Coke and Pepsi Hear It From the Food Police

Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP) and the rest of the carbonated beverage industry have become public enemy No. 1 for the nation’s self-appointed food police, and the battle is far from over.

The Center for Science & the Public Interest (CSPI) on Monday announced that it had found “high levels of 4-methylimidazole (4-MI), a known animal carcinogen” in samples of Coca-Cola, Pepsi, Diet Coke and Diet Pepsi that the group analyzed. The chemical is a byproduct of the manufacturing process used to create the distinctive brown caramel color in these popular beverages.

Wall Street shrugged off the news, with shares of Coca-Cola and PepsiCo not showing much reaction during Monday trading. KO barely budged, and PEP was up 0.4% on the day. Still, investors should take the CSPI seriously because it can be a formidable foe to the food industry. Among its other fights are with McDonald’s (NYSE:MCD) over the marketing of Happy Meal toys to kids.

The CSPI, which petitioned the Food & Drug Administration to ban ammonia sulfate food coloring in February 2011, has been at odds with the soda industry for years. The group is one of the leading proponents of levying additional taxes on soft drinks to attack America’s obesity epidemic.

However,  just because something causes cancer in a laboratory doesn’t mean it will trigger the disease in the real world.

“Is it a carcinogen? The tests have shown in mice it can increase the risk of cancer,” said Dr. Fred Guengerich, professor of biochemistry at Vanderbilt University in an interview last year with ABC News. “On the other hand, there is also evidence in male rats, it prevented several kinds of cancer.”

Not surprisingly, the American Beverage Association (ABA) trade group rejected the CSPI’s arguments. “This is nothing more than CSPI scare tactics, and their claims are outrageous,” the ABA said in a statement. “The science simply does not show that 4-MEI in foods or beverages is a threat to human health. In fact, findings of regulatory agencies worldwide, including the U.S. Food and Drug Administration, European Food Safety Authority and Health Canada, consider caramel coloring safe for use in foods and beverages.”

Officials in California took a different tact. In January, the state added 4-MI to its list of human carcinogens, a decision the beverage industry challenged in court and lost. Industry officials argued that the move was based on flawed science. Soda or other foods with 29 micrograms of 4-MI must be sold with a warning label in California. The CSPI’s samples collected in Washington, D.C., all had higher levels than that standard.

“Three of four samples of Dr Pepper or Diet Dr Pepper that CSPI tested had low levels of 4-MI, with about 10 mcg per 12 ounces,” the CSPI said. “But even those levels pose a cancer risk of seven in one million—seven times greater than what FDA allows.”

The FDA, in fact, doesn’t appear to be nearly as worried about the “threat” as is the CSPI, which argues that 4-MI probably causes cancers in humans.

An FDA spokesman, Douglas Karas, told Bloomberg News that the agency doesn’t believe the substance poses an immediate risk and that “a consumer would have to drink more than a thousand cans of soda in a day to match the doses administered in studies that showed links to cancer in rodents.”

CSPI Executive Director Michael Jacobsen accused the FDA of simply “regurgitating” the arguments of the beverage industry in an interview with InvestorPlace. He noted that cancers can take decades to manifest themselves and that a solution to the problem is not difficult to find.

“Some people drink almost 10 cans a day [of soda],” said Jacobsen, adding that “having a Coke every week or two is not a major problem.”

Unfortunately for the industry, those types of 10-can-a-day dedicated customers are increasingly rare. Per capita soda consumption in the U.S. has been on the decline for years, which is why Coca-Cola and PepsiCo have expanded for years into noncarbonated drinks such as sports drinks.

Seeking to sooth concerns, the trade group ABA added: “Our member companies will still use caramel coloring in certain products, as always. The companies that make caramel coloring for our members’ soft drinks are producing it to meet California’s new standard. Consumers will notice no difference in our products and have no reason at all for any health concerns.”

–As of this writing, Jonathan Berr is long Coca-Cola.

Article printed from InvestorPlace Media,

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