Amid consumer skepticism, limited-service restaurants can attract higher-income diners with non-GMO options

EXCERPT: A recent study by Dogan Gursoy at Washington State University’s Carson College of Business found that 75 percent of restaurant-goers say they’re willing to pay up to 13 percent more for non-GMO menu items.
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Why restaurants are still saying No to GMO

By Maggie Hennessy
QSR, January 2017
https://www.qsrmagazine.com/health-wellness/why-restaurants-are-still-saying-no-gmo

* Amid consumer skepticism, limited-service restaurants can attract higher-income diners with non-GMO options

Controversy surrounding genetically modified organisms (GMO) continues to sow doubt about them among consumers, despite being deemed safe to eat by the FDA and the National Academy of Sciences. Restaurants are finding that more diners are seeking out and willing to pay more for non-GMO options.

As of 2015, more than half of Americans (57 percent) deemed GMOs generally unsafe, per the Pew Research Institute. And according to a December 2015 Associated Press-Gaff poll, two-thirds of Americans support GMO labeling on packaged food.

While much of the discussion has centered on “right to know” labels for packaged food and beverage products, the GMO debate is reaching restaurants, too. A recent study by Dogan Gursoy at Washington State University’s Carson College of Business found that 75 percent of restaurant-goers say they’re willing to pay up to 13 percent more for non-GMO menu items, which could be a boon for limited-service operators. Most of those surveyed had a moderate understanding of GMOs, says Gursoy, who is a professor of hospitality business management.

“In our studies, the main concern respondents had [with GMOs] was potential health issues,” he says. “Because of their worries about their health and how GMOs may affect it, they are willing to pay a premium for organic, non-GMO menu items. From an operator perspective, it might be very profitable.”

Indeed, with nearly three-quarters of consumers convinced that organic food is healthier than conventional (per Mintel), there’s potential to make regulars out of those who aren’t used to having organic or non-GMO options in limited service.

“When people go to fast-food and many fast-casual restaurants, they don’t have an expectation of getting organic or non-GMO items like they would at a fine-dining restaurant,” Gursoy says. “When they are offered those options, they’re more willing to purchase them and, as a result, more likely to form loyalty behaviors towards those lower-level restaurants.”

But it’s not enough to offer one non-GMO item, he adds. Operators should offer a choice of several items (including beverages) to give people who are committed to non-GMO or organic eating a reason to return.

Chipotle took things even further when it became the first national chain to say it would disclose the GMO ingredients in its food. Citing murkiness surrounding long-term consumption implications and potential environmental damage from GMOs, “It was also important to us to provide an alternative for people who simply choose not to eat genetically modified foods,” says Chipotle communications director Chris Arnold. “It was a change that we could make relatively easily and with minimal cost implications, so we did it.”

Because the cost of transitioning was limited, Chipotle has yet to raise menu prices. The most-used GMO was soybean oil, which it replaced with non-GMO sunflower oil for cooking chips and taco shells, and non-GMO rice bran oil for chicken and steak marinades, sautéing, and grilling. The brand also moved to non-GMO corn for its salsa and tortillas.

Chipotle has come under fire for the presence of GMO ingredients in its beverages, meat, and dairy products. The ubiquity of genetically engineered corn and soybeans in animal feed makes it difficult to totally phase out GMOs. Chipotle has since switched to 100 percent grass-fed beef, which was not fed GMOs or any kind of grain.

In the more regulated packaged food and beverage realm, the easiest way to identify and avoid GMO ingredients is to choose products that are USDA-certified organic, since the U.S. and Canadian governments prohibit a organic labeling if the product contains GMO ingredients. San Francisco–based Project Juice made organic sourcing the hallmark of its brand, which launched as a juice company and has since expanded into cafes.

“The emotional benefit resonates with consumers and is at the crux of the high loyalty of our customers,” says CEO Susan Shields. “For us, it’s worthwhile to do the extra legwork of overcoming the challenges of organic sourcing because more and more consumers say it’s what they want—and they’re willing to pay for that.”

And even though loyal Project Juice customers appreciate that sourcing organic is costlier—roughly twice that of conventional sourcing, says cofounder Rachel Malsin—the chain can’t mark up its products by double in a competitive marketplace.

“A lot of people come into the store with the expectation that we’re charging crazy prices and getting all these margins, but the margin for us is smaller,” Malsin says.

The brand’s biggest challenge is finding consistently available organic produce in an environment where a flood could wipe out an entire crop or a hotter-than-average year means two fewer months of production. Rather than suspending those items, Project Juice has seven variations of ready-made labels that disclose non-organic versions of certain ingredients in case the organic version becomes temporarily unavailable.

These adaptations are much easier in a limited-service chain than packaged juice or snack products, which can’t swap ingredients without FDA approval and certification, Malsin says.

But, as Shields points out, part of the brand’s broader, plant-based vision is to be much more than a juice company.

“Doing so requires investing in time, money, and research and development to create an innovative food menu that addresses different dayparts and provides people with choices,” she says.