If you’re a large food manufacturer, you’re probably debating if going non-gmo is the right move for your business. Like most manufacturers, your decision will have to be based on real business numbers — not just personal values or ideals.
Will this decision benefit our company? Does it serve our target market? Will we be able to survive and continue making profits after a change like this? Is this change to non-gmo sustainable in the long run?
Before you can make this kind of a large and strategic business decision, it’s helpful to get a clear understanding of the steps or “mini-evaluations” you’ll need to address along the way. All of these are big questions, but they can be approached tactfully and smartly by breaking the larger question down into 7 individual parts.
1. Survey Your Target Market
Does your target market want you to sell a natural, quality or non-gmo product? Or do they want the lowest possible price?
The best way to answer this question is to do actual market research. This can involve hiring a market research company (for larger brands) or simply surveying your customers at each grocery store demo that you do (for smaller companies).
Chances are that if you sell to Whole Foods Market, your customers will expect you to offer a non-gmo or organic product. On the other hand, if you sell to a mainstream grocery store chain, the answer is up for debate and this question is definitely worth doing some research on.
If you have customers on both sides of the debate, you’ll want to start to get a picture of if it would be better to create a secondary non-gmo, organic or clean line, or if you should switch your ingredients to across the board for all products.
2. Evaluate The Potential Loss/Gain In Sales
Take that survey insight that you’ve gained, and begin to put it into quantifiable numbers. You’ll want to end up with a dollar amount in terms of the sales that you will potentially gain or lose.
To begin to evaluate this, you’ll want to ask yourself questions like:
- Will you lose shelf placement in certain grocery stores (like Whole Foods, due to their GMO label transparency requirements)?
- If so, will you loose the entire chains’ business, or just certain stores?
- How much is that business worth?
- Are there any distributors that will discontinue your products if you don’t switch?
- What do you predict your sales could grow to if you switched exclusively to non-gmo?
- Would a switch to non-gmo allow you into any new grocery stores that you haven’t been ideal for in the past?
- If so, how much is that potential business worth?
3. Research The Non-GMO Project Verification
Submit an inquiry with the Non-GMO Project online. In response to your inquiry, they will give you an approximate outline of costs.
The total price will depend on how complex your verification process is — which will depend on how many low-risk vs. high risk ingredients you use, and how many possible GMO contamination points you have in your sourcing and manufacturing process.
Get an estimate of the cost of this verification process and log it away.
4. Evaluate Any Facility Changes Required
Read the Non-GMO Verification process outline closely. Try to get an idea on if you will need to make any obvious facility chances to preserve non-gmo identity.
This can be a tough thing to evaluate before you get an auditor in house, but you can start to get an idea of the rough changes and costs associated with them if you’re logical. Ask yourself questions like:
- Are there GMO ingredients running on the same line?
- Is it possible to purge and/or create separate lines to preserve non-GMO identity?
See where there may be operational changes required and get an estimate on making the necessary adjustments.
Many of the issues that a non-gmo auditor will notice will be similar to what an organic auditor would comment on. Therefore, if you’re organic certified, it’s likely that you will be in good shape to meet your non-gmo requirements.
5. Estimate The Increased Ingredient Cost
Begin to research non-gmo alternative ingredients. Depending on the ingredients you use, you may be able to switch to a non-gmo version of the same product (like non-gmo canola or non-gmo soybean oil), or you may need to switch to a different ingredient all together.
Search for a non-gmo ingredient supplier. Your new non-gmo ingredients may be something that your current supplier can offer, or you may need to look for completely new sources.
Get an estimate on the non-gmo options. You’ll want to note the rise in price in comparison to what you’re paying now for conventional ingredients. (Yes, typically this is always going to be an increase in price).
If you do switch to a low risk ingredient (one that is naturally non-gmo like safflower or sunflower oil), remember that your Non-GMO Verification process costs may go down as a result because they are low-risk items.
6. Understand The Non-GMO Supply Chain & Availability
Talk to your current and potential non-gmo suppliers to get an accurate read on the commodity market. You’ll want to give them your current and expected volumes for the next couple years, to make sure that this sort of supply is even available in the market given current demand.
Your supplier should be able to provide some insight on current and predicted demand, what the market looks like and if supply availability will ever be an issue and why.
This insight will help you determine if:
- this non-gmo endeavor is even plausible for you right now, and
- if you should sign a supply contract for your non-gmo ingredients to guarantee price and supply
7. Quantify Your Data & Compare Costs vs. Gains In Sales
Go through the previous steps and assign approximate costs or gains in dollars to each evaluation step. Then add them up!
Because this is a long term decision, it will be helpful to review numbers based on a 1, 5 ,10 and 20 year period. Because of the upfront investment to make a change like this, the decision may be expensive in the short term but very worthwhile in the long run.
Doing a full cost evaluation over the long term will help you get a good idea if making this sort of switch is beneficial, and how worthwhile it will really be.
Conclusion: Discuss The Unquantifiable And Unknown And Make A Final Decision
There’s going to be a lot about this process that is ultimately unknown. Most importantly, we can all only take an educated guess on where the natural market is going to go in the next few years and how influential the non-gmo movement will be on the food industry as a whole.
To make an informed decision, it’s best to talk with your team about all these unknowns in a practical, brainstorming format. Ask questions like:
- Is this is short term trend or a long term industry movement?
- How much do we think our sales will really increase or decrease once all these changes are put into place?
- Are there any outside influencing factors that could affect this sales prediction?
- Do you expect your grocery chains to stay in business and keep buying from you for years to come?
- How will the industry change if the US government decided to enact a GMO labeling law?
- How will consumers food choices change if a national GMO labeling law is put into place?
Inevitably, there are many unknowns to this decision and it’s repercussions. The best thing to do is to sit down with your qualified strategy team, and talk about the most realistic possibilities. With the numbers that you’ve put together in the last 7 steps, this conversation can help you make a final decision on how to proceed.
Topics: Non-GMO
