An ear of corn the size of a Trident missile? Not quite, but Monsanto is all about bioengineered crops. The company helps farmers grow more crops like corn, cotton, oilseeds, and vegetables by applying biotechnology and genomics to seeds and herbicides. It produces genetically altered seeds that tolerate Roundup (its flagship product and the world's #1 herbicide) and resist bugs. The company also produces Asgrow, DEKALB, Deltapine, and Seminis seeds. During the past decade, Monsanto re-made itself into a seed and biotech company, as opposed to one focused on agrochemicals, a transition that was sped up with the acquisition of Delta and Pine Land.
St. Louis, Missouri-based Monsanto rings up more than half of its sales in the US. Europe-Africa, followed by Brazil, account for about 14% and 10%, respectively. Argentina contributes about 8% of sales.
Monsanto organizes its business into dual segments: Seeds and Genomics, and Agricultural Productivity. Today, its seeds and genomics unit (70% of sales) is the company's growth engine. The firm's agricultural productivity unit, which serves both farmers and the residential market, makes herbicides under the Roundup, Harness, and other brands for lawn and garden use. From 2009 to 2013, alone, Monsanto's agricultural productivity segment withered from 38% of annual sales to 30%.
Sales and Marketing
The company supports a worldwide distribution and sales and marketing organization for its two business segments. It sells its agricultural productivity products (aka herbicides) through distributors, independent retailers and dealers, and agricultural cooperatives. In some places outside the US, the company sells directly to farmers. Some of Monsanto's herbicides are marketed by The Scotts Miracle-Gro Co. Monsanto's advertising costs totaled $95 million, $87 million, and $100 million in fiscal 2013, 2012, and 2011, respectively.
Following a decline in revenue and profits in fiscal 2010 (ended August), Monsanto has posted three consecutive years of steady gains in both. In fiscal 2013 revenue was up 10% versus the prior year, to nearly $14.9 billion, while net income rose 21% over the same period to $2.5 billion. Monsanto credited the double-digit revenue gain in 2013 to increased sales by its Seeds and Genomics business on rising prices and volumes globally. In the US, Argentina, and Brazil prices were higher due to improved germplasm and trait mix, whereas in Europe and Mexico prices were higher on germplasm mix. Global demand for the company's corn technologies also boosted sales. Monsanto's other business segment, Agricultural Productivity, posted a 22% gain in year-over-year sales primarily due to increased demand from Brazil and Argentina. Rising sales and a decline in interest expense boosted profits in 2013. Cash flow from operations declined by $311 million in fiscal 2013 versus 2012, on increased tax payments due to higher earnings and timing of tax payments.
The recent strong financial (and stock) performance validates the company's course change from a company focused on herbicide sales to a seed and biotech business. Indeed, historically Monsanto's sales were generated primarily by the weed killer Roundup. Since its US patent on glyphosate expired in 2000, the company has seen its share of the herbicide market shrink. Still, Roundup herbicides are the world's largest crop protection brand and a significant source of revenue for Monsanto.
The acquisition of Delta and Pine Land in 2007 provided for the gradual shift in its business and has furthered the seed buildup. Monsanto is now the #1 cotton seed producer in the US. Several other acquisitions laid the foundation for Monsanto's shift to seed production. The company acquired Netherlands-based De Ruiter Seeds Group in 2008 for some $850 million and the assumption of debt. De Ruiter sells to the greenhouse market, offering seeds for vegetable crops such as tomatoes, cucumbers, and melons. Monsanto purchased Central America's largest corn seed company, Marmot, which operates Semillas Cristiani Burkard (SCB) in Guatemala City, Guatemala. The company also bought the world's largest private sugarcane breeding company, Brazil's CanaVialis, for $290 million in 2008.
Looking to the future as a way to add diversity to its revenue, Monsanto formed a $1.5 billion joint R&D initiative with BASF to develop genetically modified crops with an emphasis on meeting the demand for biofuels. The two companies foresee the venture's first products being delivered sometime by 2015.
Despite its success in the seed and biotech businesses (or more likely because of it), Monsanto is contending with the public's negative perception of genetically modified organisms (aka GMOs). The company has undertaken an aggressive international public relations campaign to promote genetically modified crops as beneficial rather than "Frankenfood."