December 14, 2020

 By Michelle Pelletier Marshall, Global AgInvesting Media

As one of the world’s largest agri-commodities merchants, Louis Dreyfus Company (LDC) has stood the test of time throughout its nearly 170-year history. The global merchant is involved in food, feed, fibers and ingredients processing, citrus juice production, international shipping and trade finance, and is the world’s largest raw cotton and rice merchandizer. Employing some 18,000 people around the globe, active in over 100 countries, and with net sales upward of US$33 billion, LDC helps feed and clothe some 500 million people every year by shipping approximately 80 million tons of products.

This year, the pandemic has put an enormous spotlight on food, agriculture and critical challenges in the global supply chain. Seeing the writing on the wall, LDC began to pivot away from its traditional role as an agricultural commodities merchant toward greater vertical integration and focus on the full value chain.

The company’s strategy is built around four pillars: to strengthen LDC’s edge in its core agri-commodities trading activity; to move further downstream, closer to end consumers, by embracing more of the value chain; to diversify revenue streams through more value-added products; and to leverage innovation and disruptive technologies in food, logistics research and trading operations.

Guided by this strategic vision, and by its company purpose, LDC is transforming its business model. An important milestone was the establishment of its corporate venture capital program, “LDC Innovations” (LDCI), in June of 2020. Introduced as an essential element in the company’s strategic plans to reinforce its position as a key value chain participant, the program focuses on investing in early-stage companies with the potential to transform the food and agriculture industries.

Max Clegg, who heads up the program, said that LDC Innovations would “support businesses which share LDC’s vision for a safe and sustainable future through transparent supply chains, responsible sourcing and long-term value creation.”

GAI News spoke with Clegg, who joined LDC in 2012 and has served as head of Business Development and Mergers & Acquisitions for North America, and as head of Food Innovation Projects in North America, to find more about his role, recent LDC investment decisions and the future of innovation in food and ag.

1). LDC has clearly identified the need to embrace innovation as one of the pillars in its transformational strategy to master more of the food, feed, fiber, and ingredients value chain. What does that mean to you as head of LDC Innovations (LDCI)?

LDCI’s goal is to enhance the company’s exposure to innovative technology, products, and services in a structured way. We involve the right experts in our company – and sometimes external expertise – in identifying and evaluating investment opportunities, and we look for deals with the potential for follow-on partnership, albeit at arm’s length, as a customer, supplier, or partner.

We work this way to ‘embed’ innovation in our operations, as we have done throughout our history as a company, embracing new technologies, products and methods in our work, in order to meet changing customer and consumer needs.

2). Established less than six months ago, LDCI is tasked with investing in early-stage companies with the power to disrupt the food and ag sector. Why establish this corporate venture capital program now, and where along the value chain is the primary focus for investment? What are the expectations for size and frequency of deals, and the potential exit strategy?  

LDC is primarily active in the “mid-stream” of the agricultural value chain. That is, with the exception of citrus fruit, that we actually produce, and of certain products like cooking oils that we market as branded products, for the most part we originate agricultural products at the farm gate or aggregation points downstream, and deliver these to customers globally. We also process many of these commodities along the way to market the by-products as feed and food grade ingredients.

LDCI seeks to invest in early stage companies whose innovative products, services, or solutions complement – or in some cases have the potential to disrupt or displace – our core business. We expect to invest primarily in Series A and B transactions, where there is proof of concept, and hope to maintain a transaction cadence of four deals per year, although fit and value are more important to us than volume.

3). LDC was an investor in biotech and food innovation company Benson Hill’s recent $150 million Series D to bring ultra-high protein soybeans to market. What potential does LDC see in plant proteins, and how might Benson Hill help advance this business line?

In general, seed companies have focused on enhancing yield and reducing input costs at the expense of other desirable traits like nutrition and taste. The reason for this is simple – their customers are farmers, whose primary concerns have been to keep costs in check and maximize production. Today, we believe burgeoning consumer interest in plant-based foods are creating greater market pull for enhanced attributes like protein content. Benson Hill is poised to address this market need, by creating more nutritious, sustainable, high-protein crops and by building verticals that incentivize the farmer to plant them.

4). Just last month, in a historic move, LDC for the first time sold a stake in the business to Abu Dhabi sovereign wealth fund ADQ. To what extent was that deal done based on LDC’s innovation potential and venture capital programs?

Subject to closing in 2021, the agreement we announced will bring ADQ into our company’s shareholder group as long-term partners and investors – so alignment on the company’s strategic vision to contribute to sustainable global access to food was one of the key criteria in LDC’s decision to engage with ADQ, and vice-versa.

As our Group CEO mentioned at the time of the announcement, with a shared ambition for investment in innovations and technologies that can transform food and agricultural production, the investment potential created by the long-term partnership with ADQ brings additional strength to the pursuit of LDC’s strategic growth plans.

5). This new partnership with ADQ will give LDC a strong position in meeting rising food demands in the Middle East region. What other opportunities does that present for innovative collaborations in that region?

The partnership signed with ADQ also includes an arm’s-length commercial agreement to supply the UAE with agri-commodities commercialized by the Group.

This being said, LDC’s long-term business plan involves an acceleration of investments across the value chain, including through regional partnerships that bring complementary strengths and competencies, and this across all our geographies.

6). How has innovation taken on a “new face” in the wake of COVID-19, and what are the resulting opportunities and challenges for LDC in addressing the pandemic?

The pandemic has been hugely disruptive to many parts of the agriculture and food value chains. Some contend that this is because in past decades, the industry has focused on efficiency at the expense of resilience. For my part, I am not sure that these are mutually exclusive goals – and I think that innovation will play a big role in bridging any gaps.

LDC will continue to work to make the ag and food value chain as efficient, reliable AND sustainable as possible – and LDCI will play its part – by investing in companies with similar goals.

COVID also demonstrated the fundamental role that companies like ours play in ensuring supply chain continuity. The pandemic accelerated the rewiring of supply chains, as buyers sought supply optionality and proximity. With our global footprint in both origination and destination markets, and with strong risk and supply chain management capabilities, we are well positioned to continue playing a key role in efficiently and sustainably moving food from surplus to deficit areas, globally and regionally.

The pandemic also demonstrated LDC’s resilience. We kept almost all of our facilities running with minimal disruption, while delivering for customers and reinforcing protocols that keep our workers healthy and safe. 

About Max Clegg

Max Clegg is head of Louis Dreyfus Company’s (LDC) corporate venture capital program, LDC Innovations. Clegg joined the Group in 2012. He has since served as head of Business Development and Mergers & Acquisitions for North America, and as head of Food Innovation Projects in North America, leading LDC’s investment in Motif FoodWorks, before taking up his current role in 2020. Prior to joining LDC, Clegg worked at General Electric in several transaction leadership, restructuring, and portfolio management roles. He holds a Bachelor of Science from the United States Military Academy at West Point, and an MBA from Lehigh University.

~ Michelle Pelletier Marshall is managing editor for HighQuest Group’s Global AgInvesting’s GAI Gazette magazine and its WIA Today blog, as well as a contributor to GAI News and the Oilseed & Grain News. She can be reached at mmarshall@highquestgroup.com.