The impacts of genetically modified food labeling are assessed from an industry, consumer, and legislative standpoint. An economic analysis of genetically modified food labeling, as well as challenges and opportunities related to the topic are discussed.

1. The Economics of
Genetically Modified
Food Labeling
PRESENTED BY: KELSEY ZOOK
WILKES UNIVERSITY
MBA 592

2. Agenda
• Introduction
• Food Labeling Legislation
o History
o Current Regulation
o Contributing Agencies
• Producers
o Industry Reactions
• Consumers
o Millennial Consumer Impacts
• Economic Analysis
• Challenges & Opportunities

3. Introduction
Genetically Modified Foods:
oOrganisms in which the genetic material (DNA) has been altered in a way that would not
occur naturally
• Consumers calling for increased transparency in food industry
• Voluntary vs. Mandatory GM food labeling
• Labeling = Differentiation and Communication
o Food labeling functions as the primary means of communication between producers and
consumers

4. Food Labeling Legislation
Pure Food &
Drugs Act
1906
Federal Food, Drug
& Cosmetic Act
1938
Fair Packaging
& Labeling Act
1966
Nutrition Labeling
& Education Act
1990

5. Current Legislation
Safe & Accurate Food Labeling Act
• Introduced to U.S. Senate, March 2015
• Preempts all state laws relating to mandatory labeling of GM products
o Standards for uniform, national GM labeling
- Utilizes QR codes, websites, phone numbers
o Certification process for non-GM foods
• Trade groups vs. Advocacy groups

6. Production
• United States = largest global producer of GM crops
o Corn, Soybeans, Rapeseed, Cotton are the most common
o In “Corn Belt” States as much as 90% of corn & soybeans planted are GMO
• Consolidation among GM seed producers
o Top 10 GM Seed producing firms = 73% market share in 2013

7. Producer Reactions
• Mandatory Labeling is Inherently misleading
o Concerns with mandatory GM labeling related to economics not safety
• Some producers are taking matters into their own hands
 Campbell Company Example
- Beginning January 2016, voluntarily labeling all GM food products
 PepsiCo’s Tropicana Example
- Manufacturer choosing to label some products for GM ingredients is a marketing ploy

8. Consumers
• 93% of American consumers want to know if food products contain GM ingredients
• 56% of American adult consumers seek nutritional information on food labels
• 1.3 million American consumers have signed a petition – demanding FDA mandates GM food
labeling
“It [GM labeling] will encourage hysterical reaction and discourage thoughtful
deliberation about the risks posed by biotechnology”
- - Johnathan Frenzen
(Clinical Professor of Marketing, University of Chicago)

9. Millennial Consumers
• Consumers born after 1980
• Account for greatest percentage of food buying market share
• Mintel reports, 2/3 of Millennials pay close attention to food labels
“Real - Searchers”
o Millennials are quick to fact-check
“Ultimate Day Traders”
o willing to trade up or down, depending on preferences

10. Millennial Consumers Continued…
• Price Elasticity increases as uniqueness, authenticity, & meaningfulness increases for product
• Organic food purchases increasing among Millennials
o Among Household leaders purchasing organic, more than 52% are now Millennials
• Social Media Effect

11. Economic Analysis of GM Food Labeling
“An Economic Analysis of Nanofood Labeling” By: Tran, Yiannaka, & Giannakas
of University of Nebraska-Lincoln
• Consumers willing to pay more as a means of avoiding risk
o Participating consumers support argument that GM labeling results in risks & benefits
• Adverse consumer response = slower adaptation
• Cost Effect vs. Preference Effect Under Mandatory Labeling Regime
o Increased cost for consumers
o When Preference & Cost Effect work in same direction more consumers switch to substitute product

12. Economic Analysis Continued…
Tran, V. T., Yiannaka, A., & Giannakas, K. (2014). An economic of nanofood labeling. American Agricultural Economics Association.

13. Consumer Impacts of GM Labeling
• Cost Effect > Preference Effect:
o Price of GM Foods will increase
o Consumers will switch to substitute for GM food product
• Preference Effect > Cost Effect:
o Consumers more averse to GM food products
o Price of GM Foods will increase
• Certainty Effect > Stigma Effect
o Consumers who prefer GM food products

14. Producer Impacts
• For GM Food Producers/Manufacturers
o Consumer preference decreases  Leftward shift of demand curve
o Leading to Decreased Profit Margins
- Increased cost of production
- Decreased consumer demand
• For Organic Food Producers/Manufacturers
o Increased demand & Profits

15. Conclusions: Challenges
• Producers
o Changing Consumer Preferences
o Conforming to future GM Labeling Legislation
• Consumers
o Unknown labeling methods
o Continued concerns with Transparency
• Legislation/Regulatory
o International Trade
- Anti GM Food Legislation in importing countries
- Cultural Differences (Hofstede’s Dimensions)

16. Conclusions: Opportunities
• Producers
o Organic food markets
o Capitalizing on Millennial eating habits
• Consumers
o USDA Certified Organic foods
o Additional information about food through Safe & Accurate Food
Labeling Act
• Legislation/Regulatory
o Solving Food Insecurity
o Possible solution to domestic & international “Food Deserts”

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