Corn Syrup Struggles to Stay Sweet

Things haven’t been going well recently for producers of high-fructose corn syrup (HFCS). The sweet, cheap, ubiquitous product of (mostly) massive Midwestern collective farms -- corporate, not Soviet -- is found in almost every sweet drink, including (Coke (NYSE: KO) and Pepsi (NYSE: PEP), and is also contained in myriad snack foods and condiments all over the junk-food spectrum.

For the past several years now, HFCS is also being largely blamed for the obesity and diabetes epidemics -- and projected serious increases in both -- that we are facing in the United States. Though high-fructose corn syrup and table sugar are quite similar, the problem many clinicians have with the product lies in how it is processed, and how the human body metabolizes it.

To combat this, the producers of HFCS -- agribusiness giants such as Archer Daniels Midland (NYSE: ADM), privately-owned Cargill, Corn Products International (NYSE: CPO), and several smaller companies -- banded together in a lobbying effort to improve the image of HFCS to consumers.

The companies' lobbying group, known as the Corn Refiners Association, in 2010 petitioned the US Food and Drug Administration (FDA) for permission to rebrand the substance as "corn sugar" since they claim there is no chemical or metabolic difference between the two products. They even launched a multimillion-dollar advertising campaign to convince consumers of this.

But lobbying groups such as the Sugar Association, as well as medical officials, fought the move. And while the jury is out on whether the Corn Refiners Association's PR moves have succeeded, government regulators have rendered their verdict. Just this past week, the FDA denied the major HFCS producers' request to rebrand high-fructose corn syrup as "corn sugar," stating that "the use of the term 'sugar' to describe HFCS, a product that is a syrup, would not accurately identify or describe the basic nature of the food or its characterizing properties."

But that hasn't been the only bad news for the commodity. If you want to buy a Big Gulp from privately-held 7-Eleven in New York City, you're going to be SOL if Mayor Michael Bloomberg gets his way. Last week, Bloomberg announced plans to order restaurants citywide to eliminate supersize portions of all HFCS-containing beverages. Any cup or bottle of soda, fruit drink, energy drink, iced tea, or anything else containing the sweet stuff measuring more than 16-fluid ounces will be strictly verboten. Of course, this could actually lead to an increase in sales of drinks, as there is no prohibition against buying sweet alcoholic cocktails, as well as nothing that says you can't buy two (or more) 16-ounce soft drinks at one time. Same calories, same amount of HFCS...higher cost.

Some might call the NYC move nanny-statism, citing Bloomberg's earlier bans on smoking in bars, restaurants, and public places, ban on artificial trans fats in restaurant food, and requirement for fast-food outlets to post calorie counts of their products. Bloomberg also leads a campaign to cut salt in restaurant meals and packaged foods.

Others simply see it as further government curbs on basic civil rights. McDonald's (NYSE: MCD) and Coca-Cola, two companies which would be among the most adversely affected, strongly condemned Hizzoner's proposal, calling it, among other things, confusing.

No comments were forthcoming from Starbucks (Nasdaq: SBUX), which, despite having sugar-laden offerings of its own, would not be affected by the proposed ban. Although many of its products are sweet, including the 310-calorie 12-ounce Chocolate Cookie Crumble Frappucino, which has 40g of sugar (about 10 teaspoonfuls), they also contain coffee and dairy products, both exempt from the ban.