After abandoning its $46 billion bid to acquire Syngenta AG, Monsanto has decided to create value for its shareholders through repositioning the company to focus on big data science and services in addition to its traditional chemical and seed and genetic trait business.
“We transformed from industrial chemical company to a biotech company, then to a seeds company,” Fraley said. “Now, we’re transforming again,” Chief Technology Officer Robert T. Fraley told Reuters.
Top Monsanto executives have met with approximately 200 technology start-ups and have narrowed their focus to five that present themselves as potential acquisition targets. The names of the selected target companies have not been released.
This redirection of the company is a stark reversal from the company’s focus just weeks ago when it was planning to dominate the agricultural chemical and advanced seed space. Monsanto is now looking to be a major provider of software, hardware, and services that use data to advise farmers on how to achieve the highest potential from their operations through identifying shifts in soil chemistry, advising on the timing and method of pesticide applications, and enhancing a farmer’s choice of seeds to better custom fit a farm.
Aside from the failed bid for Syngenta, the move by Monsanto is also being driven by consumer pushback against genetically modified foods, increased regulatory and consumer scrutiny regarding the safety of its products, and sluggish profits as both its RoundUp herbicide and its genetically modified seed offerings are losing their luster among farmers as weeds are becoming resistant to glyphosate. And although Monsanto has developed dicamba, a new weed killer to be combined into an herbicide that can be used in conjunction with the company’s newly developed herbicide-tolerant crops, newly developed and commercialized products from rivals such as Dow AgroSciences are increasing the pressure on Monsanto for market share and profits.
Monsanto has already taken steps into the big data arena with the acquisition of Precision Planting in 2012 and Climate Corp. in 2013, and the company’s biologics and data initiatives account for an increasingly larger share of its $1 billion in annual R&D spending. However, although analysts see Climate Corp. as showing promise, it is not being seen as a vehicle Monsanto can use to dominate the $20 billion market for its Integrated Farming System platform.
Despite Monsanto’s powerful position, its attempt to pivot into the big data arena is not viewed as an easy move. The space is crowded and competitive, and the company’s initial forays into the industry have generated inconsistent results. Rivals including Syngenta, DuPont Pioneer, WinField Solutions, and countless other international players and startups, are vying for a piece of the big data pie while farmers and agribusiness customers remain reluctant to pay for such services. Climate Corp’s free offerings are used across 22% of U.S. cropland, but its paid-for services are used on only 1.5% of cultivated U.S. farmland.
The scale of how much of the firm Monsanto executives expect big data to account for, or the scale of expected profits or sales, remains to be seen, but plans are currently being solidified and major shareholders are being briefed prior to a presentation to the wider body of shareholders at the company’s St. Louis headquarters in November.