat genetically modified foods (47%). However, perhaps most interesting is that when asked why they behave that way, the overwhelming majority (85%) named human health concerns, rather than the proven negative environmental impacts of GMO crop production.
Whether consumer concerns around the safety of GMO foods are rational or not, one thing is for certain – they’re making already complex food commodity markets even harder for procurement managers to understand and navigate.
Alongside changing consumer demands, over the years, numerous countries and their governments around the world have placed bans on various GMO crops. In many cases however, these bans have been revoked or removed by broader governing bodies. The inconsistency in GMO regulations has fuelled unpredictability in the market, giving large food producers a big reason – beyond environmental concerns – to shift away from GMO ingredients altogether.
To safeguard against the uncertain future of GMO production and shifting customer perceptions of GMO-based goods, several major food producers have already gone entirely GMO-free. For example, in 2016, Del Monte announced plans to remove all GMOs from its products, rather than adapt to relabelling them to make their GMO contents clear.
Non-GMO food commodities are widely available, but as more of the world shifts towards being GMO-free, each non-GMO commodity market poses its own unique challenges for procurement teams to tackle.
Let’s look at the Corn-based Non-GMO Glucose Syrup market as an example.
Understanding the global Corn-based Non-GMO Glucose Syrup market
Corn-based Glucose Syrup is a hugely popular commodity, commonly used as a sweetener, texturiser, preservative, and fermentation feedstock right across the global food and beverage industry. In light of declining demand for GMO-based products and regulations putting pressure on supply, demand for Corn-based Non-GMO Glucose Syrup has increased significantly in recent years.
In response to rising demand, global production is increasing. According to The Smart Cube’s research, the global supply of Corn-based Non-GMO Glucose Syrup was estimated at ~6 million tons in 2018, with Europe accounting for around 50% of production and China a further 33%. Inversely, the US produces a very low volume – estimated at around 50,000 tons in 2018.
There’s a clear correlation between the presence of stringent GMO regulations in a country, and that country’s production of Corn-based Non-GMO Glucose Syrup. The harder it is to produce and sell GMO crops, the higher non-GMO production tends to be.
For food and beverage businesses operating in countries like the US that are now voluntarily making the move to non-GMO ingredients, it’s creating new sourcing challenges.
The outlook for food and beverage companies
Regardless of raw material costs, once transportation costs and tariffs are factored in, clear differences between producing regions emerge – largely because Corn-based Non-GMO Glucose Syrup is not usually traded over long distances, as it is bulky to transport and thus involves significant transportation costs.
Depending on where you are in the world, transportation costs can easily make one producing region more viable than another – even if the price of Corn-based Non-GMO Glucose Syrup is higher there. US producers for example are aggressively pricing their goods to remain competitive with Europe and China, but for buyers operating in or close to these regions, better US prices are almost always negated by increased transportation costs.
However, while interesting and undoubtedly important for procurement managers to keep track of, the current way that the commodity is purchased makes differences in price a relatively insignificant factor in this market. Typically, large-scale Corn-based Non-GMO Glucose Syrup buyers sign year-long contracts with a small number of suppliers to mitigate the risk of supply disruption – favouring stability over short-term savings. Sourcing non-GMO corn-based syrup from global suppliers is also economical as they have plants worldwide (therefore low transportation costs) and consistent quality is ensured.
While short-term cost benefits may be available to those willing to switch suppliers and source ingredients from new geographies, most significant buyers will continue to favour a sustainable, predictable sourcing strategy, rooted in high-producing regions within their reach.
In light of shifting market conditions and a changing global regulatory environment, this appears to be the best way forward, regardless of where in the world buyers are based.
Wherever you are, market intelligence is key
No matter which non-GMO ingredients you’re tasked with procuring, market intelligence is your most valuable resource today. With consumer demand, national crop yields, and international tariffs and regulations all changing at the same time, intelligence is essential to staying ahead of what has become an extremely dynamic market.
If your end goal is to build a sustainable, cost-effective sourcing strategy for non-GMO ingredients, you need to know how these factors are changing – and more importantly, how they’re likely to change further in the near future.
At The Smart Cube, we work with the procurement and supply chain teams of the world’s leading CPG companies to provide visibility and deep analysis of both external markets and internal demand.
If you’d like to talk about how our market intelligence, research and analytics solutions can help you better understand complex procurement markets, and the forces influencing them, please get in touch.
And read our case study about how we provide end-to-end support for the category management process for one of the world’s leading fast-food chains.