Alltech, headquartered in Kentucky, is the only privately held and family-owned business among the top 10 animal health companies in the world. The leading company has more than 4,700 employees and 77 production facilities across the globe as well as three bioscience centers, all working toward fostering trading relationships in 128 countries.
The company is steadfast in its mission to improve the health and performance of people, animals, and plants through natural nutrition and scientific innovation. It seeks to excel at this through its ACE principal – the promise that in doing business they have a positive impact on the Animal, the Consumer, and the Environment.
This mission, set forth in 1980 by well-known industry disruptor and founder Dr. Pearse Lyons, has set the company on a path of exploration into ways to naturally enrich foods through improving the animal diet or crop produced. Mergers and acquisitions dot the framework of this mission and include the recent acquisitions of Canadian company Masterfeeds, Montana-based WestFeeds, and Keenan Systems of Ireland – its fourteenth acquisition since 2011.
Global AgInvesting caught up with Aidan Connolly, chief innovation officer and vice president of corporate accounts at Alltech, for a discussion on how the company’s innovative technologies are having an impact on the ag sector.
From soil to feed, Alltech’s goal is to seamlessly bridge the gap between science and sustainability in the livestock and poultry sectors. How have the company’s innovations advanced the industry?
I think it is clear that Alltech is viewed in animal nutrition as being a leader in thinking about how to feed animals differently. We first made advancements in this industry back in the 1980s with some fairly basic technologies, and in 1990 we announced that we were going to become a company that was focused on animal consumer and environmentally-friendly solutions, which might not seem that revolutionary, but in those days it was.
We have definitely been a leader in finding solutions for raising livestock without the continuous use of antibiotics in the feed, as well as understanding how to use organically complex trace minerals such as zinc, manganese, copper, iron. We mix them into a form such as is found in nature to be included in feed to help animals with immunity, fertility, and productivity. When people think Alltech, it is synonymous with innovation and with bringing ideas to the marketplace that have not been there before.
Much of your work in the last 10 years has been focused on nutrigenomics, the science of how diet affects gene expression. What type of results have your products helped producers realize?
Nutrigenomics has allowed us to do three things: learn how we can improve the products and technologies we have developed; replace things in the feed that for some reason we can no longer use; and allow us to look at benefits that can be achieved by combining combinations of nutrients, specifically for meat quality and the bigger issues of fertility and disease.
Genomics is like the blueprint for who we are, but as we have found out, the genes in our body actually react with nutrients and that science is called nutrigenomics – so how nutrition impacts on the expression of the genes that we have in our body. It is very interesting because at a basic level it means that what we feed animals could be adapted on an individual basis and could have a big impact on what happens to them in their lives. And, as we’ve studied it further, we’ve discovered that you also can be impacted by what your parents ate, or what your parent’s parents ate. We’ve realized that nutrition is as important as the genes in our body. And while we thought we were finishing the story by mapping out genes, we’ve discovered that we are far from done and may, in fact, just be beginning the book.
And keep in mind that for humans, bad nutrition and bad habits can take years to produce ill effects because our metabolisms are very, very slow, but in animals – pigs, chickens – who are consuming nutrition very quickly and have a fast metabolism, when something goes wrong, we see it very quickly. Nutrigenomics lets us establish what happens when we change nutrition for the better or for the worse, and provide “precision nutrition” – feeding each animal precisely what it needs at the right time.
In essence, we are experts at improving the genetic capacity of food production, which means that on an annual basis we have improved the productivity of wheat, barley, corn, milk production, pork production, etc., by about 2 percent per year for the last 30 to 40 years. The average has been pretty consistent due to better management, better nutrition, better genetics, so we are getting more out of our ag productions systems. However, that means that we have to become more and more precise about what we are doing. It doesn’t concern me that we have to produce more food by 2050, because if you think about it – in 35 years, we need to produce 70 percent more food, which compounded out translates to about a 1.6 or 1.7 percent increase per year. It’s not that difficult to achieve, but it does mean that we really need precision agriculture.
For seven years now, Alltech has published the annual Global Feed Survey, which serves as a barometer for agriculture, and demonstrates the economic strength of the countries included in the survey. What subsectors are showing the most promise in the marketplace and why?
Some of the big numbers in the feed survey, not just this year but every year include: China is the number one producer of feed, followed by the U.S., then Brazil. Over 40 percent of the world’s feed is going into chickens – eggs and broiler meat; Asia represents over one-third of the world’s feed production. These numbers reflect that chicken meat is growing tremendously quickly because it’s affordable and easy to produce with a low environmental impact, it’s not influenced by cultural or religious restrictions, and it’s very flexible as far as its ability to be further processed. And this will only continue to gain strength.
The growth of aquaculture is high – fish farming now exceeds the fish taken from the sea. And the sector is becoming more efficient so it’s requiring less feed to produce fish than it has in the past. Asia is number one in farmed animals, but Africa is the fastest growing. I think this reflects the growth from an economic perspective of what’s happening in Africa.
Over the seven years [of the survey], the trends we’ve seen do reflect the fact that the world is continuing to eat more animal proteins, supporting the fact that the middle class continues to grow.
You have been a professor at the Michael Smurfit Graduate Business School (in Dublin) and China’s Agricultural University (in Beijing) for many years. From this perspective, how has the academic level of interest in food and agribusiness changed, and what particular fields/topics are attracting the most attention?
At my appointment in Dublin, which is Ireland’s leading MBA program and in the top 25 in Europe, reflects the fact that that university decided it was time to get serious about food and agribusiness. It certainly hadn’t been before, but nowadays agriculture is seen as quite an exciting career, seen as being very critical to the future of the world. It’s something to be proud of; to say that you are involved in food production is a great story. Their [the MBA program] acceptance of case studies on food companies who are disrupting the way the world produces food, such as Nestlé, Danone, and McDonalds, and also Amazon and Alltech, is very exciting.
In China, we address more of the societal issues, such as consolidating farmers – where do they go and what do they do once they are no longer farming?
That said, the biggest issue we discuss is how many people do we need to feed by 2050, 2100, and how are we going to do it? What will the impact be on natural resources, sustainability, and human health?
Alltech partners with producers to increase their efficiency, productivity, and profitability through analytical service, and is active in M&A. What opportunities for ag investors might be on the horizon related to this?
We are a private company so I can’t name specifics, but in general from our perspective the agricultural industry is not very profitable, but it is very solid and can produce very consistent returns and that’s important to remember.
Whether it be feed or baking or brewing or trading grains, there are opportunities to make superior returns. If we think about agtech, specifically digital technologies, the market has turned to startups, which are creating some real challenges from an investing perspective. If you get in too early you run the tremendous risk of losing all of your money, and if you get in too late you run the tremendous risk of overpaying for your investment.
So that sweet spot of how and when to invest is really exercising the mind of a lot of companies at our level and larger. Those that I have spoken to at Kellogg’s, Anheuser Busch, and Nestlé, are trying different things to kick start their activities from an innovation perspective by engaging with a wide range of startups of various natures. And I know that a lot of the companies that are middle or smaller level are struggling because they don’t have the cash to take a portfolio approach to startups.
When we work with startups we look closely at the people and the commercial outlook – we evaluate the technology but we tend to take for granted that it will work – and then we look for a portfolio approach. From an investment perspective, it’s the most exciting market that we’ve even been in but it’s also one that you have to work very carefully to find the true value, because outside of traditional businesses, and in this startup environment, it’s very easy to make the wrong choice.
Alltech’s Pearse Lyons Accelerator program, which brings applicants to Dublin’s Dogpatch Labs for a three-month program that offers space, mentoring, and investment opportunities, is underway. What were the results for last year’s class of companies, and what are your expectations for 2018?
We felt that we added a lot of value to the companies that were in the program, and the companies themselves reported that they generated $60 million in leads. There were 10 startups in last year’s program and they had already raised about $13 million in capital combined, and in the 10 months since the program concluded, they have raised another $20 million. We’re glad to provide this opportunity to raise capital and generate leads, and from our perspective it was great to have them at the One Conference, which is what we did again in May. We brought in venture capitalists, private equity companies, and local startups and provided an opportunity present on stage on the innovation day in front of almost 4,000 people, including our speakers such as Professor Robert Wolcott of the Kellogg Innovation Network of Northwestern, and Jack Welsh, the legendary leader of General Electric.
This year with the accelerator program, we did something a little different – we had five internal ventures combined with five external startups. Externally, they included a company that is involved with insect larvae for feed for chickens and fish; a company that is using CRISPR gene editing to make eggs glow naturally under a light if they are male but not if they are female; another that uses ear tags to measure movement and detect stress in dairy cows; another that uses drones to create virtual fences to corral wild animals into small areas, which can also be used with beef cattle; and one that is using probiotics for the bioremediation of soil that has become toxic.
Overall, the Pearse Lyons Accelerator program is a very exciting program that infuses energy into our business, while we infuse knowledge and business opportunities into the participants of the program. So it’s a very symbiotic relationship that’s mutually beneficial.
ABOUT AIDAN CONNOLLY
As chief innovation officer and vice president of corporate accounts for Alltech, Aidan Connolly is responsible for the commercialization of Alltech’s global research and overseeing the company’s corporate account strategy. He also has responsibility for the highly-anticipated Alltech Global Feed Survey, which is released annually, and led the implementation of The Pearse Lyons Accelerator, a late-stage, agri-tech accelerator run by Alltech and Dogpatch Labs, which received 184 applications from more than 30 countries for its inaugural program.