The Ontario Ministry of Agriculture, Food & Rural Affairs (OMAFRA) in conjunction with Agriculture & Agri Food Canada (AAFC) commissioned Promar International¹ to assess how best Canadian processed food exporters can approach the EU market, particularly in relation to the supply of products that contain GM ingredients.

Background

AAFC has already commissioned some research on the technical detail of the EU regulations vis-a-vis the use of GM in 2005. As part of the study, three key target markets in Europe were chosen: the UK, Germany and the Netherlands, of which the UK holds particular interest for the Canadian processed foods export sector.

The main points of the Terms of Reference (TOR) were as follows:

an outline of the EU and national legislation on GM and supporting legislation on agri food imports
an assessment of the specific regulatory requirements in the EU vis-a-vis traceability and product testing for GM processed foods
an overview of the food industries in key target EU markets and a review of trade in key agri food commodities with Canada and other international suppliers
a short analysis of the retail, food processing and foodservice sectors in these key markets
the development of market entry strategies that might be used in the future by Canadian exporters

Our Methodology

This involved desk research from the main recognised sources of information regarding GM regulations in the EU: the EU Commission itself, national governments and their agencies, industry associations and various lobby groups. We also carried out a relatively small number of selected trade interviews with key EU importers and food processors across key markets (UK, Germany and Netherlands). The work was largely carried out in March 2006.

A list of the contacts made with key public and private sector organisations is given as Appendix 1of this document and a list of other "useful" contacts given as Appendix II. Neither of these lists are totally exhaustive and in the context of this study were not intended to be. In particular, the UK based import companies are a cross section of companies that have some track record of handling Canadian agri food products. These companies were "selected" in consultation with the Canadian High Commission in London.

SECTION ONE: EXECUTIVE SUMMARY

1.1 Where is Europe Coming From?

The UK, German and Netherlands' position on GM food and ingredients can be summarised as follows:

any food product containing GM ingredients must be labelled accordingly
food safety is high on the agenda of consumer concerns, following salmonella in eggs, BSE and Sudan 1 and other food scares over the last 10-15 years
confidence in official bodies to monitor food safety has been eroded over a period of time, following the mis-management of the above
GM as a subject has been very successfully hijacked by the anti-GM/ environmental lobby groups
the UK tabloid press, in particular, has supported negative campaigning, which has raised at least some doubts and a negative perception of GM in the minds of the majority of consumers
many consumers living in a modern, urban based society, do not understand primary food production. Communicating increasingly technical issues to the mass of consumers is very difficult
major mass market and premium niche market retailers alike have responded to these consumer concerns by positioning their business with a very public anti-GM position
major foodservice operators have followed their lead in this respect
even discount retailers are now raising their game, and coming into line with the premium level players in relation to a non GM policy
"non GM" and "GM free" are two descriptions which have been used to aid market differentiation, and assist GM avoidance strategies:
- "GM free" relates to no GM being detectable in the purchased product, although the product may have been produced with the aid of GMM technology
- "non GM" relates to a GM free product process from source to final product
food processors, and not just those based within the EU, are under scrutiny to demonstrate traceability and full IP systems in order to meet the increasing demands of their customers, who themselves are looking for reassurance regarding food ingredients in general

What does this mean for Canadian exporters?

The subject of GM ingredients in processed foods and the growing of GM crops remains a highly sensitive issue within Europe. The anti GMO lobby groups have invariably driven the debate. In turn, it has been their voice and associated negative messages that have largely influenced consumer opinion. In general, the tabloid media, together with some broadsheets have assisted this negative campaigning with headlines on so called "Frankenstein Foods" and environmental contamination.

The key industry players involved in the technology are also in the position of trying to recover lost ground from the approach taken by the early promoters of GM - who to some extent ignored consumer concerns in Europe.

Today's key players (such as Monsanto, Bayer, Syngenta etc) have found huge difficulty in promoting the new technology without exposing the negative aspects of existing chemistry which continues to form the core foundation of their businesses around the world. To date, the high profile GM market entries have been for traits, which appear to benefit primary producers, rather than the consumer.

Resistance to herbicides is one example, where producers can reduce the volume of herbicides used in the production of a crop, thereby saving cost. It would also reduce the potential of residues in both the environment and final product. However, consumers are sceptical that any savings in production costs will actually be passed onto them in the form of retail prices. Many of the more consumer friendly traits may not be as commercially rewarding for the backers of the technology. Therefore, they have not, to date, been a primary focus.

However, due to the on going resistance of consumers across the EU, a new approach may have to be taken. A higher profile for functional foods and the enhancement of flavour, shelf life, nutritional value and even medical enhancements is now evident. This may in turn assist a recovery of the perception of GM in the minds of the consumer.

Consumer attitudes

From the consumer perspective, they often have limited knowledge about modern farming practices and primary production inputs, let alone food processing. To communicate to them at the technical level and promote the advantages of GM requires bridging a significant knowledge gap. Most of the major food retailers and foodservice operators aim their consumer communication at the lowest common denominator, which is a long way removed from the intricacies of GM technology. Most European consumers often simply do not understand the key technical issues. As such, major retailers will invariably look to avoid putting doubt into the minds of their customers by simply not presenting GM labelled products on the retail shelf.

Issues across the food distribution sector

Right across the spectrum of food distribution, from major high street outlets to foodservice operators, the issue of GM is not an area that appears to attract positive support. In the UK market, there is now a further move to remove anything from food products that appears to be "artificial". Avoidance of products such as modified starch as an ingredient because of concerns relating to consumer perception on the term "modified," is a key message being passed back down the supply chain from retailers to food processors.

The underlying cause of consumer concern

Underlying the GM debate across Europe is the plethora of food safety alerts, including salmonella in eggs, BSE in cattle, Sudan 1 and dioxin in the poultry sector, all of which contributed to further consumer concerns about modern food production and the monitoring of food safety. All these examples highlighted historic weaknesses in both food production processes and the ability of the official organisations to monitor and communicate an appropriate response to such incidents. Following these incidents, many consumers lost faith in the "official voice" and were drawn to question its messages.

Legislation

Europe is awash with agri-food legislation. Many agri-food businesses² struggle to cope with understanding the sheer complexity of rules and regulations affecting food production. Responsibility is increasingly being pushed down the chain towards the primary producer by the major retailers and/or major foodservice operators. This provides an opportunity to distance themselves from direct association with primary production processes: although at the other end of the spectrum, it also provides the platform for some retailers to emphasise their close links to selected and identified producers:

"...our milk ? Only sourced from farmers we know..."³

The sheer amount of potential legislation actually presents itself as a major hurdle for many companies to get to grips with. It has become an expensive area in which to invest time and effort understanding. In relation to the GM issue, for many businesses, the question is asked:

"...is it worth all the effort ?"

...or, indeed, is the whole area (of GM) just best avoided. This would apply to Canadian agri food processors and exporters as much as anywhere else in the world. This is a serious question that any potential exporter to the EU should be asking themselves.

The opportunity in Europe: now and in the future

Against this background, a processed food product containing any traces of modified DNA/ protein which requires labelling will struggle to be accepted within the key countries targeted in this research. Within the commercial trade of food producers, processors, importers, distributors, retailers and foodservice operators, there is clearly an awareness of the integration of GM technology in food production, whether in feed ingredients, or in GMM associated with food processing.

However, at this stage, no one is going to raise the issue with the public and risk another commercially damaging food scare. There are a few instances where this has been the case, such as in biscuits and pet food, but as a general comment, whilst alternatives are available to GM ingredients, retailers and other players at the POS will insist upon their suppliers using them. A clear picture has developed, which indicates the EU market is still not ready, at this stage, for products containing GM ingredients.

1.2 GM Issues

The current situation

The GM food/ingredient issue is one of the most controversial issue in the European food industry in the past 10-15 years. It has become a highly emotive subject amongst consumers and consumer groups. Whether borne out of understanding of fact or driven by the sheer perception of risk, it remains an area of uncertainty for many
Compounding this concern is the nature of modern food production, which whether in the case of basic commodities or more highly processed goods, has become a very technically complex process
Major food companies in the supply chain have not shown they are prepared to publicly take the risk of making positive statements about GM. Rather they have made public statements to position their businesses in support of consumer fears, by avoiding Above The Line (ABL) promotion of GM goods

Whether based on rational, or irrational thinking, the facts remain that the majority of European consumers and the major retailers that sell them food are today - and for the foreseeable future - not receptive to GM food/ingredients.

The GM debate

The GM debate has, for the most part, been led by the two extremes of the interested parties. These are the commercial beneficiaries of the technology and the vociferous "anti" lobby
The strategy of the NGO "anti" lobby was to make very public statements about potential risks of the technology and to undermine the depth and breath of the research that has been done to support these perceived advancements
The destruction of field trials across Europe provided an ideal platform for the European mass media to expose the debate to a wider audience. These protests by NGOs, lobby groups and anti GM activists, were an attempt to influence public and consumer opinion, as well as that of legislators. In addition to this, a number of research studies have been carried out to determine the receptiveness of GM amongst consumers
Some of the activities from the NGOs (i.e. organisations such as Greenpeace) may not always be based on totally sound science. Indeed, concerns in the food industry per se do exist about their real motives. Regardless, one cannot ignore the high degree of success they have had in raising the (negative) awareness on this issue
The reality is, as an existing and/or potential exporter to the EU agri food market, any Canadian processed food company will come across these NGOs. Their influence could be a further barrier to successful business development - but not just for Canadian food suppliers, but for other third country exporters to the EU.

The reality

The use of GMM technology in food production is common. However, it rarely presents itself as a residue in the final food product. Due to this lack of detectable residue, labelling is not required and, therefore, the consumer is unaware of the use of the technology in the production processes
Until those in the food industry who are using the GMM technology stand up and make consumers aware that they have been consuming foods derived from processes involving GM for years without ill effect, the consumer GM fear issue will not go away

From a commercial trade perspective, there is a growing sense of inevitability, relating to the ultimate integration of GM ingredients into the food chain as the reality of global commodity trade involving GM ingredients, closes in around Europe.

However, Europe is not at that point yet and may not be for another 5 – 10 years at least.

1.3 Retailers

Major food retailers dominate food distribution in Europe. In most EU markets, they account for c. 70% of the overall market. Some distinct in - country differences occur, mainly between the North European markets⁴, which are especially concentrated and the Southern European markets which are traditionally more fragmented. Major retailers have developed strong consumer loyalty. In many cases, they have positioned themselves as the "defender of consumer interests" in instances of food scares which have characterised the last 10 –15 years
GM represents a major issue for most EU based retailers today. As a result of consumer concern, the leading retail operators have reacted with public statements about their policies. These are to either avoid GM food products altogether or to ensure compliance with EU legislation by adopting transparent labelling and so ensuring consumer awareness and choice, when GM ingredients do exist
European retailers, in effect, do not currently want to use GM. They do not want to arouse consumer concerns and be forced to label food products as such. This is especially in relation to their "own brand" goods. It is also clear that no one single retailer is prepared to lead the way with highly visible branded goods
Retailers, however, are not necessarily against the technology. They will argue that they are simply reacting to their customers concerns and positioning their businesses accordingly. They remain firmly anchored to the "moral high ground", complying with legislation and ensuring suppliers meet all the requirements

They are however also highly price sensitive. Whether the "non GM" position is sustainable remains to be seen. When there is an alternative to GM and whilst consumers remain sensitive, they will avoid it. When alternatives are not available or they are a significantly greater cost, it will be interesting to see what position the major European retailers then adopt.

Retailers do react to headline issues. They require all their suppliers⁵ to prove compliance to a series of technical and commercial issues. Of late, this has seen a range of additive issues included (i.e. such as nut allergies, artificial colourings, allergens etc). Suppliers are required to carry out an extensive audit processes to reassure the retail customer of the product's integrity
Retailers expect their suppliers to be the experts in their products. Not least, the constant changing of retail buyers across food categories (typically every 12 – 18 months in some cases) inevitably leads to a lack of in house specialist knowledge. They increasingly rely upon their relatively small number of their most trusted suppliers to provide that experience

What are the implications of this for Canadian agri food exporters to the EU ?

Retailers in the EU hold enormous power and influence over the rest of the supply chain. It would be a brave, if not foolish company to go head to head with them on an issue where they have made such bold and unambiguous statements.

Major retailers have been reticent to engage in the GM debate with NGOs, fearing something of a "no win" situation. As a result, consumers across the EU are left with a negative message regarding the potential benefits of GM produced foods and its possible dangers.

Food processors are, in most cases, totally led by retailer policy. As a result, they have become equally reticent to use GM products and ingredients when dealing with major retail customers. They are often challenged to prove non GM compliance for ingredients by providing a complete audit trail for traceability.

1.4 Legislation

This can be summarised as follows:

if a food product is produced from a GM plant and contains a detectable GM residue (i.e. protein/DNA) it needs labelling as containing GM ingredient
if a product is produced with the aid of a GM crop (i.e. GM feed that has been eaten by an animal, or GM yeast being used in wine etc), which is then put into the food chain, the meat, eggs and milk from that animal does not require labelling regarding GM

A contradiction in labelling legislation exists relating to when it applies or does not apply to the labelling of ingredients, additives and enzymes derived from GMMs. This allows businesses that have a "non-GM" policy, to market products that have in their production processes involved GMM that is strictly within the law. However, it is nowhere near a non-GM policy for consumers wishing to avoid all products derived from GMOs.

1.5 Future strategies

For any Canadian processed food exporter who is looking to target the EU market and in particular, the UK, Germany and the Netherlands, the options for market entry for products that contain GM ingredients can be summarised as follows:

The simplest and easiest approach to the GM food and ingredient issues in Europe is to avoid them. GM ingredient products will not be accepted in the short to medium term into the mainstream European retail channels and indeed will struggle to gain entry into other routes, such as the fast growing foodservice sector. This would imply a concentration on exports to other markets in North America. Here the whole GM issue is seen as being less sensitive and Canadian companies have already established a strong track record of supply
The second option for Canadian exporters is to reformulate and position Canadian agri food products as being "GM free". However, this is not an option that is free from other related issues. Depending on the sensitivity of the EU end customer, it may be required to prove IP with appropriate systems, thereby adding to the overall cost of production. Sourcing from North America/Canada for many EU agri food processors has, in the last few years, raised immediate concerns because of the sensitivities to GM and the need to ensure adequate IP
A third option is to target the organic sector, which remains a growing, but very niche sector in the UK and much of Europe (across the EU market per se, it accounts for c. 1% of retail food spend)⁶. At the complete opposite end of the technical spectrum from GM, it brings with it as many issues on total compliance as GM. Most of the major retailers in the EU have made substantial efforts to source a wider range of organic food products, not least to boost their own "green credentials". As with the GM issue, they will counter that they are just responding to consumer demand. Although the European consumer is seemingly more accepting of this approach to food production, it represents only a minor opportunity to market penetration. Under current European organic regulations, importers must demonstrate that imported products meet EU regulations, or the exporting country must be included on a list of third countries where production and inspection standards are equivalent to those in the EU

A final option is for Canadian companies to build strong links with the EU food import and retail and/or foodservice market over a period of time; in other words, "play the long game".

Whatever the sector and market in the EU being targeted……

Canadian food exporters need to get their products seen by potential European buyers: direct approaches to major retailers are often not that welcome. The first point of contact will often be with the primary importer and distributor to the supermarket and/or foodservice operator.

Attendance at recognised national and international trade shows is essential to build awareness and to provide a platform for discussion regarding future market entry strategies. These shows are often increasingly sector specific, and as such, locations will vary widely.

It is worth noting a comment from a UK importer, relating to planning these events:

"...many international companies, not just the Canadians, just turn up at exhibitions and expect the buyers to just arrive at their booth by magic. UK buyers do not work like this. They have meeting agendas, and often only 1 or 2 buyers will be tasked with responsibility of window shopping all the stands on behalf of their business..."

The message is clear: do your research first, plan ahead, invite potential customers to your stand and schedule appointments so that you ensure dedicated time with each of them, rather than hope for a selection of random meetings.

In order to develop any significant business relationships between Canadian agri food processors and exporters and the EU market, especially the UK, Canadian businesses also need to be highly mindful of the sensitivities surrounding the GM issue: to quote a leading UK food importer on the issue:

"...Canadian processors have to tie in their capabilities with what the European market wants. They should not and must not invest time and money in a new food processing plant if the market is not receptive to the product..."

Major retail and/or foodservice business sales will be difficult to achieve for any product, from any source of supply that contains GM ingredients in the short to medium term. The development of any level of business with a major EU based retailer and/or foodservice operator does not occur overnight. It requires investment in time, the development of trust, proven relationships based on track records of delivery which inspire both confidence and build commitment. Most of the larger retail and/or foodservice businesses have a grading system for suppliers, again regardless of source and/or product.

Only when a certain standard has been achieved across a range of criteria will significant volume sales be achieved. These might include continuity of supply, quality, the ability to meet increased demands, delivery against timeframes, etc. It will also need the proven ability to provide a range of supporting technical data regarding the nature, time and responsibility for production and processing activity.

The attraction of dealing with the major European and/or foodservice companies for Canadian processors and exporters is clear: for those that can show they understand the customers' business and meet all the technical and commercial requirements, there is the opportunity for regular, relatively stable and potential lucrative business. However, especially for those businesses in Canada that can be categorised as being an SME and /or "first time exporter" to the EU, working with large European retailers will almost certainly find their rigorous commercial and administrative procedures:

complex
time consuming
and technically demanding.

For the Canadian SME and/or "first time exporter" to the EU, it might well be worth initially focussing on developing business with smaller players in the retail and/or foodservice sectors. This would provide an opportunity to build experience of the market before engaging in dialogue with the larger players at the POS and their nominated importers/distributors.

Where a company originates from a region of the world which is known for producing GM ingredients, a non GM policy involving GM avoidance will require a more complex traceability system in order to prove compliance. Canada would be a prime example – this is because of the vast array of ingredients that are derived from soya and maize, or where they are used as fermentation substrates, from which ingredients are manufactured. Any EU based food business considering importing from Canada would need to be totally satisfied that very comprehensive audit trails are available to ensure the purity of GM free samples. This will all add to the marketing cost. It should be a serious consideration for any Canadian food business contemplating exports to the EU market.

In conclusion...

Bearing this all in mind, it would be a brave company in Canada who approaches the EU market on the basis and/or claim that it is looking to distribute a GM food product or one that contains GM ingredients. There are some isolated incidents where this has been attempted but these are very much the exception and not the rule. It might be (more) possible in the future.

However, this moment looks to be at least 5 – 10 years away. There has to be a fundamental change of mindset by all those involved in the EU food supply chain, not least amongst the all powerful food retailers for this to happen, as well as a massive change in the nature of consumer opinion.

SECTION TWO: EU & NATIONAL LEGISLATION

2.1 EU Legislation

GM food and ingredients in the food chain have been one of the most controversial areas of the European agri food sector over the last 10-15 years. This has lead to more stringent approval and labelling regulations for GM foods, and a raging worldwide debate on just how safe GM foods are to grow and consume. Despite this however, the regulatory environment is beginning to change and some GM products do now have EU Commission approval.

The two key areas of European GM legislation which relate to food, feed and ingredients are as follows:

EC1829/2003 Food and Feed
EC1830/2003 Labelling and Traceability

Other legislation exists, that relate to the following:

the testing of field /laboratory crops and release into the environment
the technical application of identifiers to highlight a GM modification

2.2 GM Food

The European Union has established a legal framework to regulate the approval and marketing of GMOs in food and animal feed products. The most recent EC Regulations became legally binding in April 2004. The main features of this are as follows:

GM Food and Feed Regulation (EC 1829/2003): these regulations ultimately create a harmonised procedure for the scientific assessment and authorisation of GMOs and GM food and animal feed. The responsibility for the scientific assessment procedure is held by the European Food Safety Authority (EFSA). It covers all GM food and animal feed, regardless of the presence of any GM material in the final product

Authorisation for GMO usage must be sought:

for GMOs as a source material for production of food and feed (e.g. GM soya beans processed as soyameal for use in animal feed); or
for ingredients in food and/or feed which contain, consist of or are produced from a GMO (e.g. lecithin from GM soya for use as an emulsifier in chocolate bars); or
for food or feed produced from a GMO (e.g. cooking oil produced from GM maize, or tomato paste from GM tomatoes)

Food and animal feed additives, such as colours, flavourings and emulsifiers from GM sources also fall within the scope of the regulation (EC 1829/2003).

Two thresholds are provided where labelling and traceability are not required for the adventitious (accidental and technically unavoidable) presence of GM material in non GM food or feed. These thresholds are set at 0.9% for approved GMO varieties and 0.5% for unapproved varieties that have received a favourable assessment from an European Commission scientific committee. The latter threshold is valid until April 2007.

The intentional use of GM ingredients at any level must also be labelled. However, there are some cases where GM labelling is not required. These are set out in Table 1 below.

Table 1: GM labelling in the EU – a quick summary
Products that require GM labelling	Products exempt from GM labelling
Products containing or consisting of GMOs, e.g. GM soya Products produced from GMOs, e.g. glucose syrups from GM maize Products containing ingredients produced from GMOs, e.g. GM tomato paste, lecithin from GM soya	Products produced with GM technology/processing aids, e.g. cheese produced with GM enzymes Products derived from animals (e.g. meat, milk and eggs) fed on GM feed

2.3 GM Traceability And Labelling

The main legislation relating to this issues can be summarised as follows:

Traceability and Labelling GM Regulation EC 1830/2003: provides a harmonised EU system on the documentation required for identifying GM products throughout the food supply chain. These regulations are set with the objective of facilitating accurate labelling in accordance with the GM Food and Feed Regulation EC 1829/2003.

A system of unique identifier codes have been developed to allow access to specific information on GMOs approved for commercial use (including planting and food/feed use). This guidance is designed to help eliminate any confusion arising between different national authorities when sharing the same information on the same GM crop that holds different names (see Regulation EC 65/2004 for further detail).

Unique identifier codes are only required in documentation relating to the traceability and labelling of products consisting of or containing GMOs (e.g. soya beans). However, they are not required in relation to traceability and labelling of food and feed products produced from GMOs (e.g. rapeseed oil, maize gluten feed, soya lecithin).

For products consisting of or containing GMOs written documentation is required throughout all stages of the supply chain stating that the product:

contains or consists of GMOs
giving the unique identifiers for the GMOs

For food and feed produced from GMOs, written documentation must be transmitted to the company receiving the product in the supply chain. For each transaction, the document must:

indicate which of the food ingredient, feed materials/additives are produced from GMOs
or, in the case of products of consisting of one ingredient, indicate that the product is produced from GMOs

For pre-packaged products consisting of or containing GMOs, the words:

"...This product contains genetically modified organisms" or "This product contains genetically modified [name of organisms(s)]"

- will need to appear on the label. In the case of a non-pre-packaged product, the words must appear on, or in connection with, the display of the product to the final consumer.

It is compulsory for companies in the supply chain to:

retain documentation for a period of 5 years detailing the operator providing the product and to whom it was sold on to
adopt a "one step up, one step down" approach to verifying and validating documentation

The labelling of GM Foods is also covered by the Novel Food Regulations EC 259/97. This is discussed in more detail in Section 2.4. Further detail of GM regulation can be found at www.europa.eu.int

Other regulations applying to GMOs include:

Regulation EC 641/2004 on detailed rules for the implementation of Regulation EC 1829/2003
Regulation EC 65/2004 on establishing a system for the development and assignment of unique identifiers for GMOs
Directive 2001/18/EC on the deliberate release in to the environment of GMOs
Directive 90/219/EC on the contained use of genetically modified micro-organisms (e.g. laboratory research)

Food and feed produced from or containing GMOs must also meet other EU regulations covering food and feed in general. Again further details can be found at www.europa.eu.int.

2.4 Novel Foods

Developments in science and technology have led the way for novel foods arriving regularly on the international market. Northern Europe is no exception. In order for these products to be marketed, they must follow the appropriate safety assessment regulations in place. In 1997, an EU Regulation known as 258/97 came in to force and covered all foods which were viewed as being "novel" to the human diet as well as novel processing methods, including GMOs. Upon the introduction of Regulation 1829/2003 and 1830/2004, Regulation 258/97 stopped covering GM foods.

2.5 UK GM Food And Ingredient Legislation

By law, the UK must abide by the regulations set by the EU, namely GM Food and Feed Regulation EC 1829/2003 and the Traceability and Labelling Regulation EC 1830/2003. The principal aim of these regulations is to protect human health and the environment and it applies to all GMOs.

In the UK, enforcement of the GM Food and Feed EC Regulation 1829/2003 has been implemented by country specific legislation (i.e. England, Scotland, Northern Ireland, Wales). Statutory Instruments have been devised to provide enforcement powers and penalties for non-compliance with the EC Regulations 1829/2003 and 1830/2003.

These are as follows:

the Genetically Modified Food (England) Regulations 2004 No. (2335)
the Genetically Modified Feed (England) Regulations 2004 No. (2334)
the Genetically Modified Organisms Traceability and Labelling (England) Regulations No. (2412)

The UK Government and devolved administrations in Scotland, Wales and Northern Ireland have all established joint arrangements for assessing applications for the release of GMOs. The main consultations are involved with:

the Advisory Committee on Releases to the Environment (ACRE)
the Health and Safety Executive
the Food Standards Agency (FSA)
the statutory nature conservation bodies (e.g. English Nature)

The release of a GMO will only be allowed if it has been approved by the EU Commission. If the release of a GMO is approved by the EU Commission, the UK and others in the EU would need to violate EU law to ban this GMO.

GM products may also have to satisfy other regulatory procedures that apply to the other commercial use of similar products, whether or not their production is GM related. For example, cultivation of new varieties of plant species will be allowed only once they have been added to the UK National List or the European Common Catalogue (Directive 2001/18/EC). Ultimately, the GM and non GM varieties of a crop have to demonstrate by a series of trials and tests that they are distinct, uniform and stable and that they have a value for cultivation and use in the UK.

The overall procedure for the consideration of an application for the use of GM ingredients is illustrated overleaf in Figure 1.

A summary of the legislation in the UK regarding the use of GM foods and ingredients is given as Appendix III.

Figure 1: The UK Procedure for Applications For The Use of GM Ingredients

SECTION THREE: THE IMPACT OF TRACEABILITY AND LABELLING REGULATIONS

3.1 GM & Non-GM: Commercial Requirements

Only a minority of soya and maize (& derivatives) used in the EU are required to be certified as "non GM". Most of this demand is in the sector producing foods for direct human consumption, plus some penetration of non GM requirements for protein ingredients used in animal feed (in some Member States only and mainly in fresh poultry & eggs).

It is estimated that the requirement for certified non-GM supplies applies to <15% of soy consumption & <25% of maize consumption in the EU.

The current price differentials for GM products as opposed to GM free for soy are:

4 - 5% @ 0.9% threshold
7 - 10% @ 0.1%-0.5% threshold

The price differential for maize is between 0 – 2%.

3.2 GM Avoidance

3.2.1 Pre 2004

Under the pre - 2004 labelling legislation, selective wording of publicly-stated, "non-GM" policies allowed a spectrum of "GM avoidance" to be in place. Careful scrutiny of the policies was necessary to determine the extent of individual, commercial practices but, in practice, a "non-GM" policy could mean supplying products that had been selected and/or formulated to meet one or more of the following criteria by:

using, or changing to, ingredients from crops that have not been subjected to GM:
removing ingredients which could have detectable presence of GM material (i.e. protein / DNA) above the (then) 1% threshold for adventitious "contamination" by re-formulation of food products away from (mostly) soya based products and, to a lesser extent maize, to alternative crops for which no GM products or derivatives are currently allowed for cultivation / import into the EU
procuring IP, non-GM raw materials from non-GM crop supply chains:
- primarily, this applied to soya, but also to a lesser extent maize
- IP could be based on audited supplies and processes ("hard IP") or by sourcing the ingredients from geographic regions where GM crops were not being grown or likely to be imported/processed ("soft IP")
- for the majority of ingredients, a 1% threshold for adventitious "contamination" applied although, in practice, many companies operated to 0.1% tolerance (considered to be the limit of quantifiable detection)
avoiding totally the use of any materials that have in some way been derived from gene technology (i.e. as per the Austrian and German legislation)
supplying livestock products (e.g. fresh meat, eggs, milk) from animals that have been fed a diet free from GM derived crops, although the approach to non-protein elements, veterinary and prophylactic medicines remained ambivalent

In relation to refined products, such as soy oil, where it is not possible to detect GM DNA/protein, policies fell into two categories. Some food processors required their suppliers to use non-GM derived raw materials (e.g. this policy applied to the use of soy oil in most food products used in some leading European retailer own-label foods like cooking oil or margarine). In other cases, European retailers and food processors continued to use certain ingredients obtained from GM crops or micro-organisms, but did not label their presence, because they were legally exempt from doing so.

Examples of exemptions (these are explained in more detail in Table 1 & Figure 2)

GM DNA/protein was no longer detectable after refining, e.g. soy oil/lecithin and also vitamins and food acids derived from GMMs
Certain end-products (e.g. cheese) are legally exempt from declaring their components
Certain ingredients (processing aids, enzymes, carried-over additives)

Prior to April 2004, these approaches did not compromise a company's public "non-GM" policy, where this was given as a commitment to (or could be interpreted against) "the need to meet legal labelling requirements". However, the extent to which the average consumer is aware of, understands or accepts these distinctions is not known.

Where the introduction of these "GM avoidance" policies has resulted in additional costs being incurred in the supply chain (or, more importantly, resulted in losing the opportunity to use lower cost alternatives), this has largely fallen on the supply chain up to, but not including, the retail sector.

3.2.2 Post 2004

Since April 2004, companies in the supply chain wishing to operate "GM avoidance" policies have needed to accommodate significant changes to the legal definition of products that fall within the scope of labelling and traceability requirements as GM derived products. This involves:

a significant broadening of the range of products that are classified as "derived from GMOs" to include ingredients in which it is not possible to detect any GM DNA/protein:
- in relation to soybeans and maize derivatives, the main additional products affected are the refined oils and starches/glucose syrups, respectively, but some 30 or so other food ingredients and additives can be identified as potentially having been derived from crops that have been genetically modified and are currently being grown commercially
identifying, on the label, the GM origin of any ingredient in a final product that is knowingly "derived from a GMO" regardless of the level of inclusion and the number of stages of refinement and/or chemical conversion the ingredient has undergone:
- the legal exemptions from labelling certain ingredients (outlined above) remain in place but in the case of some soya derivatives these may now be subject to separate labelling requirements under new legislation on allergen labelling; the positions of processing aids and enzymes are currently subject to review by the European Commission
tightening of the legal threshold to accommodate "adventitious presence" of GM derived material from 1% to 0.9% coupled with a legal requirement to demonstrate that any GM presence (below 0.9%) was, indeed, "adventitious" (i.e. the operator must be able to show that appropriate steps were taken to minimise the chances of this presence occurring). In addition, a threshold of 0.5% applies to the adventitious presence of material from a GMO that has benefited from a favourable scientific opinion within the EU:
- these requirements apply even if the presence is not detectable by analysis, thus requiring comprehensive records to be in place throughout the supply chain and retained for a period of five years
extension of the labelling requirements to animal feed and pet foods.

Possibly recognising the very wide scope of the new legislation and potential international trade repercussions, an attempt was made (late in the drafting of the legislation) to distinguish between materials "produced from" and "produced with" GMOs. This would mean that products considered to have been produced by fermentation and the use of related GM derived "processing aids" would be exempt from the labelling requirement.

However, this distinction was not formally introduced into the Articles of the Regulations and, consequently, the precise requirements related to the GM status of fermentation derived materials remains legally unclear, despite the European Commission and Standing Committee Expert Groups having published their views.

A meeting of the Standing Committee on the Food Chain and Animal Health in June 2004 failed to agree. However, during a follow up discussion in September 2004 a broad, but not unanimous, consensus was reached that food and feed (including ingredients such as additives, flavourings and vitamins) produced by fermentation using a GMM are:

outside the scope of Regulation 1829/2003 if the GMM is not present in the final product (these materials are considered as having been produced with, rather than from the GMM)
within the scope of Regulation 1829/2003 if the GMM is present in the final product, whether "alive or not"

With regards to direct crop derivatives, these would include the following:

proteins, oils, starches/sugars
extracts, purified fractions
lecithin, tocopherols, sterols etc
cellulose derivatives
chemical/physical modifications, hydrolysates
pure chemicals – fatty acids
chemical derivatives – emulsifiers, gluconates
caramels

What does this mean to the Canadian supply chain?

The key issues for the supply chain, where GM avoidance strategies are being adopted, are related to ensuring complete traceability of products ingredients and processes of production. This also includes whether the product is manufactured from ingredients, either directly related to GM, or derived from GM, or involving GMM technologies.

This means ensuring that at all steps in the production process, suppliers have ingredient specifications proven audit processes and trusted proven relationships with each step of the supply chain. The emphasis will be on Canadian processors and exporters to prove compliance with GM avoidance. Major European retailers and/or foodservice operators are increasingly demanding from their supply base costly audit trails to be conducted in order to prove compliance.

The complexity of legal labelling requirements with regards to EU legalisation in the food sector, and specifically in the area of GM food products should not be underestimated. For example, official regulations do not require specifically third countries to trace products (but in fact the so called "last handler" to provide this. As such this is more of a commercial requirement set by importers and major retailers and/or foodservice operators. However, for Canadian companies not to have this in place would send out the wrong message to the EU food market per se and would be akin to taking a "short cut".

For an experienced international trader of agri food products, this all might be less of a problem. However, for a first time exporter and/or a SME company bearing in mind the inherent constraints on resource that they typically face, it can be a major obstacle to overcome in terms of EU market entry.

Not least, the adoption of the correct language of whether a product is "GM free" or "non GM" is crucial. The extent to which a (Canadian) product relies on GM ingredients is another measure to consider in terms of exposure to risk, both financially in managing audits etc and the subsequent ability to modify ingredients if required in order to comply with EU legislation.

SECTION FOUR: UK MARKET REQUIREMENTS

The requirements for Canadian agri food processors to successfully export to the UK are ultimately made up of two elements: the legal focus and the commercial focus. Essentially, these two elements have to work in conjunction if Canadian exporters to the UK are to satisfy all trading requirements.

Legal Focus

4.1 Legal Focus

European legislation: is integral to trading in the UK. It relates to what can and cannot be allowed in terms of food products and ingredients (see Section 2)

The European Food Safety Authority: works with EU and national legislators through the provision of independent scientific advice to support EU legislation and policies related to food and feed safety

National Legislation: relates to the national response to EU legislation and additional directives over and above EU policy

The Food Standards Agency: an independent UK government agency with a clear focus on consumer food safety by ensuring national compliance with EU & UK food legislation.

Trading Standards: effectively act as regional local government agencies. They advise businesses and visit food processing premises on a regular basis, to ensure compliance on legislation relating to a range of factors, but in particular:

health and safety
hygiene ( i.e. environmental health)

Home Authority Principle: operates throughout the UK and determines which regional office enforces the legality of goods and services in its area.

Accredited Laboratories: provide services to both trading standards and private business to test samples of food/ingredients for compliance.

What should a Canadian company do?

There is a plethora of EU and UK legislation to comply with for any Canadian agri food processor and/or exporter with regards to market entry; and this before any sort of commercial acceptance by importers, distributors, food retailers and foodservice operators might have been achieved.

It is likely that trying to fathom all of this out from long distance would be extremely time consuming and complex. Some of the organisations involved in shaping this legislation such as EFSA and the FSA in the UK are primarily involved in government to government type discussions and/or would deal with leading trade associations on behalf of their members, rather than deal with individual companies.

For any Canadian company looking to target the UK market, it might be highly advisable to make initial contact with the food laboratories that have been given the accreditation to carry out a full range of tests on food products. These tests are carried out on food produced within the UK, elsewhere in the EU and from third country suppliers. They will provide advice and guidance to potential Canadian exporters on all aspects of meeting the legal requirements of doing business in the UK, and are normally well accustomed to working with SME operators.

Appendix IV will provide more details of organisations and companies that can assist Canadian processors and exporters in this respect.

4.2 Commercial Focus

Commercially led initiatives are also in place to ensure higher standards of food production, from primary production to finished product.

Commercial Focus

The Global Food Safety Initiative: is a response to global trading which aims to harmonise standards across the world and ensure clarity of communication on food related activities.

The British Retail Consortium (BRC): is the leading retail trade association in the UK. It looks to influence government on policy related issues which affect the membership. The BRC standards developed are now recognised as "best practice standards" across the food chain. The BRC and the Food and Drink Federation (FDF)⁷ have developed a standard for the IP of GM ingredients: this is known as the BRC/FDF Non-GM food standard.

EUREPGAP/Assured Farm Standards: is a system of global benchmarking of a given standard across primary production sectors. EUREPGAP is based in Germany. Its formation was encouraged largely by a combination of the leading EU based retailers, significant players especially in the fresh fruit and vegetable trade from both within and outside the EU⁸ and life science companies such as Bayer and Syngenta. EUREPGAP now covers the full spectrum of activity across the supply chain.

In contrast, the Assured Farm Standards Scheme has been largely driven by the UK National Farmers Union in response to demands from retailers and consumers alike for clearer schemes of quality assurance. It covers most areas of primary agricultural production and has a high level of uptake (i.e. in the UK horticultural sector, some 75% of production is now carried out under the auspices of the AFS)

The UK Accreditation Scheme (UKAS): this is the sole government approved accreditation body recognised to make assessments against international standards. UKAS has the ability to appoint other approved agencies to either certify, audit and/or consult on related food safety and traceability issues.

Retailer specific disciplines on top of the basic requirements

Most of the UK retailers have come out with strong and unambiguous statements regarding the use of GM foods and ingredients especially in their own brand products. The leading retailers such as Tesco and Sainsbury have as a way of differentiating themselves in the highly competitive market also introduced their own range of foods such as Tesco's "Finest" and/or Sainsbury's "Taste the Difference". These will involve suppliers in meeting specific company protocols, as well as complying with the standards as set out by the likes of the BRC and/or EUREPGAP.

The fact that a single food company might be required to comply with several retail specific protocols as well as industry wide schemes, such as BRC and AFS and has been seen as a huge burden, especially for SME companies.. However, with the dominant position of the retailers in the UK food market, it has become an unavoidable "cost of doing business". The rationalisation of the supply chain has seen some of this burden reduced, whereby many food companies now have a relatively high proportion of their business with just 1 – 3 major retail customers.

As with the case in meeting the legal requirements for doing business in the UK, it is not practical, advisable, desirable or even necessary for lots of individual Canadian agri food companies to start a dialogue with the likes of the Global Food Safety Initiative. It is more practical to look to gain BRC accreditation as a starting point and/or demonstrate compliance with EUREPGAP. This would demonstrate to UK buyers across the supply chain of the level of technical expertise within the Canadian company and it would act as a strong signal of intent. To gain this type of accreditation, Canadian agri food companies should be making contact and developing a strong interaction with the companies who are qualified to give this sort of assistance.

A summary of the requirements regarding labelling in the EU can be given in Figure 2 overleaf.

Some of the typical sort of companies who can provide this assistance in the UK are listed in Appendix IV of this document and a summary of the more "commercial" requirements for undertaking business in the UK food market are given in Appendix IV.

Figure 2: Examples of European GM Labelling Requirements: a summary

SECTION FIVE: EU CONSUMERS AND GM FOOD

5.1 Introduction

As has already been stated, the "average" European consumer has relatively little understanding of the modern food production processes⁹. It is therefore difficult to measure the receptiveness of consumers to new technologies until they have had a thorough briefing on the subject. Recent food scares such as BSE and Sudan 1 have unfortunately heightened consumer concerns regarding food ingredients and created a lack of trust in official bodies who regulate and monitor food safety. The management of these issues by the Government has done little to allay their fears.

However, public attitudes and consumer responses ultimately determine the viability of biotechnology and GM food/ingredient usage in the long-term. Examining consumer attitudes is therefore an important part in investigating the receptiveness of consumers towards GM food and ingredients, but by no means is the sole platform for analysis.

5.2 European Consumer Attitudes to GM

Attitudes, which are often formed by culture, social environment and experiences, clearly and as would be expected, differs amongst consumers. There are noticeably different attitudes for example between US and European consumers which are outlined below in Table 2 on the following page.

Table 2: US & EU Consumer Attitudes: a quick summary
US Consumer	European Consumer
Largely domestically focused (estimated that 65% of American consumers unaware of EU demonstrations to GM) Lack of awareness of agri-biotechnology Less than 50% American consumers realise foods containing GM are sold in the supermarket Less than 30% believe they have consumed it Largely remote from primary production, due to geography of urban population and core farming areas Trust in scientific and academic communities Lack of exposure to information on GM issues	Proximity to other European countries aid transparency of /exposure to issues Agricultural farm structures more integrated into the community, consumers see what is going on assisted by land access rights Trust in environmental and consumer groups rather than institutions in the form of government and academia Environmental & consumer groups tend to be negative towards GM Greater exposure to information from extensive press coverage European consumers on the whole believe GM foods to be risky, not useful and not to be encouraged

Source: Choices and the American Agricultural Economics Association

5.3 Consumer Research

Some analysts would question the robustness of the sampling methodologies adopted in some of the GM consumer research in the EU. Additionally, there is doubt about how far the average consumer really understands the complex issues involved in modern style food production, let alone GM.

However, it is without question that the reality remains that consumers have not taken to GM foods and there exists concern about the whole GM debate. Based on this evidence, major retailers and/or foodservice operators do not have sufficient confidence to put their individual or collective heads "above the parapet" to present pro GM arguments to consumers.

The UK Institute of Grocery Distribution (IGD)¹⁰, conducted consumer research in 2003 of which the main results can be summarised as follows in Table 3 below.

Table 3: Summary of Key Findings from IGD Consumer Research, 2003
Reasons to support	Reasons not to support
The benefits of GM production and/or eating GM food needed to be clear and important to the individual: - 13% would support GM production if the end foods were more nutritious - 12% would support GM production to ease food shortages in developing countries - 10% would be encouraged to support GM production if there were added health benefits to the food, such as in existing ‘functional foods' that help lower cholesterol Few would support GM production if the benefits were only perceived to be applicable to the producer (e.g. disease resistant crops). Consumers see this as leading to lower production costs but do not think these savings will be on to passed to the consumer	They do not have enough credible information about GM to currently make a decision whether or not to support it Without this information consumers opt for a precautionary approach The findings from IGD research show the impact this lack of information has on consumers' attitudes: - 24% would not support GM production because they do not know the long-term benefits for their health - 14% would not support GM because they knew too little to make a decision either way - 10% felt that there was too much conflicting information that made it difficult for them to make a decision - 10% though GM was unnatural, and so would not support it

The IGD consumer research also shows that GM is making little difference to the majority of consumers' shopping as illustrated in Figure 3 on the following page.

Figure 3: Impact of GM on UK Consumer Shopping Habits

Implications for Canadian Agri Food Processors & Exporters

Food safety aspects are of concern, although in many cases tainted by "suspicion" rather than hard facts
Informed choice is considered essential and clear labelling is a must
Concerns exist about the UK being left behind in GM technological developments if the rest of the world continue to adopt it
Transparency of information, even at a basic level, will be essential for the public to gain an understanding of the technology
Trust in the scientific community and Government had been damaged following the management of the BSE and other food industry crisis
Concerns exist over how far the technology will be implemented, especially in relation to gene transfer between animals and plants
It was recognised that GM food had been consumed outside the EU for some time without any apparent detrimental health effects, but longer-term studies were required to reassure consumers
Environment and biodiversity were the key areas of concern, even in consumers who are generally "pro GM"
The use of GM in developing countries give consumers a wide range of concerns ranging from the perceived benefits in economic growth to doubts about sustainability

5.4 The FSA Food Debate

In 2003, as part of the UK Food Safety Agency (FSA) contribution to the Government public debate on GM food, an independent assessment of consumer opinion on the acceptability of GM food and how this relates to consumer choice was carried out. A range of data, qualitative (20 groups) and quantitative (3,000 consumers over 3 years), was collected.

The key results were:

Most UK consumers are "suspicious" about the subject of GM
A lack of readily understood information is a hindrance to alleviate this suspicion
However, in the last few years, concerns over GM food have reduced
For many, consumer benefits of GM food have remained unproven
The environmental impact of GM technology remained high in the concerns of the consumer

Source: FSA Contribution to public dialogue, Consumer Views of GM Food, 2003

What does this mean for Canadian agri food exporters ?

In the current environment, it would be a high risk strategy for any company to launch a food product in the UK market that overtly contained GM ingredients. Attitudes are beginning to change though. It might be that acceptance of GM becomes more the norm in the future; but in the UK and the rest of the EU, it is clear that we are not at that stage yet, and might be some 5 – 10 years away from it.

SECTION SIX: THE CURRENT CLIMATE

6.1 Introduction

GM is an issue seen to be high up on the list of concerns within the EU agri food sector and the debate continues to expand. As a result, all stakeholders in the EU food chain have been forced to respond as tensions rise over regulations and traceability issues, as well as the moral and ethical implications of supporting GM.

6.2 National Government Positions

In the long term, regardless of Government policy, the market will influence the decision making process. However, the role of government can clearly set the tone of possible future events. The position of the UK, Netherlands and German governments regarding the use of GM technology in agricultural and food production can be summarised as follows:

The UK Government remains relatively "open minded" about GMOs where the focus is on the protection of human health and the environment. This focus is based on "pro-consumer choice" combined with a belief that "sound science should guide their development and use"
The German Government was extremely cautious regarding the use of GM when the Social Democratic Party (SDP) and the Green Party were in power until 2005. However, when a coalition of the Christian Democratic Union (CDU) and SDP, the two largest parties, took over in September 2005, the stance against GM seemed to soften. The coalition agreement sees biotechnology as a key industry branch for the future, which the government intends to promote (research and use) with the implementation of the relevant EC legislation. In the long-term, a co-existence of GM and conventional products set as the achievable goal, with the safety of the environment and consumers in mind
In the Netherlands, government considers GM crops as a "hot topic." The preservation of the existing agricultural systems is considered as key and as well as whether conventional and organic agriculture can co-exist with the cultivation of GMOs. IP is therefore seen as a key consideration. Currently, no GM crops are grown commercially in the Netherlands. There are only a limited number of small-scale field trials

A summary of the legislation surrounding the use of GM foods and ingredients in the German and Netherlands market is given in Appendices VI and VII respectively.

What does this really mean for Canadian processors and exporters?

Governments in the EU are in effect sitting on the fence at the moment: they do not want to miss an opportunity and/or fall behind the rest of the world if GM becomes more widely adopted and clearly they will be concerned if EU agricultural and food production begins to suffer in terms of international competitiveness vis a vis other major producers who might be adopting GM technology more readily.

However, they are also very mindful of the potential for a strong adverse consumer reaction to the over zealous adoption of GM technology. Politicians find its application in other scientific areas such as medicine much more comfortable to deal with, than in agriculture and food.

6.3 Anti Lobby Groups

UK anti GM lobby groups attacking official GM crop trials make highly visible protests, but their extreme views and tactics are not likely to be fully representative of consumer opinion. They do however make ideal "media fodder". It was these images (as seen below) that made the headlines, not anything about potential savings on crop inputs.

Anti Lobby Groups

6.4 Major Retailers Position on GM

As already mentioned, in many EU markets, consumers have developed a huge loyalty to retailers and their brands and in some cases the retailers are seen as the "defenders of consumers interest" especially in matters relating to food safety. With regards to GM, most food retailers have reacted to public concern over the GM foods in the form of public statements relating to the avoidance of GM food ingredients in their own labelled products.

A UK food importer quoted in the course of this research:

"...what manufacturers need to do is spend more time in the first instance in understanding why and how European consumers are different to Canadians... and then why, how European supermarkets are different to those they deal with in North America and what this all means to the way that they will do business".

6.4.1 The UK

The major retailers in the UK have all made public statements indicating the removal of GM ingredients from their "own brand" range. This is particularly the case for Tesco, the leading food retailer in the UK representing c. 30% of the food retail market and who therefore ultimately is hugely influential in the GM debate. They have stated that they will source non GM ingredients in future.

The retail chain with the strongest message against GM is M &S, who have advertised "All our food is GM free" and in their Company Policy document state:

"...maintaining a total ban on GM foods will become increasingly challenging if, as seems likely, governments around the world relax the rules on growing GM crops. We will have to work harder and harder in future to maintain this ban and we are committed to doing so".

The majority of UK food retailers have also made statements on ensuring clear labelling on other products where GM ingredients may be present to, "permit consumer choice," however, this is an actual EU legislation requirement. Furthermore, retailers are now faced with a situation where they want to capitalise on present consumer concerns regarding GM, but also need to leave the door open, if the situation changed rapidly.

What has started to happen in some cases though is that products are now being labelled as being specifically GM free as shown in Figure 4 overleaf: not an overly encouraging sign for the future.

Figure 4: Example of UK Trade Press Advertising

The Future ?

In the future, maintaining a complete ban on GM food will be challenging given that the EU has to resume its GMO approval process which will lead ultimately to increased authorisation of GMO food products in the EU. However, the widespread adoption of GM food ingredients across the UK supply chain and acceptance by consumers would still appear to be some way off. The market would not appear ready for this as yet.

A summary of the position of the position of the main UK retailers is given in Appendix VIII.

6.4.2 Germany

German food retailers have been cautious in making public statements addressing the usage of GM food and ingredients in their products. Some major German food retailers however, such as Aldi, Globus, Kaufland, Lidl, Rewe and Wal-Mart, have made a conscious effort to wherever possible avoid GM food on their shelves, including animal products where suppliers use GM feed. In the case of Edeka, the food retailer has asked all of its branded suppliers to supply non GM products. This mirrors the situation which are guaranteed to be GM free.

6.4.3 Netherlands

In the Netherlands, consumers have so far relied on the major food retailers for taking decisions for them concerning the production and backgrounds of food products. With regards to GM foods, it is generally regarded that if a product is sold in a supermarket then there is no threat. Interestingly, Ahold has been selling GM labelled corn oil for the last 3 - 4 years (in the Netherlands), with seemingly no adverse reaction, but the relevant labelling is not at all highly visible to the consumer.

6.4.4 The Foodservice Sector

The EU foodservice sector is not as well developed as it is in North America. However, especially in the North European markets, the trend to eating away from home is on the increase, as it is in many other developed international markets. The North European foodservice markets are becoming increasingly dominated by large franchise and chain operators, be it in the fast food sector, hotels, restaurants and/or leisure sectors and their procurement practices are now in line with those of major retailers. Their attitude to the GM issue is often the same too. The Southern European markets in contrast, are as with the retail sector, more fragmented than in the North and the independent foodservice outlets are still more prominent.

Across the sector though, foodservice operators are already making claims on their menus to indicate their position on the GM issue. An example of a public statement on GM from major UK hotel chain, restaurant menu is given below.

Please inform the Restaurant Manager immediately if you have any dietary requirements or food allergies. Special dietary requirements can be catered for on request. Please note the Bridge Restaurant reserves a non-smoking policy, however smoking is permitted in the Bridge Cocktail bar. our hotel policy is not to use GM foods. However, we are currently unable to guarantee the origin of some foods, therefore some ingredients may arise from genetically modifed maize/Soya. Some dishes may contain nuts or traces of nuts.

SECTION SEVEN: AN OVERVIEW OF KEY AGRI FOOD COMMODITY TRADE & FOOD INDUSTRIES

7.1 The UK

The main points to note regarding the UK agri food market are as follows:

the UK is an overall net agricultural importer of food
in 2004, total agri food imports were around €24billion (C$39billion), in comparison food exports totalled around just €9.4billion (C$15billion)
around 20% of UK total agricultural imports are unprocessed, 50% semi-processed and the remaining 30% processed
fruit and vegetables are the UK's primary agricultural import and account for 28% of total imports. Meat and meat products are the second largest import product with 20% of the total
over 60% of the UK's agricultural imports originate from within the EU, primarily Germany, Netherlands and France, but with an increasing presence from New Zealand, South Africa and Central European countries
the UK is Canada's fastest growing market for exports, after the US. In 2004, Canada exported around €230million (C$372million) worth of agricultural and food products to the UK
major exports from Canada to the UK included cereals, fish and crustaceans and prepared vegetable and fruit products

Implications for Canadian Companies

The UK is still a key market for Canadian agri food exports. The market is highly concentrated but it operates in a transparent manner. The retail sector is highly demanding, but offers lucrative business for those that can meet the combination of technical and commercial requirements. The foodservice sector has to date been seen as the "poor relation" of the retail sector, but is expanding rapidly and is beginning to look for the same sort of supplier competencies as found in the retail sector. There is no strong domestic food culture in the UK in the way that there is in perhaps France. In effect, this means that the market is receptive to food products and eating concepts from around the world.

Figure 5 : UK import profile - % of total value by each sector by top 8 origins

Agri-food sector

fish imports

Cereal imports

Fruit and Veg Imports

Meat imports

7.2 Germany

The main points to note regarding the agri food market in Germany are as follows:

Germany is a leading importer and exporter of agricultural products within the EU
in 2004, total agri food imports for Germany valued at €35billion (C$57billion) in comparison agri food exports totalled €27billion (C$44billion)
fruit and vegetables are Germany's primary agricultural import accounting for 33% of total agri food imports
meat products and dairy are the second most important import product(s) with an equal import share of 12% of the agri food total in 2004
more than half of German agri food imports are sourced from other EU countries, particularly France, Italy and the Netherlands.
In 2004, Canada exported around €88million (C$142million) worth of agri food products to Germany
Major Canadian exports to Germany included fish and crustaceans, prepared vegetable and fruit products, maple sugar and syrup, honey and hatching eggs.

Figure 6: German import profile - % of value by each sector and by top 8 origins

Agri-food sector

Coffee/team imports

Dairy imports

Fruit and veg imports

meat imports

Implications for Canadian Companies

The German market is the largest single market in the EU, with some 80 million consumers since re unification took place. Although there are some serious economic issues to address in Germany over the next few years, this is all relative. The German economy is still the most powerful in Europe. Consumers are affluent and well educated.

It is therefore always a surprise that the German food market is dominated by the discount chains for whom price is everything, with relatively little in the way of added value products and/or services. Price is a key factor in all international markets, but the issue is especially acute in the German market although, at the same time, there is no let up in either the technical and/or legal demands made on suppliers.

Nearly all major international players in the agricultural and food sector see Germany as something as a "must have" market. This is because of its sheer size, and the fact that Hamburg as a major point of entry, is also a safe re export route to other markets in Eastern Europe and the Former Soviet Union.

7.3 The Netherlands

The main points to note regarding the agri food market in the Netherlands are as follows:

the port of Rotterdam is the largest port in the world, and a major contributor to the Dutch economy. It is therefore no surprise that the Netherlands is an overall net exporter of agri food products
in 2004, total agri food exports valued at around €33billion (C$53billion) in comparison total agri food imports valued at just €20billion (C$32billion)
the majority of agri food trade centres around other EU Member States. Around 85% of the Netherlands total agri food exports are destined to the EU and around 65% of agri food imports originate from within the EU, primarily Germany, Belgium and France
in 2004, vegetables and fruit were the primary agricultural import in the Netherlands accounting for 28% of total agri food imports.
coffee/tea, meat and dairy came a close second each representing 13% and 12% respectively of total agri food imports.
in 2004, Canadian agri food exports to the Netherlands valued at around €45million (C$73million).
major imports from Canada to the Netherlands included fish and crustaceans, prepared vegetable and fruit products and miscellaneous products (sauces, condiments, powders and baking yeasts).

Figure 7: The Netherlands import profile - % of total value by each sector and by top 8 origins

Agri food sector

Coffee/tea imports

Cereal imports

Fruit and veg imports

Dairy imports

Implications for Canadian Companies

The Netherlands is one of the worlds great "entrepot" markets, with imports attracted in from all over the world, before being re-exported right across the EU, Eastern Europe, Former Soviet Union, Middle East and Asia. The danger for a "first time" exporter is that they are liable to "get lost" amongst all the frantic activity that takes place in the Netherlands food sector.

The domestic market itself is quite small, but consumers have high incomes, are well educated and the market is characterised by the dominance of retail chains and a fast emerging foodservice sector. The Netherlands is also home to some of the world's leading agri food processing companies usually attracted to invest there, by its excellent location for trade with the rest of the EU.

7.4 Canada

7.4.1 Export Profile

Agri food and agriculture plays an important role in the Canadian economy, representing 8.3% of GDP. The food and beverage processing sector is the second largest contributor to the manufacturing GDP and is the largest manufacturing employer. In 2003, Canada was the fourth largest exporter of agri food products in the world, after the EU15¹¹, the US and Brazil, with exports valued at C$24.4billion. In 2005, this grew to C$26.2billion.

Canadian agricultural and agri-food exports are predominantly concentrated around the commodities of cereals, meat, fish and vegetables and fruits. Dairy products are significantly smaller accounting for less than 2% of agri-food exports. Canada's primary export market is the US accounting for 62% of agricultural and agri-food export sales in 2004. Following the US is Japan (9%), EU15 (6%), China (4.6%) and Mexico (4.4%).

Figure 8: Canadian export profile- % of total value by each sector and by top 8 destinations

Agri food sector

Fruit and veg exports

Fish exports

Cereal exports

Meat exports

Increasingly, value added, high processed food products have been the more successful exports of Canada. In 2003, Canadian processed products such as oil seeds/grains, pasta, fruit and vegetable preserves, confectionery and wine were exported to some 170 countries around the world but of which, 85% went to just two markets - the US (76%) and Japan (9%).

Figure 9 on the following page illustrates the overall trend in Canadian exports for the 10 leading agri food products between the period 2000 – 2005.

Figure 9: Top 10 Canadian Agri Food Exports, 2000-2005

Source: Canadian Trade Statistics

7.4.2 Canadian Exports To The EU

As well as the overall increase in Canada's growth in exports of high, added value processed foods, there is also an increase in exports trade with the EU. In the following figures below, we have illustrated Canada's trade profile to the EU of selected added value food products in the period between 2000-2004.

Canadian Wine Exports

Canadian Confectionery Exports

Canadian exports to the EU have grown significantly from 2000-2004. France dominates as the main export market for Canada, but with other countries such as the UK and then newer markets such as Portugal, Belgium and Denmark. becoming more important by 2004.

Canadian Confectionery Exports

In 2000, Germany and the UK dominated EU imports of Canadian confectionery. However, since then, exports to these countries have declined, with greater import activity switching to France, Italy and the Netherlands.

Canadian Pasta Exports

Only 3 EU markets import significant volumes of pasta product from Canada: the UK, Germany and the Netherlands, but over the period of 2000–2004 all three of these markets have seen something of a significant decline in terms of products from Canada.

Canadian Preserved Fruits Exports

In terms of value, preserved fruit products represents the highest Canadian export to the EU. High levels of imports are apparent in Germany, UK, Netherlands and France, but less so in Belgium and Italy. The main growth markets in this period however have been the UK, the Netherlands and Belgium.

SECTION EIGHT: EUROPEAN FOOD MANUFACTURING, FOOD SERVICE & RETAIL

8.1 Background

The changing nature of European consumers in terms of:

static population growth
an ageing consumer base
an increasingly polarised consumer base, in terms of income and educational opportunities
stronger socio economic influences from ethnic and migrant groups, including in terms of food consumption
the first real generation of consumers who will have to pay for education, health care and pensions (all of which have been in the past State funded)
an IT literate society which impacts on how and where consumers work as well as how and when they shop for food

...is having a major impact on the food industry.

Faced with a mature market, food retailers are increasingly consolidating and specialising as they attempt to achieve economies of scale and profitability. Retailers are looking to IT and automation to maximise efficiency, and are moving into ready meals and convenience foods to capture the growing out of home food consumption.

Two distinct models of modern retailing have emerged across Europe – the German discount-led model and the British value added format. Both models are present in most European countries to varying degrees. The foodservice sector has continued to grow in volume and value in response to consumer trends. Despite continued growth, the industry is also consolidating in an attempt to maximise profitability. Foodservice companies are increasingly adopting retailer-style supplier management systems.

Changes in the foodservice and food retail markets have imposed even greater changes on food processors in recent years. The evolution of the discount retailer and private label brands has placed massive pressure on branded food manufacturers. Pricing is now set by the retailers or private label brands, rather than food manufacturers. Food processors are increasingly producing smaller production runs, and customising products to meet very specific customer demands.

While the above trends are prevalent to some extent all over Europe, they are most developed in Northern European markets, such as the UK and Germany, and least developed in countries such as Italy and Spain. The following section aims to provide Canadian suppliers to the EU a "snap shot" overview of the food retail and food manufacturing sectors in selected markets of the UK, Germany and the Netherlands.

8.2 The Retail Sector

Country	Comments
UK	The UK grocery market is worth €176 billion: food and drink €114 billion, non food €18 billion, tobacco €18.3 billion, health & beauty €25billion (2005) Forecasts indicate the UK grocery market will reach €200 billion by 2010 Food and grocery is the third biggest element of UK household expenditure accounting for 13.1%. Housing and transport are 18.7% and 14.2% respectively A highly concentrated sector with four players representing 75% of the market: Tesco (30.4%), Asda-Walmart (16.6%), Sainsburys (15.9%) and Morrisons (11.5%) Tesco's remains as the leading food retailer, operating around 2,365 supermarket stores in the UK and generating a turnover of around €39 billion The continued dominance of Tesco is expected as the retailer leads the way with its wide range of products from discount items through to "Tesco's Finest" which means it can appeal to all consumers
Germany	The value of the food retail market in Germany only grew from €112.5 billion in 1994 to just €121.7 billion in 2003 The principal winners over the last years are discount stores and large out of town hypermarkets Smaller supermarkets in residential areas are becoming less popular The top 5 food retailers are: Edeka Group (25%), Rewe (22%), two major discount groups (who own Lidl) Aldi (18%) and the Schwarz-Group (17%) and Metro (14%) all of whom offer different store formats to appeal to many customers Discount stores are expected to grow again after sales in the discount sector decreased from 2002 onwards In 2005, discount stores grew by 5.4%, more than any other supermarket sector
Netherlands	The value of the domestic food market is some €29 billion per annum 90% of the Netherlands food retail outlets are full service supermarkets of between 500 and 1,500 square metres The hypermarket concept is still underdeveloped with only 120 stores The Netherlands based are currently in an ongoing price war, which led to low food prices, which are among the cheapest in Europe Albert Heijn, Laurus and Schuitema have a combined market share of 60% Discount stores have been growing from 6% in 1999 to 10% in 2004

8.3 Food Manufacturing

Country	Comments
UK	The UK food and drink manufacturing industry is the single largest sector in the UK, with an annual turnover of €107 billion Of the top 10 largest food manufacturers in the UK, the sector is largely dominated by bakery ingredients, confectionery, beverages, meat and dairy (see Figure 10 below) Around 6,500 companies across the UK are employed in jobs associated with food and drink manufacture and sales, accounting for 12% of total employment in the country
Germany	In 2005, the German food and drink industry consisted of 5,900 enterprises, more than half a million employees and a turnover of over €130 billion Nearly 80% of the turnover is achieved by transactions within Germany The food processing industry is characterised by a large number of small and medium sized enterprises The ten largest enterprises only account for 12% of the entire industry turnover
Netherlands	Growth in processed food manufacturing has come from high R & D and innovation in convenience foods, meal replacements and health and wellness products Major Netherlands food companies include Campina, Friesland Coberco, Van Den Bergh and Iglo Mora

Figure 10: The Ten Largest Food Manufacturers in the UK

Source: The Grocer / OC&C, 2005

8.4 Foodservice

Country	Comment
UK	The UK out-of home sector is worth around €56 billion: with the "profit" sector worth some €46 billion (restaurants, takeaways) and the "cost" sector worth some €10 billion (schools, hospitals, prisons) The foodservice sector in the UK is being fuelled by a buoyant consumer market and international tourist spending; strong growth is being seen particularly in branded coffee shop chains, e.g. Starbucks, Café Nero and fresh "take out" meal chains, e.g. Prêt à Manger There has been a significant response by supermarket chains to recapture foodservice occasions via convenience (e.g. Tesco Express, Sainsbury Local, Marks & Spencers Simply Food) and urban centres (e.g. Tesco Metro, Sainsbury's Central) fascias
Germany	The German foodservice market is estimated to be around €26 billion, however by 2008, this value is expected to shrink to €25 billion, with the decline expected to come from larger outlets displacing smaller outlets Traceability and food labelling are becoming increasingly important, particularly amongst chained operators in the fast food sector The expansion of self-service cafeterias in locations such as retail, transport and leisure with greater emphasis on quality, freshness and variety as USPs. The coffee bar scene however remains under developed compared to other European cities
Netherlands	The Netherlands foodservice market is valued at €11 billion, representing around 30% of the total food market The profiles of the Netherlands consumers is changing, with increased interest in eating out as a leisure, social activity or as a convenient alternative to home cooking Rising prices and competition in the sector is expected, with sophisticated food products, services and cross-border entry by outsiders being key drivers

8. 5 What Does This Mean for Canadian Agri Food Processors & Exporters ?

With the expansion of the EU food market to now cover some 25 countries across the Continent, it is the largest food grocery market in the world. For Canadian exporters to ignore it completely, would be somewhat short sighted.

The EU market should however not be seen "as one" but rather a series of separate markets, each with their own specific characteristics. There is a huge difference, for example, between the markets in Northern Europe (such as the UK, the Netherlands and Germany) and then the Southern European markets of Spain, Italy and Portugal. There is a huge difference again between these markets and those found in Eastern Europe such as Poland, the Czech Republic, Hungary and the Baltic States.

In terms of the emphasis of this report, with its focus on the UK, Germany and the Netherlands, Canadian exporters should be aware of the following:

the market is in most cases mature, especially for commodity type products. Any growth in the market is coming from niche areas such as organics, products with strong degrees of "provenance" attached to them, health foods, functional food and drink products and convenience based products and snacks
products are already sourced from a wide range of countries, both from within the EU and from third countries, including North America, Latin America, the Middle East, Africa, Asia and the Far East and Australasia; it is truly a global market place
specialist food and drink importers who offer the best and/or most appropriate route to market for most Canadian processors and/or exporters are constantly being approached from around the world by potential suppliers. It stands to reason that not of all these are followed up. Only the most attractive opportunities will be pursued. Canadian companies will find that competition to attract attention is fierce, and by no means will they have the market to themselves
having said this, and while there will be no "identikit" picture of the Canadian agri food sector in the EU supply chain, it is reasonable to assume that while very specific knowledge of what the Canadian agri food sector has to offer the EU market might be limited, the overall image of the Canadian food sector is likely to be favourable: modern, professional, efficient and with good environmental credentials, but probably more influenced by market trends and customer requirements in the US market than in Europe
the overall point is that the Canadian food industry would be seen as having much going for it, but these days, technical competence is almost certainly valued higher than traditional images of "green and clean", not least as most of other countries around the world also claim the same, and to some extent this has lost its meaning
competition amongst suppliers, irrespective of source and entry into the market is hard won: the supply chain in terms of the number of intermediaries is being shorted all the time, in order to reduce costs and increase efficiency
the major retailers and foodservice operators exert huge influence over the rest of the supply chain and in many cases consumers too: the supply chain is increasingly consolidated. Most retailers and/or foodservice companies have appointed a relatively small number of trusted key companies to organise their supply base on their behalf, sometimes on an exclusive basis
in terms of channel and distribution opportunities, the mass retail market is in many EU markets, especially in Northern Europe already close to saturation: growth is coming from the foodservice market, the convenience sector and from niche routes to markets such as Farmers Markets, specialist independent delicatessens etc (although it should be noted that the overall % of the market that these niche distribution channels account for is still often very small)
levels of commercial and technical competence required to service the major retailers and foodservice operators is high, and will only get higher in the future. Systems of traceability and technical due diligence are not optional. Even when these are in place, they do not guarantee access to the market: they are in effect a basic minimum requirement of the "right to supply"
the market operates in a reasonably transparent manner, communication systems work well, legal and financial systems operate well and the initial identity of key players at most stages of the supply chain is no big secret: developing a meaningful business relationship with them is however more challenging and will take considerable time and effort
consumers are often well educated, are used to being exposed to new food products from around the world and have relatively high levels of disposable income. However, with regards to the GM issue, there is often a good deal of confusion and a lack of real knowledge surrounding the key issues. It has become an emotive subject, often driven by the media and most retailers and foodservice operators have interpreted the concern that consumers appear to have in to a non GM policy for their business
these attitudes might well change in the future, but in the short to medium term, it is difficult to see any widespread enthusiasm in the EU for GM products

Implications for Canadian Processors & Exporters

Regardless of the GM issue, from a standing start, it might take a period of some 12 - 24 months to begin the actual shipment of products from a new source to a major EU retailer and/or foodservice operator. Even then, this is unlikely to be on a direct basis, but through an appointed supplier. These positions are closely guarded. A primary supplier to a major EU retailer and/or foodservice operator is unlikely to take a risk with a new supplier unless they are totally satisfied with the commercial and technical credibility of that firm.

All of the above might make the EU market sound unattractive to Canadian agri food processors and exporters: it is not the intention to "scare off" Canadian companies.

The key point is that the EU market is large, demanding, highly professional, fragmented in terms of individual market characteristics and changing all the time. There are plenty of food companies around the world who have found great success in the EU. There is no reason why Canadian companies should not enjoy the same, provided the key success criteria are adhered to. It is not, however, a market for the non-committed, the short termer, the non-professional, or those who do not have a long term plan in place and are prepared to commit time and resources.

SECTION NINE : FUTURE STRATEGY FOR CANADIAN AGRI FOOD PROCESSORS AND EXPORTERS

9.1 Initial Considerations

There are clear factors that Canadian exporters of agri food products which contain GM ingredients will need to consider if they are to seriously consider entering the European market, particularly, but not exclusively the UK, Germany and the Netherlands. These considerations are by no means exhaustive, but should be treated with high priority. They include:

the overall legislative environment regarding GM food products
the potential adoption of a non GM policy
country characteristics specifically concerning the dominance of food retailers and/or foodservice companies and the role of their chosen suppliers and distributors
and then, not least the overall attitude of the "typical" EU consumer found in the market place

These are discussed in more detail in the sections below.

9.2 Legislation

EU legislation clearly outlines that if a (food) product contains GM ingredients, then it needs to be labelled accordingly. This is a legal requirement that will be enforced at both national and a more local and/or regional level. Over and above that, the sensitivity of key players in the supply chain especially amongst retailers and foodservice operators and to some extent the consumer (if selling direct), will require further costly IP systems combined with traceability and audits to be in place.

What does this mean for Canadian exporters?

For Canadian businesses to be successful in the promotion any products that contain GM ingredients, they will need to adopt alternative strategies for the EU compared to the US and home market. In summary, a European retailer being offered a product that contains any GM ingredients is probably likely to see this as a potential problem, not an opportunity. This might change in the future but it is clear that at this current time, the EU market is not ready for the widespread uptake of products that contain GM ingredients.

9.3 Non GM Policy

Delivering a non GM policy by Canadian agri food exporters will require compliance with:

a certification testing regime (that has been approved by the customer) and/or
establishing a paper trail to demonstrate that all reasonable precautions have been taken to ensure that raw materials, ingredients etc are procured from a certified non GM source

In terms of the former (testing), there are no standard approved tests across Europe. These are on a country by country basis at the moment. Therefore, the likelihood is that such tests will be determined by the retailer via their nominated key suppliers, and for a Canadian company, this could then involve a series of specific tests in order to satisfy numerous retailer customers. This is inevitably a high cost exercise. Furthermore, when approaching the key suppliers to major retailers and/or foodservice operators, rigorous traceability and audit trails will need to be adopted since, just saying:

"...to the best of our knowledge..."

- that any products are GM free... will not be acceptable.

One significant point is the contradiction in legislation that exists in the area of the labelling of food products. Legislation does not require labelling of ingredients, additives and enzymes derived from GMMs. With the above regimes in place, the EU food industry can offer a non GM policy that is strictly within the law, however it is nowhere near a non GM policy for consumers wishing to avoid all products derived from GMOs.

9.4 Market Approach

In order to develop any form of market entry strategy in the EU, it is recommended that Canadian agri food processors and exporters look to identify similar businesses to their own with which it is possible to identify joint synergies and opportunities for mid to long term collaborative ventures.

In effect, this means that there is an opportunity for Canadian companies¹² to:

work with a partner business in the EU in order to identify the local challenges and capitalise on their local knowledge of the market
work with them to ensure everything is in order before meaningful trade begins to take place: valuable feedback and guidance might well be required in the lead up to this and will help enhance the overall relationship between (Canadian) processor and/or exporter and (EU) importer and/or distributor

Identifying Partners in the EU Supply Chain

It is not impossible for a Canadian SME and/or first time exporter to build a relationship with a major food multi national and go on to supply a leading retailer and/or foodservice company in the North European markets. However, as already stated, this may take considerable time and effort and the resources required for what maybe seen as "just another (potential) supplier" could well be limited. More success might be found in identifying one of the more specialist importers and distributors that will be able to work alongside a Canadian company over a period of time and build a more interactive dialogue in order to resolve potential problem areas.

Regardless of the above, Canadian food processors and exporters must invest time and effort in undertaking at least some basic market research in the EU with potential partners: unless a worthwhile return is likely, the unnecessary costs involved in approaching certain sectors of the market should be avoided. As an example, major retailers in the UK will almost certainly insist on BRC standards and audits. Both can be costly exercises.

Developing routes to market through less sensitive routes, independent retailers, delicatessens etc is clearly an option for Canadian processors and exporters. Although, as a result they will be operating in a (relatively) small market, it might be viewed as a less demanding "starting point" with regards to doing business in the Northern EU markets.

Even here, European foodservice operators or independent businesses cannot knowingly supply products that may contain GM without declaring it. Canadian processors and/or exporters might well find that the (smaller) size of operators in these sectors of the market may mean that they are not always in a position to check the origin of all ingredients used. However, under the EU regulation in place, this can be interpreted as a failure to carry out due diligence resulting in the exposure of legal action.

If adopting a non GM policy, the use of terminology should be treated with extreme caution. It should be clear where all ingredients have been sourced from and whether it is claimed to be "non GM" or "GM free" may be critical. The advice to Canadian companies has to be:

do not claim what you cannot prove
do not rely on exploiting loop holes in the system
invest in market research first
be prepared to carry out the appropriate tests and invest in traceability systems and supplier audits
be prepared to use specialist companies based in the EU to help on these: doing it all from long distance will be difficult and might prolong the process

The Legislative Knowledge Base

Ironically those same locally based importers and/or distributors that provide access to a wide range of routes to market may also be at a similar early stage in understanding the complexities of the GM related legislation in the EU. Technical knowledge might be stretched and the appropriate tests might take time to complete – maybe as along as 9 months in some cases.

Others, however, may clearly be more advanced in their thinking. Hence, abusing gaps in the legislative knowledge base of potential business partners is a high risk strategy and should be avoided. The cost of a product recall and any subsequent legal action, let alone overall reputation, may be fatal to a Canadian processor/exporters especially if they are a typical SME and/or "first time" exporter.

In the UK, the Local Standards Agencies are well placed to advise on the basic legislation for particular products and any reputable potential import/distribution partner will also already have other established relationships to pursue.

A UK importer stated:

"...we initially work closely with our local UK trading standards authority, and then a specialist testing company: its an outfit that has been established as long as we have and we have close relationships with them."

Many import and/or distribution businesses employ freelance technical advisors and/or commercial laboratories to offer help and advice as and when needed. Incidentally, for processed food, Canadian companies should be aware that laboratory tests often cannot detect the threshold levels specified in the legislation, but levels can be detected in individual commodities. Working with a combination of like minded importers and the recognised testing and laboratory based R & D companies is likely to prove the most effective way of not getting in to difficulties on this complex subject for Canadian companies.

APPENDIX 1: KEY STUDY RESPONDENT DETAILS

1.1 Key Organisations

The Public Sector

UK Trading Standards Agency (Wiltshire)
www.tradingstandards.gov.uk/wiltshire

The UK Food Standards Authority
www.food.gov.uk

The United States Department of Agriculture
www.usembassy.org.uk

The Private Sector

The British Retail Consortium
www.brc.org.uk

CMi International plc
www.cmi-plc.com

The American Peanut Council
www.peanutsusa.org.uk

International Laboratory Services
www.ils-limited.co.uk

AL Control Laboratories (Food Division)
www.alcontrol.com

SGS – Global Inspection and Verification Services
www.sgs.co.uk

The Organic Soil Association
www.soilassociation.org

1.2 UK Food Importers

Community Foods Ltd
Micross, Brent Terrace
London,
NW2 1LT
Telephone: 020 8450 9411
Fax: 020 8450 9413
Products: Breakfast
www.communityfoods.co.uk

May & Raeburn Limited
98 High Street
Ingatestone
Essex, CM4 OBA
Telephone: 01277 353838
Fax: 01277 354171
Products: Snack, confectionery

McEvoy Foods International Ltd
1 Mill Street
Stone
Staffordshire
ST15 8BA
Telephone: 01782 647040
Fax: 01785 817388
Products: Bakery products, ready meals

Angel Associates
Mill Lane
Hadley
Ombersley
Worcestershire WR 9 0AU
Telephone: 01905 620 888
Products: Fish importer

SBM – Snack & Beverage Marketing Ltd
P.O.Box 29, Saffron Walden
Essex
CB11 3YG
Telephone: 01799 543459
Fax: 01799 541741
Products: Snacks

Delfino Rice & Green Ltd
107 Clarence Avenue
Northampton
NN2 6NY
Telephone: 01604 791769
Fax: 01604 720987
Products: Ready meal, meat products

1.3 Canadian Food Processing Companies

The Garlic Box (Ontario)
P.O. Box 430
54 London Road,
Hensall,
ON, Canada
NOM 1XO
Telephone: 519.262.2470
Fax: 519.262.2466
www.thegarlicbox.com

The Really Garlicky Company
( a UK company and partner to the Garlic Box)
Telephone: 01667 452193
Products: UK company, partner to the Garlic Box
www.reallygarlicky.co.uk

Give & Go Prepared Foods Corp (Ontario)
Product: Cakes, brownies, cookies

1.4 UK Food Processors

The Greencore Group
- a UK based food processing/food service supplier
www.hazlewoodfoods.co.uk

APPENDIX II: USEFUL REFERENCE POINTS AND OTHER CONTACT POINTS

*Companies/individuals that offer consultancy on GM food and ingredient legislation

Area of interest	Body/ Organisation	Description
Legislation	Europa – Gateway to the European Union http://europa.eu.int (Institutions, European Commission, Food Safety)	EUROPA is the portal site of the European Union. It provides up-to-date coverage of EU affairs, information on European integration, consultation on all legislation currently in force or under discussion, access the websites of each of the EU institutions, information on policies administered by the EU under the powers devolved to it by the Treaties.
	European Food Safety Authority www.efsa.eu.int	Agency responsible for EU risk assessment regarding food and feed safety and provision of independent scientific advice and technical support for EU legislation and policy. Collaborates with EU and National legislators in responding to current issues and works to implement strategies to address to them.
Testing/ Inspection	SGS* www.sgs.com www.uk.sgs.com	SGS is the world's leading inspection, verification, testing and certification company and operates 1,000 offices and laboratories around the world. Core services offered: - Testing - Inspection - Certification
Certification	Checkmate International* www.cmi-plc.com	Check mate is a provider of independent assurance and certification services to the agriculture, produce and processing industries. The company operates in the UK and internationally through two principal divisions, Consulting and Technical Services and Certification and has operations in eleven countries.
	Product Authentication Inspectorate* paul.wright@thepaigroup.com www.thepaigroup.com	A member of the Association of British certification bodies, and a leading Approved Certifiers of Food Products, Food Authenticity, Labelling Claims and Food Chain Traceability in Europe. PAI has three integrated divisions: Food, Farm and Animal Feed.
	The Soil Association Certification Ltd* Dpeace@SoilAssociation.org Website: www.soilassociation.org	A member of the Association of British certification bodies, The Soil Association offers assistance, information and certification for anyone considering going organic. As a charity, they can offer some support free of charge. However, by becoming a producer member you can benefit from the full range of services.
	Historic Futures Limited* Contact: tim@historicfutures.com www.historicfutures.com	Historic Futures Limited (HF) are leading experts in the design, development, implementation and management of supply-chain traceability solutions. They have considerable experience of the up and coming need for an integrated food chain traceability and compliance system.
Accreditation	United Kingdom Accreditation Service (UKAS)* www.ukas.com	UKAS is the sole government approved body, recognised to make assessments against international standards, certification bodies, testing, inspection and calibration services. Appoints approved accredited bodies to either certificate, audit, test and/or consult on related issues mainly on behalf of retailers/manufacturers.
Agencies	The Food Standards Agency (FSA)* www.food.gov.uk	The FSA is an independent Government Agency set up to protect the public's health and consumer interests in relation to food by ensuring national compliance with EU and UK legislation. The FSA also provides advice and information to the public and Government on food safety throughout the supply chain, nutrition and diet.
	Trading Standards* www.tradingstandards.gov.uk	This organisation acts as a regional government agency and advises businesses and visiting premises to ensure compliance on legislation relating to a range of factors such as: food, health & safety, hygiene (environmental issue).
Retail trade bodies	The British Retail Consortium www.brc.org.uk	The BRC is the lead trade association in the UK and acts to influence government on policy related issues which affect the membership. BRC standards are recognised as "Best Practice Standards" across the food and drink industry. The BRC Global Standard for Food is a prerequisite for high street retailers as an entry-level benchmark for quality standards.

APPENDIX III: UK GM FOOD & INGREDIENT LEGISLATION

3.1 Introduction

By law, the UK must abide by the regulations set by the EU, namely GM Food and Feed Regulation EC 1829/2003 and the Traceability and Labelling Regulation EC 1830/2003.

The impact of (labelling) legislation for Canadian exporters on products consisting of/or containing GMOs, (anyone involved up to the point of delivery to the ultimate consumer) shall ensure that:

for pre-packed food, the words "this product contains genetically modified organisms", or "this product contains genetically modified (name of organism(s))," shall appear on the label; or
for non pre-packed food offered to the final consumer, the words "this product contains genetically modified organisms" or "this product contains genetically modified (name of organism(s)," shall appear on or near the display of the product

Within UK and EU legislation, there are additional labelling requirements regarding food, flavourings and additives that must be followed (UK Trading Standards). For a Canadian exporter the impact of this is:

3.2 Food, Flavourings and Food Additives With A List of Ingredients

a. where the food consists of more than one ingredient - the words "genetically modified" or "produced from genetically modified (name of the ingredient)," shall appear in brackets on the list of ingredients immediately after the name of the specific ingredient concerned. For example, a biscuit containing soya flour derived from GM soya must state "contains soya flour from genetically modified soya" or "soya flour from GM soya"

b. ingredients designated by a category - the designation shall be completed by the words "contains genetically modified (name of organism" or "contains (name of ingredient)) produced from genetically modified (name of organism)," shall appear in the list of ingredients. For example, for vegetable oils containing rape seed oil produced from genetically modified rape, the reference "contains rape oil from genetically modified rape" must appear in the list of ingredients

For both (a) and (b), the indications may appear in a footnote to the list of ingredients, provided that they are printed in a font of at least the same size as the list of ingredients. Where there is no list of ingredients, they shall appear clearly on the labelling.

3.3 Food, Flavourings and Food Additives Without A List of Ingredients

The words "genetically modified' or "produced from genetically modified (name of organism)" shall appear on the labelling of the food. For example, "a spirit containing caramel produced from genetically modified maize", or "genetically modified sweet maize."

3.4 Non Pre-Packed Food

Where the food is offered for sale to the ultimate consumer as non pre-packed or as pre-packed in small containers of which the largest surface has an area of less than 10cm², the information must be permanently and visibly displayed either on the food display or immediately next to it, or on the packaging material, in sufficiently large print for it to be easily read. For example, "bread produced from genetically modified maize".

3.5 Exemptions

Exemptions from the additional labelling requirements exist for products containing ingredients produced from GMOs. These exemptions include:

food which contains GM material that is accidentally introduced or technically unavoidable and does not exceed the threshold of 0.9% (applies to each individual ingredient). The threshold of 0.9% may potentially contain up to 0.5% unauthorised GM material. The supplier must be able to demonstrate that he has taken appropriate steps to avoid the presence of GM material
constituents of an ingredient which have been temporarily separated during the manufacturing process and later reintroduced but not in excess of their original proportions
additives whose presence in a given foodstuff is solely due to the fact that they were contained in one or more ingredients of that foodstuff, provided that they serve no technical function in the finished product
additives which are used as processing aids
substances used in the quantities strictly necessary as solvents or media for additives or flavouring. As from 25th November 2005, substances which are not additives but are used in the same way and with the same purpose as processing aids and are still present in the finished product, even if in altered form
products such as meat, milk and eggs from animals fed GM animal feed
products produced with GM technology e.g. cheese produced from GM enzymes

3.6 Traceability

When shipping to the EU market, Canadian processors and exporters dealing with products consisting of or containing GMOs (e.g. soya) need to be able to trace the source and level of GM content. The implication of this is that written documentation is required to be passed on throughout all stages of the supply chain. The documentation shall state which of the food ingredients is produced from GMOs, or in the case of products for which no ingredient list exists, indicate that the food is produced from GMOs. Each operator in the supply chain must retain copies of the written documentation for a minimum period of five years.

3.7 Point of Sale

Greenpeace UK has launched the "Shoppers Guide to GM" to inform and assist consumers when purchasing food of a GM presence. The guide is not a legal requirement, but potential Canadian suppliers should at least be aware of its existence. It is not unlikely that Greenpeace will look to put pressure on major retailers and foodservice operators to use this system in the future¹³. It covers a vast range of food products, including supermarket own brands and ultimately works on the basis of a traffic light system:

Green: companies or products where written assurances have been given indicating that they are non GM, including non GM being used in animal feed
Yellow: companies that have removed GM ingredients and have made a commitment to ensure that their products do not contain ingredients from animals fed on GM crops but who have not yet completed this process
Red: failure to get assurance from companies that their products do not contain GM ingredients or do not contain ingredients that come from animals fed on GM crops

The guide highlights the importance of how despite the presence of a consumer backlash on GM, derived products are making their way onto supermarket shelves through GM usage of animal feed, which under current legislation makes these products exempt from GM labelling.

Some of the activities on the NGOs (Greenpeace etc) may not always be based on totally sound science, but the reality for Canadian companies looking to target the UK and other EU markets is that they are highly active and effective in getting their message across. Within the commercial agri food sector, there are concerns over their real motives but one cannot ignore the high degree of success they have had in raising the awareness (negatively) on these issues.

APPENDIX IV: UK MONITORING & TESTING ORGANISATIONS

4.1 Introduction

In order to carry out trade with the UK, there are two main compliance routes, one is mandatory the other in theory more optional dependant¹⁴, on the route to market being followed:

4.2 Legal

A combination of national and regional government agencies are in place to ensure adherence to EU/National Legislation of which the most important are:

the Food Standards Agency (FSA): which acts as the main source of policy advice
Local Trading Standards Agencies: who in effect act as the agents of the FSA

4.3 Commercial

Specific retail and commercial industry standards which overrides statutory EU/national legislation and is seen as part of the "right to supply" and which might include a combination of the following:

the British Retail Consortium (BRC) Food standards
EUREPGAP / Assured Farm standards
retailer specific schemes for nominated suppliers and which are used as part of a policy of clear differentiation from the competition (e.g. Tesco Natures Choice)

Canadian agri food processors and exporters along with their chosen UK based importer and distributor wishing to trade with UK retailers and/or foodservice companies will have to prove compliance with the above. Once proven, due diligence will be expected to ensure consistency of standards, traceability and product integrity is maintained.

Independent accreditation and certification companies do currently exist and provide a service to ensure compliance with either 1 or 2. Major retailers and/or leading foodservice operators will very much expect confirmation of compliance and will request random sampling tests on an going basis.

4.4 Compliance Criteria

For Canadian food businesses to trade with the UK retailers, as a minimum it will be expected as the norm to comply with the British Retail Consortium Global Food Standard. The rationale behind the development of the BRC Global Standard Food was to eliminate, as far as possible, multiple audits by retailer technical and third party technical representatives of food manufacturers supplying the UK Retailer with own brand products. The standard covers:

the HACCP System
Quality Management Systems
Factory Environmental Standards
Product/Process Controls
Personnel

Consumer demands for non GM crops and their derivatives has also led to the introduction of the BRC/FDF Non-GM food standard which introduced a number of 'Identity Preserved' systems to facilitate the supply of such crops and derivatives. These systems ensure that products are traceable and steps have been taken to ensure the integrity of the product through the food chain. More detail can be found at: www.brc.org.uk/standards

A comprehensive list of approved accreditation agencies can also be found at: www.ukas.com/default.asp

APPENDIX V: OTHER UK FOOD IMPORT REGULATIONS

Canadian exporters wishing to export agri food products commercially should be aware of the regulations in place that apply to specific products. Failure to comply with UK and EU regulations can lead to severe disruption of trade (e.g. impoundment by enforcement authorities, lengthy delay in shipments). For the purpose of this study, this section focuses on the importing of any products of animal origin in to the UK, regardless of whether GM is present or not.

These rules are mainly concerned with high added value and processed foods, where it is compulsory that they be followed. Information has been sourced from the UK Food Standards Agency and products include:

meat, including fresh meat, meat products, minced meat, meat preparations, poultry meat, rabbit, farmed game meat and wild game meat
eggs and egg products
fish and fishery products
milk and milk products
honey, gelatine and gelatine products

APPENDIX VI: GERMAN GM FOOD AND INGREDIENT LEGISLATION

6.1 Legislation

All national legislation regarding the use of GMO is harmonised with existing EC legislation. The two main pieces of legislation regulating the use of genetically modified products in agriculture and food processing are:

EC Regulation 1829/2003 on genetically modified food and feed
EC Directive 2001/18 on the deliberate release into the environment of genetically modified organisms

The main German legislation and/or authorities implementing EC regulations and directives are as follows:

GenTG implements EC Directive 2001/18
EGGenTDurchfG executes EC Regulation 1829/2003

Any breaches against this legislation can lead to jail (up to five years) or fine of up to €50,000. The executing national authority which passes on applications to the EFSA and participates in the safety evaluation of the product in question is the Federal Agency for Consumer Protection and Food Safety (Bundesamt für Verbraucherschutz - BVL).

The Cartagena Protocol on Biosafety (PCB) regulates the traffic of Living Modified Organisms (LMO) products. This convention between EU and non- EU Member States countries establishes an instrument for information exchange, the Biosafety Clearing House (BCH). The BVL is the national point of contact for the BCH. More information on the PCB can be found on www.biodiv.org

6.2 Significant Organisations

The major authorities in Germany with decision making powers regarding this legislation include:

Bundesamt für Lebensmittelsicherheit (Federal Authority for Consumer Protection and Food Safety):

was established in 2002 to reinstall consumers' trust in food products after numerous food scares during the 1990s
it is organised within the Ministry for Nutrition, Agriculture and Consumer Protection (BMELV) and is a branch office of the Zentrale Kommission für Biologische Sicherheit
it authorises the release of GM crops for scientific purposes and evaluates and/or gives an opinion on the use of GM crops for commercial growing to the EFSA for a EU wide approval process
it manages the information exchange on GMO for Germany within the Biosafety Clearing House.

Bundesinstitut für Risikobewertung (Federal Institute for Risk Assessment)

this organisation is responsible for scientific export reports and opinions on questions of food safety and consumer health
it undertakes the safety evaluation of food and feed at the national level. The (GM) product is examined on the basis of the producers' documents and compared with the conventional equivalent. In the case of differences to conventional products, the BfR decides which further examinations are necessary to exclude any health risks

6.3 Other Significant Authorities and Advisory Committees

Certain institutes and agencies give opinions as part of the safety evaluations for the approval of GM products to the BVL when the deliberate release of GMO seeds are concerned. These are as follows:

the Robert-Koch-Institut
the Biologische Bundesanstalt für Land- und Forstwirtschaft (BBA) (Biological Federal Agency for Agriculture and Forestry)
the Friedrich-Loeffler-Institut (FLI) (Federal Research Institute for Animal Health)
the Paul-Ehrlich-Institut (PEI) (Federal Institute for pharmaceutical products)
the Zentrale Kommission für Biologische Sicherheit (ZKBS) (Central Commission for Biological Safety): established in 1978 during the debate on in-vitro newly combined nucleic acids. Organisational group of expert who take a stand on issues relating to gene technology (food as well as crops)

6.4 Product Testing

Germany has a federal structure and each of the 16 Länder has its own ministries and executing authorities regarding consumer protection and food safety (Länderämter). These Länderämter are responsible for the monitoring of food and feed safety and examine samples regularly, including checks on GMO contamination. Their obligation in connection with GMO is based on EC Regulations 1829/2003 and 1830/2003 where tasks involve:

checking if the percentage share of the finished product does not exceed 0.9%
controlling of imports from third countries ( i.e. primarily feed and seed)

6.5 Traceability and Labelling

EC legislation (Regulation 1830/2003) regulates the traceability of GM products in Germany and stipulates that GMOs have to be traceable through the complete supply chain. Importers are required to show all GMO origin, including those ingredients which are not traceable anymore. Products sold in Germany have to comply with the EC labelling legislation (EC Regulation 1830/2003).

This includes:

all products which consist of a genetically modified organism (e.g. GM corn) and
all products which are processed from GMOs ( i.e. oil made from GM corn) have to be labelled accordingly, despite the fact if GMOs are not traceable in the finished product

Products that contain GMOs, which have been added accidentally and unintentionally, do not have to be labelled accordingly if the GMOs are legally approved to be safe and if the share of GMOs in the product is under 0.9%. Furthermore, products derived from animals (i.e. meat, dairy, eggs) do not have to be labelled accordingly if the animal feeds contained any GMO. This is a major point of criticism for interest groups (i.e. Greenpeace, Foodwatch) who are pushing for a change in the law, so that food manufacturers have to declare if any of the used animals in meat and dairy products were fed on a diet containing GMO.

6.6 Point of Sale

Due to the wide scale rejection of GM products by many, very few products containing GMOs (and accordingly labelled) are found on German supermarket shelves. The majority of products with GM ingredients are offered in ethnic Asian shops and are mainly imported soya products. Other products that are known to contain GMOs that have been found on the German market to date include the following:

Butterfinger - Nestlé: corn flakes and starch made from GM maize. This product has been temporarily taken from the market in response to consumer protests
Mitsukan Ajipon Citrus Seasoned Soy Sauce - Mitsukan Group: GM soy beans
Sempio soy Sauce - Sempio Foods (Korea): GM soy beans
Soy bean sprouts - Shin Chang General Food: GM soy beans
Tofu Mix - House Food Industrial Co. (Japan): soy bean flour from GM soy beans
Yamaki Mentsuyu - Yamaki Co. (Japan): GM soy beans
Yamasa Soy Sauce + Teriyaki Sauce - Yamasa (Japan): GM soy beans

APPENDIX VII: NETHERLANDS GM FOOD & INGREDIENT LEGISLATION

7.1 Legislation

Four Ministries are responsible for implementation and enforcement of the relevant GM legislation in the Netherlands:

The Ministry of Public Health, Welfare & Sport (VWS)
The Ministry of Housing. Regional planning and Environment (VROM)
The Ministry of Agriculture, Nature and Food Quality (LNV):
- The Food and Consumer Product Safety Authority (VWA)
- The General Inspection Service (AID)
- The Plant Protection Service (PD)
The Ministry of Economic Affairs (EZ)

When the Agricultural Council reached agreement for the EU proposals on Traceability and Labelling for GMOs in July 2003, the Netherlands voted against the traceability element section of this, with the view that regulations had to be workable for the commercial private sector and enforceable by authorities. In 2004, the Benelux region, including the Netherlands, imported approximately US$280 million of agricultural bulk products from the US. A significant amount of this was feed products, which required labelling for GM under EU legislation.

"...the Benelux region imports significant volumes of GM soybeans and derived products, and corn products derived from GM corn such as corn gluten feed and distillers dried grains. However, GM product imports are negligible due to the fact few food retailers were prepared to display GM labelled products on their shelves. Widespread avoidance for such products was in place ahead of legislative requirements. This stance together with the legislation will drive most domestic food manufacturers to source non GM ingredients..."

Source: Netherlands Annual Agricultural Biotechnology report 2005, USDA

7.2 Point of Sale

The Netherlands branch of Greenpeace advises consumers to have an exact look at the ingredients of each product and has listed products on their website which are labelled to contain GMOs.

Among these are:

Albert Heijn salad oil
Albert Heijn baked snacks
Euroshopper salad dressing
Fancy margarine
Rutjes margarine
Perfekt salad oil

Greenpeace in the Netherlands also started a campaign against GMOs in cattle feed. There are very few exceptions (but among others, Lidl), where the majority of egg, dairy and meat producers do not guarantee that their products derives from animals having been fed with non GM free feed.

APPENDIX VIII: MAJOR UK RETAILER STATED POLICIES ON GM FOOD & INGREDIENTS

8.1 Marks and Spencer

All our food is 100% GM-free

"...we are the only major UK food retailer to be able to guarantee that no genetically modified ingredients are used in the manufacture of any of the food products we sell. Since 1999, we have had a strict policy of selling only non GM products - a move which has received strong backing from our customers. The ban on GM foods covers everything from fruit and vegetables to the ingredients in our ready-meals. We also stipulate that animals used to produce fresh meat, fresh milk, all our eggs and even our farmed fish are fed on a non GM diet.

This is part of a wider policy to sell food that it is as natural and healthy as possible, free of harmful pesticides, additives and other dangerous chemicals that are regularly introduced into the food chain. In addition to banning GM foods, we have also instructed our farmers to ban the use of 60 hazardous pesticides to protect both the people growing our food and those eating it. We are phasing out the use of another 19.

We have also taken an industry-leading position on removing additives and preservatives from our foods and reducing salt and hydrogenated fats. To give you confidence that none of our food has GM content, we label our food clearly and carefully so you can see what you are eating and where it comes from. We can do this because we are able to trace the source of all our foods back to the farms where they are produced.

Maintaining a total ban on GM foods will become increasingly challenging if, as seems likely, governments around the world relax the rules on growing GM crops. We will have to work harder and harder in future to maintain this ban and we are committed to doing so..."

Source: M & S Annual Report

8.2 Tesco

Tesco - Every little helps

"...our policy on Genetically Modified (GM) foods is driven by the view of our customers. They continue to tell us that they are not yet convinced of the benefits of GM. We do not therefore have any own-brand GM foods on our shelves. We remain committed to clear labelling to enable customers to make an informed choice. All branded products containing GM are labelled as such..."

Source: Tesco Annual Report

8.3 ASDA

ASDA - part of the WalMart family

"...ASDA begins conversion to non GM animal feed and extra reassurance at no extra cost to customers. ASDA today announced that, in response to customer demand, it will be asking suppliers to source animal feed from non GM sources. 15 months after it removed all GM ingredients and derivatives from own label foods, this latest initiative will result in the introduction of a range of fully-labelled non GM fed fresh chicken, pork and eggs from this summer.

ASDA has received hundreds of letters from customer calling for the removal of GM animal feed from the food chain. Today's announcement is the result of over a year's work that will make this a reality. ASDA will not be passing the costs on to the customer in the form of higher retail prices, but will be supporting suppliers with any additional feed costs - costs that ASDA expects will reduce when other retailers follow suit.

ASDA hopes this will set a new UK standard for animal feed - one that is firmly non-GM. When the rest of the industry follows ASDA's lead, costs incurred by farmers and suppliers when segregating one retailer's grain from another's will be dramatically reduced.

"The message from customers is loud and clear", said Mike Coupe, ASDA's trading director, "Consumers are becoming increasingly conscious of how the food they eat is produced and want, more than ever, to buy products from animals reared on a non GM diet. If other retailers follow our lead, non-GM animal feed will become the industry standard and the premium charged for it will diminish, as will the costs to retailers and producers".

ASDA technologists have spent the last year forging links with Brazilian soya growers, UK distributors and laboratories to create a non GM supply base, distribution network and quality assurance scheme that has the potential to meet the needs of all UK retailers. The soya, from Brazil, will be tested by a rigorous quality assurance scheme (Hard IP-) conducted by independent laboratories when it is planted, harvested and then transported to the UK. In addition the chickens, laying hens and pigs reared for ASDA will, in time, be fed a non-GM diet for their entire life and not just in the final months before slaughter - a practice that, technically, produces non-GM fed meat.

Chickens, pigs and laying hens reared for ASDA will be fed on a non GM diet from the beginning of June and non GM fed ASDA brand fresh chicken and eggs (including Smart Price), will be available from this Summer.

A range of non GM pork will be available. Work to convert all other species and products will continue in the coming months until ASDA's aspiration to source all own label products from non GM animal feed sources is a reality. In September 2000 Greenpeace commissioned a NOP poll into consumers' attitudes to GM animal feed and 55% of adults surveyed said they did not wish to eat products from animals fed on GM crops; when asked if they thought such products should be clearly labelled 90% said yes. In September 2000 the Food Standards Agency announced it will be pressing for new legislation that would require farmers to segregate and label GM and non GM animal feed a move that would result in similar costs for primary producers.

On 11th January 2001 the Wall Street Journal reported a change in American attitudes to planting of GM crops. Evidence of which was that the Illinois Department of Agriculture's appeal to seed dealers in America's second biggest corn-producing state to stop selling grain that is not approved for use across the globe. Hard IP ensuring soya is produced to Hard IP standards (CERT ID or BRC/FDF standard) involves validating the procedures on the farm and testing the soya both at source (rapid strip tests) and more thoroughly in an independent laboratory.

A positive result on either of these tests would lead to the grain being segregated from the batch destined for ASDA suppliers. Soft IP soya that is produced to Soft IP standards is not tested either at source or at a lab. It is assumed that the region in which it is grown is free of GM crops.

8.4 Sainsburys

Sainsbury's

"...we were the first major supermarket (in July 1999) to respond to customers' concerns and eliminate genetically modified (GM) ingredients from all our own-brand food, vitamin and dietary supplements, and pet food. We also stock a large range of organic foods, which are not allowed to contain any GM ingredients. We offer the following products from animals fed on non GM soya and maize proteins, this information is prominently displayed on the packs:

All our fresh and frozen chicken
Free-range eggs
Fresh outdoor-reared pork
Outdoor reared bacon
Taste the Difference 21day matured beef
Traditional beef

We have investigated selling products only from animals fed on a non GM diet but we found that moving to non GM animal feed would significantly add to farmers' costs because GM ingredients are not segregated in most commercial feed. This means it is not feasible, at least in the near future, to move entirely to non GM products. We are keeping this matter under regular review, in the light of customer demand for items such as non GM milk.

Our position on milk

Our mainstream milk comes from cows that may have been fed on GM crops, but this does not mean that the milk contains any GM ingredients. Several scientific studies by well respected organisations have found no GM material in milk samples from cows fed on a GM diet. Our milk is sourced from the British dairy farms that supply other UK supermarkets as well as hotels, schools and hospitals. Many customers wanted to buy non organic milk from cows fed on a non GM diet and in 2004 we became the only major supermarket company to meet this demand. After extensive work, we launched a trial of semi-skimmed milk from selected farms which supplement the grass-based diet of their cows with non-GM protein, grains and oils. This milk is now on sale in nearly 200 of our stores.

Our position on cotton

Most of Sainsbury's cotton products originate from countries that do not use GM cotton seed. The likelihood of GM being present is low. The nature of the global market in cotton makes it difficult to identify precisely where the cotton is grown and we therefore cannot guarantee that any of our products are non GM.

Our position on honey

Sainsbury's honey is only produced by suppliers that operate a six-mile radius exclusion zone between beehives and GM trial sites. These suppliers are members of the Honey Association which carries out regular testing to ensure that there is no contamination of honey with pollen derived from GM plants.

Source: J Sainsbury Annual Report

8.5 Waitrose

"...no Waitrose own-label product contains GM ingredients"

8.6 Somerfield

Somerfield

"...Somerfield avoids genetically modified foods and ingredients in all own label products as a result of customer demand. To achieve this we have developed products that avoid the use of crops, foods and ingredients that contain genetic modifications. Where this is not possible, we minimise their use to particular levels. These are as follows:

in the case of soya and maize purchased as IP crops (i.e. we know the origin of the crop and believe it to have been grown with seed that has not been subject to genetic modification) then we will control the levels of accidental contamination to the lowest levels achievable given good agricultural and processing practices.
in the case of ingredients and additives we will avoid sourcing from GM materials. With processing aids we will not declare genetic modification where the ingredient, additive or processing aid is present in the final product at less than 0.01% on a weight by weight basis.

Branded GoodsBranded goods producers to Somerfield have to comply with EU/UK labelling regulations..."

Source: www.somerfield.co.uk

1. Promar International is a leading UK based agri food consulting firm operating across the full value chain for major clients in both the public and private sector. Although UK based, Promar has offices in the US, Mexico and Japan and has worked for a number of Canadian clients in the past

2. Businesses based both in the EU itself and those based in third countries of supply including Canada, the US, Latin America, the Middle East, Australasia and Asia

3. Advertising slogan from M & S, a leading UK food retailer serving the up market sector

4. This would include the UK, Germany and the Netherlands

5. Whether for domestically produced food products and/or for imports

6. We are aware that AAFC has commissioned specific work on the EU market opportunities and requirements for Canadian organic food suppliers in the relatively recent past. The UK, Germany and the Netherlands are all significant importers of a wide range of organic food products and would be appropriate target markets for Canadian organic food suppliers.

7. The FDF is the main trade association in the UK for the processed foods sector and its membership covers a wide range of food manufacturers ranging from multi national operations down to SMEs.

8. Some of the most enthusiastic uptake of EUREPGAP has been in countries such as South Africa, Chile, New Zealand etc , all of which are significant suppliers of fresh produce to the EU market

9. After the FMD crisis, a major report in to the future of the UK agricultural and food industry was commissioned by the Government (the so called Curry Commission). One of its key conclusions was that the urban based consumer had, over a period of time, become increasingly “disconnected” from the agricultural and rural environment per se.

10. The IGD is a leading trade body in the UK and operates on an NGO basis but its membership revolves around the entire major food and drink processing groups in the UK as well as the major retailers and foodservice operators. It is a well respected organisation with close links to the Government

11. Prior to the full accession to the EU of the Eastern European and Baltic countries

12. Especially SMEs and so called “first time” exporters

13. The counter response is that retailers and foodservice companies will look to resist this

14. In theory: in reality, most of the more professional, serious and dedicated suppliers to the EU market, including the UK, adhere to these too.

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Exporting Processed Foods Containing GM Ingredients to Europe

ACRONYMS

INTRODUCTION

Background

Our Methodology

SECTION ONE: EXECUTIVE SUMMARY

1.1 Where is Europe Coming From?

1.2 GM Issues

1.3 Retailers

1.4 Legislation

1.5 Future strategies

SECTION TWO: EU & NATIONAL LEGISLATION

2.1 EU Legislation

2.2 GM Food

2.3 GM Traceability And Labelling

2.4 Novel Foods

2.5 UK GM Food And Ingredient Legislation

SECTION THREE: THE IMPACT OF TRACEABILITY AND LABELLING REGULATIONS

3.1 GM & Non-GM: Commercial Requirements

3.2 GM Avoidance

3.2.1 Pre 2004

3.2.2 Post 2004

SECTION FOUR: UK MARKET REQUIREMENTS

4.1 Legal Focus

4.2 Commercial Focus

SECTION FIVE: EU CONSUMERS AND GM FOOD

5.1 Introduction

5.2 European Consumer Attitudes to GM

5.3 Consumer Research

5.4 The FSA Food Debate

SECTION SIX: THE CURRENT CLIMATE

6.1 Introduction

6.2 National Government Positions

6.3 Anti Lobby Groups

6.4 Major Retailers Position on GM

6.4.1 The UK

6.4.2 Germany

6.4.3 Netherlands

6.4.4 The Foodservice Sector

SECTION SEVEN: AN OVERVIEW OF KEY AGRI FOOD COMMODITY TRADE & FOOD INDUSTRIES

7.1 The UK

7.2 Germany

7.3 The Netherlands

7.4 Canada

7.4.1 Export Profile

7.4.2 Canadian Exports To The EU

SECTION EIGHT: EUROPEAN FOOD MANUFACTURING, FOOD SERVICE & RETAIL

8.1 Background

8.2 The Retail Sector

8.3 Food Manufacturing

8.4 Foodservice

8. 5 What Does This Mean for Canadian Agri Food Processors & Exporters ?

SECTION NINE : FUTURE STRATEGY FOR CANADIAN AGRI FOOD PROCESSORS AND EXPORTERS

9.1 Initial Considerations

9.2 Legislation

9.3 Non GM Policy

9.4 Market Approach

APPENDIX 1: KEY STUDY RESPONDENT DETAILS

1.1 Key Organisations

1.2 UK Food Importers

1.3 Canadian Food Processing Companies

1.4 UK Food Processors

APPENDIX II: USEFUL REFERENCE POINTS AND OTHER CONTACT POINTS

APPENDIX III: UK GM FOOD & INGREDIENT LEGISLATION

3.1 Introduction

3.2 Food, Flavourings and Food Additives With A List of Ingredients

3.3 Food, Flavourings and Food Additives Without A List of Ingredients

3.4 Non Pre-Packed Food

3.5 Exemptions

3.6 Traceability

3.7 Point of Sale

APPENDIX IV: UK MONITORING & TESTING ORGANISATIONS

4.1 Introduction