Chairman Galen Weston told the company's annual meeting in Halifax that the population is divided about using genetically modified foods -- those foods made from plants engineered to be resistant to pests and herbicides or to produce higher yields.

He was responding to a challenge issued by Nadege Adam, health protection campaigner for the Council of Canadians. She told the meeting that as much as 70 per cent of the processed foods sold by the grocery giant contain GM ingredients, but there is nothing on the labels to indicate that.

Ms. Adam said Loblaw should become the first grocery chain in Canada to phase out GM foods from its stores.

"We are not going to go away," Ms. Adam told the annual meeting. "The more people find out about what is in their food, the more outraged they become."

Mr. Weston said the issue is "unbelievably complex" and that Loblaw is working with federal regulators on devising ways of safeguarding the food chain and identifying foods containing GM elements.

"We're as frustrated as you are by all the rules and regulations" that are being proposed by the federal government, he said.

Mr. Weston said Loblaw is sensitive to the concern about GM foods. He said the chain has introduced a line of 57 organically produced food items and will increase the number of organic products to 200 by the fall.

But Ms. Adam said the company could act independently of government and not stock GM foods.

She said the organic foods are more expensive than those produced with the use of chemicals and many low-income consumers can't afford them.

Ms. Adam said security guards prevented her from bringing into the meeting a box with more than 24,000 postcards demanding that Loblaw ban GM food from its shelves. She and another woman who also opposed the GM foods at Loblaw's were the only voices of dissent at the meeting.

The company reported yesterday that first-quarter profit increased 21 per cent to $93-million or 34 cents a share from $77-million or 28 cents in the same period a year ago. Sales were $20-billion in the fiscal year 2000, and in the first quarter totalled $4.5-billion, up 6 per cent from the first three months of 2000.