March 2, 2020

By Michelle Pelletier Marshall, GAI Media

Kip Pendleton is executive chairman of Legacy Seed Companies, a proprietary seed company with operations in Wisconsin, Michigan, Idaho, Minnesota, and North Dakota that was created in 2017 to acquire and consolidate small regional producers of specialty seeds for U.S. Midwest farmers, producing crops for organic, GMO, and non-GMO opportunities to feed the world. The group works with owners, suppliers, investors, feed, and food companies, helping them harness the entrepreneurial power and innovation of regional seed companies.

As such, Legacy Seed Companies owns two seed companies: Dansville, Michigan-based DF Seeds and Legacy Seeds, headquartered in Scandinavia, Wisconsin. Its mission is to keep rural America strong by helping customers capture the greatest value from their farms; to aid in the growth of independent seed companies by finding opportunities that go beyond just high yielding varieties; and to meet the changing needs of consumers with attention on research and development through the lens of transparency, regenerative agriculture, and future state-of-the art technologies, like CRISPR.

For Pendleton’s part, he is a specialist in “Helping to Feed the World” by using a high performance “Business Builder” approach. He joined the executive management team of Legacy Seed Companies in August 2018. With a background in precision and decision agriculture, Pendleton’s expertise includes growing businesses by double-digit percentage points and developing and launching new products. He also worked for nearly two decades in biotech with the likes of Syngenta, DuPont Pioneer, and Dow AgroSciences, driving 18 mergers and acquisitions.

GAI News approached Pendleton for more details about the business model of Legacy Seed Companies after meeting him at our sister event, the Organic & Non-GMO Forum.

1). The $54 billion global seed market is dominated by a handful of large multinational corporations, why focus on the smaller players? And to what benefit?

Seed is the driver of value creation in agriculture as food starts from seed. Four global companies: German-headquartered Bayer, U.S.- based Corteva, China’s ChemChina Syngenta, and German-led BASF control over 82 percent of the U.S. market. We work with all of these companies but are focused in the big niches of the market that are too small for these companies.

There are many great independent agribusinesses of varying sizes that lack a succession path. The past industry practice was to buy great brands and consolidate them. We saw the loss to rural America and Main Street USA and believe great brands and their workers should continue to support their customers and the towns they are critical to sustaining. We offer good, better, and best options to fit the unique needs of our customers. We also see a major change coming from CRISPR and emerging technology companies like INARI, Equinom, Benson Hill, and Hi Fidelity Genetics who are looking for seed distribution paths to market with companies like Legacy Seed Companies.

2). Your company operates its acquired companies as standalone entities, but with shared back-office services. What does this model look like?

Legacy Seed Companies is a holding company — we plan to preserve and grow great independent brands and help them be more profitable. It starts with great entrepreneurial seed leaders. Bruce Ceranske founded Legacy Seeds and is now our CEO. Bret McCorkle joined us from Nutrien and is now leading Legacy Seeds. Chris Varner is the president of DF Seeds. One of the investors in the company, Mike McCrackin, a leader in Michigan with Harvey’s Milling, saw in 2012 the need for small companies to have an exit path. He also saw that many of these independent seed companies had great and trusted customer relationships with growers but lacked formal foundation business system sophistication.

To manage and scale the business, we have installed a leading financial platform including SeedWare, and had Stoneridge Software implement Microsoft Dynamics 365. To this end, we have a cloud-based, dynamic solution that both supports our customers and our employees with a better technological solution, from order to accounting to inventory management, that scales as the business grows, both organically and if we are able to add through acquisition. We know value is created from production data and we seek to help our customers in this area as well as focusing on how we can assist growers in the value chain focus on traceability of product through these solutions.

3). In what ways is Legacy Seed Companies helping these companies “harness entrepreneurial power and innovation” for a more robust future in seeds?

We are employing a food and feed strategy. Bruce Ceranske, our CEO, has led the strategy in feed where we are the number three U.S. alfalfa supplier through our branded and private label efforts and are growing rapidly. We supply alfalfa genetics to over 95 percent of the organic alfalfa seed under a product line called Klean Seed^TM. We work with dairy feed leaders like Vita Plus and Harvey’s Milling to deliver our RATIONS CHOICE PROGRAM to help dairy producers grow and feed a profitable ration. We are helping growers contract our highly digestible alfalfa for sale to other producers. We are adding specialty corn silage lines. We are expanding from dairy into large beef production units. Chris Varner and Jim Sheppard, VPs of Food and Feed, are driving similar actions in food. We are a major supplier of food grade soybeans under contract to Asia. We expect to employ the same strategy we have implemented in alfalfa to create new value in corn, soybean, and other crops with our feed and food focus.

4). There is a big focus on organic and non-GMO seeds in the sector and throughout the value chain, especially with consumer demand pushing for these offerings. How does Legacy Seed Companies fit into this niche?

As you suggest, the market has moved and the consumer is demanding cleaner food, largely in non-GMO and organic products. At Legacy Seed Companies, a great example for us to meet that changing consumer taste is our focus on the large niche of organic seed, of which we believe we are a market leader.

Today’s U.S. organic alfalfa seed market is about 750,000 acres. The USDA believes organic acres will grow to 5 million acres in the near future. Assuming that occurs, that is a $2 billion market. In 2019 Americans consumed more organic food than all the organic acres produced in the world. We believe that there are misrepresentations in this market that are largely unknown by the consumer at present. We believe that governmental regulation will ultimately be part of the solution and is also why large food companies are very focused on the traceability and trackability of the inputs to their food products. Not only is that a responsible practice to avoid food recalls and the associated liability, but it is what the consumer wants. As this shift occurs and awareness increases, we want Legacy Seed Companies to be positioned as the go-to supplier in the non-GMO and organic segment. We believe this strategy benefits all stakeholders in the food and feed value chain and will play an increasingly important role to the growers we serve as the market and consumer tastes continue to shift further to non-GMO and organic food.

Another brief example is that the broader market has seen the effect that generic agricultural chemicals have had. We see the same trend coming in off-patent seed lines and traits. Today there are many top lines off-patent; Herculex trait comes off-patent in 2024 and most all traits in 2027. These will be good options for farms looking to control costs.

5). Legacy Seed Companies bills itself as a $40 million agribusiness company. Can you please explain your due diligence efforts in acquisitions and what the future holds along those lines?

Our current investors do a lot of work in agtech and throughout the food and agricultural value chains. Generally speaking, all are impressed with the size, margins, and scope in seed, as well as what we believe to be a bright future for seed for the foreseeable future. We are talking to well-established, profitable companies who may want to eventually transition but still maintain the brands they have built, as well as not only retain their employees and operations but see them grow and thrive. We believe we have built the foundation to do that.

We have created a back-office strategy that can scale and is largely cost prohibitive for many of the companies we engage with to afford on their own. We also allow access to unique genetics, traits, and downstream contracts. Additionally, the seed business is heavily dependent on its people, and we feel we have both great people and culture. As such, we are also heavily focused on the cultural fit of potential companies that we partner with that can match what has been built over the years by John Diehl, Chris Varner, Jim Sheppard and Mike McCrackin at DF Seeds and Bruce Ceranske and his partners at Legacy Seeds, and ultimately allow the respective businesses to grow, its employees to benefit, and us to further expand our strategy.

In an ideal world, we would like to add six to eight more companies that fit this criteria, which is a tall order. The ideal companies we are looking for have a strong team, ideas for growth that fit our strategy, the desire for assistance in access to better technological capabilities, and want to provide their employees opportunities for continued personal and professional growth and better benefits.

6). From an investment standpoint, please explain how the company has worked with family office capital to aid in Legacy’s success, and what investment opportunities lie ahead for/with the company.

To date, we have worked with a number of family offices in our investor base and Open Prairie, a private equity firm headquartered in Effingham, Illinois. As discussed, our hope is to continue finding potential companies that believe in our future and strategy and would like to partner with us. As we move forward, we want to engage with like-minded investors that not only believe in our strategy, but also support our desire to keep rural America strong. We have partnered with two tremendous businesses and our investors in Legacy Seed Companies support this vision.  Ultimately, we believe the strategy should be a great investment for those who are looking to participate in the large changes occurring across agriculture.

ABOUT KIP PENDLETON

Kip Pendleton is executive chairman of Legacy Seed Companies with responsibility for setting strategic goals that lead to optimum performance and results. He is also executive chairman of Farmobile; and chairman and CEO of Jord BioScience. He was CEO at DTN, where he directed transformative change that led to a new strategic matrix in order to create a global billion dollar business plan. He also was founder, CEO, and chairman of DirectAg, the first e-commerce company in agriculture where he raised $32 million, developed relationships with 34 manufacturers, 845 ag retailers, and 45,000 producers, and subsequently co-CEO of Agristar.

Pendleton has a BS in Agronomy and Ag Economics from the University of Wisconsin, studies at the University of Illinois in Plant Physiology, and an MBA in Finance from the University of St. Thomas. He also has participated in the Harvard Agribusiness program.

~ Michelle Pelletier Marshall is managing editor for Global AgInvesting’s quarterly GAI Gazette magazine and a contributor to GAI News. She can be reached at mmarshall@globalaginvesting.com.