Genetically modified foods may yet find a home in Europe.
Genetically modified foods, or more colorfully, Frankenfoods, have been controversial since their introduction to the EU over a decade ago. While able to resist insects and increase production, they encourage erosion, and while providing more vitamins, they have, in some cases, caused illness. Some genetic modifications include the use of animal genes, found to be offensive by many of the world’s religious groups. For every benefit, there seems to be a tradeoff, which may be why some countries have taken a strong stance against Frankenfoods. In America, genetically modified foods sit side by side on shelves with conventional foods, but Europeans have taken a more cautious approach.
Upon their arrival in 1996, genetically modified foods began leaving a bad taste in many Europeans’ mouths amid concern that Frankenfoods harm natural biodiversity. Only a year later, protests by consumers there led to new EU regulations, which mandated that genetically modified foods be labeled and tested for safety. In 1999, Denmark, France, Greece, Italy, and Luxembourg officially went so far as to ban the foods altogether. Other countries, including Austria, Belgium, Finland, Germany, Netherlands, Spain, and Sweden, enacted strict cautionary measures.
Meanwhile, the U.S. had Frankenfoods to sell, but tight restrictions abroad put a damper on the market. In 1999, the U.S. appealed to the World Trade Organization (WTO) to lift some of those bans, and a trade battle ensued. Four years later, the situation escalated when the U.S. again complained to the WTO, initiating formal proceedings against the EU. This time, the European group relented and began easing its rules.
But the Frankenfoods battle wasn’t over. In 2006, the WTO ruled that the EU had broken trade rules by stopping imports of genetically modified foods. The EU decided not to appeal the decision, and in November 2006, the EU was given 15 months to comply with the WTO ruling. With the clock ticking, the future of Frankenfoods in Europe will soon be revealed.
The Usual Suspects
So who benefits? The usual suspects come to mind: Monsanto, BASF, Syngenta, Bayer, Dupont and Dow Chemical, but this is EQUITIES. A more interesting play for investors looking to cash in on the force-feeding of genetically modified foods to European consumers are companies that provide food testing, such as Eurofins Scientific (Frankfurt: ESF, Paris: ERF). No matter what Brussels decides or how lenient its new policy will be, there’s one thing for sure: Genetically modified foods in the EU will be tested and labeled, letting consumers decide whether the products are ultimately more or less desirable than convention products. A global leader in food testing, Eurofins is a pure play operator of laboratories focused on bioanalytical testing, operating in clearly defined, large markets with high growth potential.
Eurofins’ share price has increased over 4,000% since its Euronext Paris IPO in 1997, and about 50% in 2007. Last year, revenues swelled 34% to €492 million, from €368 million in 2006. The company expects revenues of €600 million in 2008, €720m in 2009 and €1 billion by 2011. Shares trade at €65 on the Frankfurt, down from a December 2007 all-time high just shy of €80, giving it a market cap of €900 million. Now could be a good be time to get in before Frankenfoods hit EU shelves en masse
— By Anthony W. Haddad
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