How “GMO-free” gave Cheerios a competitive advantage

Market research can help companies of every size determine how they find and communicate their competitive advantage.

Legislation requiring all companies to label which foods contain genetically modified organisms (GMO) ingredients was introduced in 26 states last year. However, mass labeling will be a tall order, as 70 – 80 percent of the food consumed in the U.S. contains GMO ingredients. “Natural” food companies like Whole Foods and Chipotle are labeling voluntarily. Whole Foods has pledged that by 2018 it will label all of its products that contain GMO ingredients. According to a recent survey by the NPD Food Market Research Group, 20 percent of U.S. consumers – double the percentage in 2002 – say they are “very” or “extremely” concerned about genetically modified food.

General Mills’ decision to stop using GMO ingredients to make Cheerios (and, more to the point, its decision to advertise it on cereal boxes) was relatively easy: there is no such thing as genetically modified oats. General Mills VP Tom Forsythe wrote on January 2, 2014, that the cereal would now be made without genetically modified ingredients. He noted, “We did it because we think consumers might embrace it.” General Mills has practiced forward-looking market research to come to this conclusion and it is a sign for smaller companies that consumer tastes are shifting.

Not much has changed about the original Cheerios since General Mills shortened the name from Cheerioats four years after the cereal first appeared on breakfast tables in 1941. Oats are the most nutritious of the big grains, containing a range between 12 - 24 percent protein. The World Health Organization says they are about as good of a source of protein as meat, milk and eggs. More famously, oats are thought to reduce the risk of heart disease. There was a demand spurt in the late 1980s for oats when research into this connection was published, and an even bigger one a decade later after the Food and Drug Administration issued guidelines for food marketers who want to make heart-health claims for oats. (A product must contain at least 0.75 grams of soluble fiber per serving.) General Mills has profited from using this claim ever since in selling Cheerios. Again, General Mills responded to consumer perceptions to market their product.

So, why are there no GMO oats? There simply are not enough oat farmers in the world, or enough oats grown, to create sufficient demand to justify the incredibly expensive research that goes into developing genetically modified seeds. In the United States, corn and soybeans are the drivers of GMO product development. That is because the markets for those crops were already dominant when genetic modification started taking off. Oats, however, are a minor crop.

But Cheerios are a special case. So many other cereals are made with corn or contain sugar that it would be impossible, or at least cost-prohibitive, for most of them to make a similar move. The whole-grain oats that are the main ingredient of Cheerios have always been GMO-free, but General Mills is now ensuring that the sugar and cornstarch used in the cereal come from non-GMO sources. The same could be said about the ingredients in original 1941 Cheerios.

So why go the non-GMO route? Well, Cheerios could use the help. While sales of all cereals dropped 2.5 percent for the year, Cheerios sales fell by 7 percent. Finding a competitive advantage to boost sales is always a concern for producers and is driven by the changes in perceptions of the consumer in the marketplace. Michigan State University Extension educators at the MSU Product Center assist current and aspiring entrepreneurs in finding and communicating their competitive advantage.