NAMA Shortcuts
Member Directory
Best of NAMA 2014
Upcoming Events
Chapters
Agri-Marketing Conf
More NAMA












THE MONSANTO MIRACLE
Editor's note: just as this issue was going to press, Monsanto announced another blockbuster deal: its acquisition of Delta and Pine Land Co. For more information on it, go to page 12.

Strategic partner, fierce competitor, terrific investment, revolutionizer of crop production practices, benefactor to many agricultural causes, Monsanto means many things to many people.

Still headquartered in St. Louis, MO, the "original" Monsanto was founded in 1901 to manufacture and market saccharine. It entered the ag market with its introduction of 2, 4-D in 1945. In 2002, the "new" Monsanto was formed after being spun off from Pharmacia which had purchased the "original" in 1999 (see timeline, page 51).

By 2005, ten years after entering the crop biotechnology business, Monsanto's corn, canola, soybean and cotton genetics were planted on more than 123 million acres in the U.S. corn, soybean and cotton acres and about 195 million acres worldwide.

Investors have certainly noticed Monsanto's recent success. They have bid its stock price up into the $80s after it first went public at $20 a short four years ago, before implementing a 2 for 1 stock split on July 31, 2006.

Those results are a miraculous turn around from what the company was facing at the turn of the century when its future was anything but certain. Its major money-maker, Roundup herbicide, was going off-patent in the U.S., its seed acquisitions were not performing as planned, and even its new superstar - biotechnology traits - were being kept out the marketplace in some regions of the world for unpredictable and highly questionable reasons.

However, through innovative management, strong brands, and its ability to adjust to an ever-changing marketplace, the new Monsanto has been achieving more success than many would have dreamed just a few years ago. Even the most astute observers of the ag industry could not have guessed they would see the day when Monsanto's revenue sources were evenly divided between seed, trait licensing and the sale of crop protection products, which they were for the first time in the first half of its current fiscal year.

THE BEST IS YET TO COME

And, it appears, the best is yet to come. In its annual report, Monsanto CEO Hugh Grant, says, "The seeds-and-traits segment in the agricultural industry is today where the computer industry was in the 1950s. We are still on the leading edge of a dynamic industry where technology will continue to revolutionize farming and how food is processed."

Each year, Monsanto invests more that half a billion dollars in research and development and this number continues to grow with the company. The result is a flood of new corn hybrids, in-bred lines, soybean and cotton varieties as well as new biotech traits.

Monsanto's crop biotech resume now includes 17 traits and trait stacks that have been launched in the U.S. In cotton and corn, the transition to second generation traits is well under way and farmers are increasingly value seed with multiple traits.

Its big launches this year are Roundup Ready Flex cotton - the largest trait launch to date with more than two million planted acres - and Roundup Ready Alfalfa.

Coming to the market soon are second generation Yieldgard Corn Borer, Roundup Ready 2 Yield soybeans and Vistive II low-lin mid-oleic soybeans.

Candidates in earlier stages of development include agronomic traits for grain yields, drought tolerance for multiple crops, new herbicide tolerance technology and disease resistance, plus a number of consumer and processor benefit traits.

At the helm of Monsanto's U.S. Crop Production business is Ernesto Fajardo, a 12-year Monsanto veteran. (See sidebar below for the units that report to Fajardo).

He was born in Atlanta, GA, but he comes from a traditional Colombian family that started decades ago with a coffee plantation in Colombia. That's where he began his career, working as a field representative for Hoechst. Next, he ran a crop input distribution company in Ecuador. In 1994, he joined Monsanto as a Sales Manager.

Fajardo believes that to be successful in the agricultural industry, a company needs to be offering an entire package of solutions to its customers. "Whether our customers are raising crops for feed, fuel, export, or high-value food, Monsanto will be there to help with the best technology that is available."

That belief is what shaped the "new" Monsanto. It all began when Monsanto researchers discovered what is now known as the Roundup Ready trait - a trait which makes a plant resistant to the herbicide. To get the trait used as widely as possible, the company began licensing it to seed companies.

In addition to licensing its traits to other seed companies, Monsanto decided to expand its seed business and purchased in-bred line marketer and developer Corn States/Holdens and the branded seed companies DEKALB and Asgrow.

Fajardo explains, "The strength of Monsanto's technologies comes from its ability to match genetics and superior yield potential with the traits that protect that yield. There is the obvious need to use seed as the delivery system for traits. But more important for farmers, the decision to purchase Corn States/Holdens, Asgrow and DEKALB enabled Monsanto to combine the breeding programs of these companies to create a unique diversity of germplasm that delivered higher yielding products for traits to protect.

Fajardo reports that DEKALB and Asgrow's seed corn sales have nearly doubled in the past three years and now stand at an 18% market share in the U.S. In addition, even though Roundup went off patent six years ago and now has generic competitors, Monsanto's Roundup has retained its market share leadership - the No. 1 and No. 2 glyphosate herbicides are Roundup Original MAX and Roundup WeatherMAX respectively.

Roundup herbicide loyalty is a powerful complement to the highly penetrated Roundup Ready soybean business. "Ninety-three percent of the soybean acres in the U.S. are planted to Roundup Ready varieties," Fajardo says.

GETTING STARTED

But the early going was far from easy. Jim Zimmer, VP of Marketing, was Mktg Mgr for Roundup Ready soybeans shortly after they were introduced.

"We knew we were bringing a new technology on the market that would help farmers save money," says Zimmer. "We calculated that farmers were going to be able to reduce their pesticide bill and have higher yields, so we set out to share that benefit with them.

"To do this, we started out by charging farmers a $5 per unit tech fee for soybean seed with the Roundup Ready trait," Zimmer says. "We licensed the technology for a single year's use. Roundup Ready Soybeans were one of the first technologies in soybeans offered to farmers that were patent protected. This was a new concept - close to 30% of the soybeans in the mid '90s planted by farmers was saved seed. Our new license approach required us to educate farmers of the benefits of Roundup Ready soybeans as well as newly purchased seed and the terms and conditions of the license.

"We believed during the introductory years it was important to breakout the cost of the technology versus the cost of the germplasm, so farmers could clearly see it. We recognized farmers wanted to be able to choose the seed that fit their farm and that not all seed was the same. Our broad licensing approach provided flexibility and clarity for the farmer. However we received feedback from both farmers and seed companies that it was also complex. As a result, we switched to charging corn and soybean seed companies a royalty, which allowed seed companies to set their own retail price. For cottonseed, the technology fee is still being used."

Zimmer reports Monsanto now uses "zone pricing" for some of its traits. "We want our pricing to fit as close as we can to local market conditions," he says. "In some markets, a trait has a different agronomic value than in other regions. To share the value proportionately with farmers in different areas, we use agronomic zone pricing.

"YieldGard rootworm is a perfect example. The new pricing approach takes into account regional agronomic value of the technology. The effect is a lower royalty to seed companies selling seed to farmers in regions where there is moderate or low rootworm pressure. For farmers, this lowers the economic threshold for using the technology and leads to wider adoption."

Research/Communications

Zimmer says Monsanto's commitment to serving farmers drives a continuous effort to stay focused on meeting customer needs. "Market research plays a significant role in our decision-making process," he says. "We utilize both qualitative and quantitative research, and conduct both proprietary and purchase syndicated studies to keep pace with the moods of the marketplace, gather market data, set our pricing, and make other decisions.

"We don't run an ad that has not been properly researched," he says. "We also post-test all of our ads."

Customer communication is central to Monsanto's approach to market. "I believe communications has played a significant role in building our brands and telling our story," Zimmer says. "There are many ways to educate farmers on the benefits of our products," he says. "But we want to communicate in unique ways that farmers can appreciate."

One example of a unique communications effort is a direct mailing of ears of Yield-Gard Plus corn and the ears of corn from the same hybrid without the Yield-Gard Plus rootworm and corn borer resistance traits but treated with soil insecticide.

More than 40,000 ears were hand-harvested from plots in Illinois where the 2005 drought took a heavy toll. The YieldGard Plus corn ears produced more grain because they were supported by a better root system and healthier stalks. "Although there was plenty of data to tell the story, the tangible benefits were clear for farmers who held the two ears in their hands," explains Zimmer.

DISTRIBUTION

When Monsanto purchased DEKALB and Asgrow, they inherited a distribution system that was the standard of the seed business - farmer-dealers. Today, most of the seed sold by these brands is handled by crop input retailers, including independents, co-ops and the chains.

Zimmer says, "We knew that when our traits began to hit the marketplace, it would be a great opportunity for crop input retailers to use the agronomic expertise they already had to sell the new weed and insect control technologies as farmers began to choose them over crop protection chemicals. So, we encouraged the retailers to add our seed lines to the products they offered.

"Also, the new technology, coupled with expanding offerings of genetics, was going to require special stewardship in getting these products placed and handled properly. With all of their agronomic training and trust they had built with their customers, retailers were naturals to sell seed."

It turns out the company was right again. Whereas five years ago, it was estimated that only 20% of the retailers handled seed, about 70% or more do so today.

Complementing Monsanto's branded seed business and retail distribution strategy is its broad licensing strategy. More than 200 seed companies access genetics and traits through Monsanto's Corn States/ Holdens business. This allows farmers to have many choices in product suppliers. Additionally, Monsanto has formed American Seeds Inc., which invests in regional seed companies allowing them to deliver cutting edge products in through the strong relationship networks they have with their customer.

THE COMPETIIVE FACTOR

Several other companies have ramped up their biotech research, and are releasing new products as well as licensing out to others what had previously been proprietary products and genetics.

Fajardo's reaction? "Competition is good - it makes us focus and brings intensity to the marketplace. However, we have been in the business a long time and the others are just getting started. Their test will be if they can actually deliver what they say.

"We feel we have the right people with the right products, and the right set of goals to continue our success of bringing new technology to the market place that truly meets our customers' needs.

LOOKING AHEAD

Zimmer says Monsanto sees big opportunities for U.S. farmers to meet growing demand for food, feed, fiber and fuel. In fact, you might say Monsanto has "bet the farm" on it. "We are 100% dedicated to agriculture. This means we must help farmers succeed before we can be successful," Zimmer says. "This is the guiding principal in everything we do."

To fulfill this commitment, Zimmer says Monsanto's challenge is to build a win-win-win scenario. "First and foremost, we have to make sure the farmer profits. But we also have to make sure the distribution channel has an opportunity to prosper and that there is value in it for Monsanto to sustain our research and development of new solutions for farmers," he says.

To find new ways to help farmers profit, Monsanto continues to develop value-added traits that processors are willing to pay a premium for. Vistive soybeans are a good example. Farmers can plant and manage Roundup Ready Vistive soybeans the same as other Roundup Ready varieties and market them through a contract with a growing list of processors. Vistive soybean acreage grew from about 100,000 acres in 2005 to 500,000 acres in 2006.

With these and a host of other plans in the works, it appears the Monsanto miracle will continue to revolutionize the agricultural industry. With a pipeline chockfull of new products that benefit all segments of the food chain, supported by effective sales and marketing efforts, this unique company - one that is solely focused on agriculture - continues to have a virtually unlimited future. AM

MONSANTO'S U.S. CROP BUSINESS UNITS AND MANAGERS

American Seeds Inc. - owns 16 regional seed corn and soybean seed companies - managed by Dennis Plummer. See March 2006 AgriMarketing for more information about this business.

Corn States/Holdens - inbred line developer that markets its genetics to other seed companies - managed by Ken Rinkenberger

U.S. Branded Business - including DEKALB, Asgrow, Stoneville, NexGen, Roundup family herbicides, Harness, and Degree - managed by Glenn Stith

Technology Development - managed by Phil Miller

Product Management - managed by Jim Bowman

Marketing - managed by Jim Zimmer

History of Monsanto
"Original" Monsanto:
1901 Company founded.
1945 Enters ag market.
1976 Roundup commercialized.
1981 Molecular biology group is set - the start of its biotechnology activities.
1987 Conducts first field trials with biotech traits.
1996 Introduces Roundup Ready soybeans and
Bollgard cotton.
1997 Introduces Yieldgard corn. Acquires Asgrow, Holden's and Corn States.
1998 Acquires DEKALB. Introduces Roundup Ready corn.
2000 Merges with Pharmacia

"New" Monsanto:
2002 Spun off as a stand alone.
2004 Forms ASI which has acquired 16 seed companies.
2005 Acquires Stoneville cottonseed and Seminis. Introduces Vistive low-lin soybeans.
2006 Introduces Roundup Ready alfalfa.


Search News & Articles





















Proudly associated with:
American Business Media Canadian Agri-Marketing Association National Agri-Marketing Association
Agricultural Relations Council National Association of Farm Broadcasters American Agricultural Editors' Association Livestock Publications Council
All content © Copyright 2014, Henderson Communications LLC. | User Agreement