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The key document summarizes success factors in the seed and agrochemical production industry. It discusses three main factors: yield potential through innovative technology and genetically modified seeds, consumer safety regarding product use, and intellectual property rights protection. Yield potential is increased through biotechnology that modifies seeds for herbicide resistance and improved structure. Companies collaborate by developing seeds tailored for specific agrochemicals to boost sales. Consumer safety involves manufacturing controls and environmental impact of seeds and chemicals. Intellectual property protection is increasingly important as research and trade secrets drive industry competition.

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SEED AND AGROCHEMICAL PRODUCTION INDUSTRY Prepared for: Professor Keifer Professor McElfresh Professor Marchese Professor Lambert September 16, 2014 1 Prepared by: Team 2 Diana Wahl Sharmaine Wilcox Anthony Head Ethan Dillhoff Ryan Cobb
TRANSMITTAL DOCUMENT 2 September 16, 2014
EXECUTIVE SUMMARY 3 September 16, 2014
TABLE OF CONTENTS INTRODUCTION KEY SUCCESS FACTORS………………………………………………………………………………3 ENVIRONMENTAL ANALYSIS INDUSTRY • INTRODUCTION ……………………………………………………………………………………5 • SIZE AND GROWTH………………………………………………………………………….5 • TRENDS…………………………………………………………………………………......5 • INNOVATIVE TECHNOLOGY……………………………………………………………...….5 • SUPPLIERS & BUYERS………………………………………………………………………..5 MARKET • SIZE AND GROWTH………………………………………………………………………………...6 • FUTURE…………………………………………………………………………………………….6 • WHEN AND WHY DO CUSTOMERS BUY…………………………………………………………….7 • GOVERNMENT REGULATIONS……………………………………………………………………...7 • CHARACTERISTICS OF PURCHASES………………………………………………………………...7 • PESTICIDES & FERTILIZERS…………………………………………………………………....7 • SEEDS……………………………………………………………………………………….7 COMPETITION • PESTICIDE COMPETITION…………………………………………………………………………...8 • FERTILIZER COMPETITION…………………………………………………………………………...8 • RIVALRY…………………………………………………………………………………………...8 • GAINING A COMPETITIVE ADVANTAGE…………………………………………………………....8 KEY SUCCESS FACTORS INTRODUCTION……………………………………………………………………….……9 YIELD POTENTIAL • INNOVATIVE SEED AND CHEMICAL TECHNOLOGY...……………………………………………...10 • USE OF BIOTECHNOLOGY TO GENETICALLY MODIFY SEEDS..………………………………10 • SEED AND AGROCHEMICAL PRODUCT COLLABORATION……………………………………...…10 September 16, 2014 4
CONSUMER SAFETY • MANUFACTURING CONTROL……………...……………………………………………….....11 • AGROCHEMICAL CONSUMER/ENVIRONMENTAL SAFETY..………………………………….…11 • SEED CONSUMER/ENVIRONMENTAL SAFETY…………………………………………………..12 • CROSS POLLINATION………………………………………………………………………….12 INTELLECTUAL PROPERTY • SEED CONSUMER/ENVIRONMENTAL SAFETY…………………………………………………..12 • CROSS POLLINATION………………………………………………………………………….12 CONCLUSION REFERENCES…………………………………………………………………………………..14 APPENDICES • A. SIZE AND GROWTH………………………………………………………………………..18 • B. PEST ANALYSIS…………………………………………………………………………….18 • POLITICAL………………………………………………………………………………19 • ECONOMIC………………………………………………………………………….....20 • SOCIAL…………………………………………………………………………….......20 • TECHNOLOGY…………………………………………………………………………..21 • C. PORTERS FIVE FORCES……………………………………………………………………..22 • RIVALRY……………………………………………………………………………......23 • THREAT OF ENTRANTS………………………………………………………………......23 • THREAT OF SUBSTITUTES………………………………………………………………….23 • BARGAINING POWER OF SUPPLIERS………………………………………………….....24 • BARGAINING POWER OF BUYERS……………………………………………………….24 • D. TOP COMPANIES………………………………………………………………………….24 TABLE OF CONTENTS September 16, 2014 5
The main focus of this analysis is to provide an in depth look into the key success factors that go along with the seed and agrochemical industry. These factors are yield potential, consumer safety, and intellectual property rights and protection. First, this report will provide an environmental analysis of the two industries. The environmental analysis will include information pertaining to the industries as a whole, their market, and their competition. Following the environmental analysis, the report will expand on each of the aforementioned key success factors. Ultimately explaining why they are critical for a companies success in the seed and agrochemical industry. Introduction Yield Potential Consumer Safety Intellectual Property Rights and Protection Key Success Factors INTRODUCTION September 16, 2014 6 A PEST analysis is used to assess the market for a business of organization unit. PEST is an acronym for political, economic, social, and technological factors that affect a business's performance in a given industry. Political: tax and trade regulations, employment laws and safety regulations • Economic: growth, exchange, inflation, and interest rates • Social: demographics, population growth rates, age, lifestyle, education, and income • Technology: technological advancements • (Brooks 2013) Porter’s Five Forces is an in depth analysis of competition within a certain industry. The analysis allows a company to identify the strengths and weaknesses with an industry. The five forces are as follows: 1. Competition in the industry 2. Threat of substitute 3. Bargaining power of suppliers 4. Bargaining power of buyers 5. Threats of new entrants (Investopedia, 2014) Porter’s Five Forces Porter’s Five Forces
LIST OF ILLUSTRATIONS 7 September 16, 2014
INDUSTRY Environmental Analysis The Crop Production industry has been around for 10,000 years but didn’t start to become a globally competitive market until after World War II. The industrialization of the farming process made the industry much more efficient. The increase in technology has allowed farmers to maximize the amount of crop per acre, this is known as having a higher yield. One of the main technologies that plays an impactful role in the increase in seed production has been agricultural chemicals; therefore, agricultural chemicals have become an industry of their own. Introduction Data Source: Neville, 2013 Year Revenue $ Million Growth % 2014 13,136.4 4.5 2015 13,451.5 2.4 2016 13,896.6 3.3 2017 14,118.6 1.6 2018 14,443.3 2.3 2019 14,582.9 1.0 The size of the crop production industry depends on the demand which is driven by food policies and trends of the population. The industry is growing rapidly because of an expected high population growth. Farmers will need to keep up with the future high demand for crops. As we’ve seen continuous growth for the past 5 years throughout the industry, we do not expect to see a rise in crop prices. The industry’s volume contribution to the economy is expected to grow 1.3% every year. See chart to the right (First Research, 2014 August 11; Neville, 2013) September 16, 2014 8 Key Concepts Size and Growth A recent increase in health awareness and education among consumers has led to the rise in demand of organically grown crops (See appendix A for PEST analysis) Some recent technological advances which improve crop yield include renewable energy, chemical innovation, and genetically modified seeds (See appendix A for PEST analysis) To be successful, companies must do extensive research to meet the customer’s demand. Chemical manufacturers mainly sell to distributors, and sometimes to larger farms. Soil, crop, and weather characteristics have a direct impact on the product demand (See appendix B for Porter’s Five Forces).
MARKET Size and Growth According to Markets and Markets, the agricultural chemical industry has become a $203.6 million dollar market. The value and quantity of agrochemicals are growing, creating a pesticide and fertilizer that is affordable and high quality (Markets and Markets, 2014; International Seed Federation 2013). Seed production and quality has been increasing. According to Amseed, the market responds to high quality seeds. The seed market is overwhelmingly dominated by the United States holding about 26.71% of the seed market, with China being a close second at 22.15% (American Seed Trade Association, 2011; International Seed Federation, 2013). The future of the market for seed and agrochemical production is growing at a rapid pace. This is due to the massive projected increase in our population. According to First Research, the world population is forecasted to reach 9.6 billion people by 2050, increasing crop demand. A critical factor for farmers to generate higher yields to meet this demand is through the use of pesticides and fertilizers. According to Markets to Markets, the agrochemical industry is projected to reach $248.2 million (Markets and Markets, 2014; First Research, 2014 August 11). 1.71% 2.20% 2.60% 3.01% 4.45% 4.72% 5.84% 6.23% 22.15% 26.71% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% Italy Argentina Germany Japan India Canada Brazil France China United States Distribution of the Global Seeds Market Value in 2012 Market Share Value Data Source: International Seed Federation, 2013 Environmental Analysis Size and Growth Future September 16, 2014 9 “The world population is forecasted to reach 9.6 billion people by 2050”
MARKET The point of using fertilizer is to replenish the nutrients in the soil. If too many crops are planted in the ground and there are no nutrients left it will be nearly impossible to generate a higher yield. Without crop protection products, around 40% of the world's crops would be lost to pests and diseases. The demand for pesticides is seasonal; for example, in China during 2013-2014, over 550,000 pesticides were being produced from January and February, while the next closest month was December, producing 339,000 tons (National Bureau of Statistics of China, 2014; Lowes, 2014). Characteristics of Purchases Pesticides & Fertilizers Seeds The main pesticide and fertilizer customers are comprised of corn farmers, wheat farmers, golf courses owners, landscapers, and farmers in other industries (See appendix C for an example of a full list of key partners). The pesticide market consumer demographic include 40% wheat and other crop farmers, 10% livestock farmers, 6.5% non-agricultural consumers, 5.9% household consumer, 1.2% dairy farmers, 4.5% beef farmers, and 1% sheep (Haider, 2014). The seed industry consumer varies on the demand of what type of seed needed to be produced. For example, customers consist of farmers, wholesalers and distributers, food processors, animal feed producers and food manufacturers (See appendix C for an example of a full list of key partners). An expected growth in population has created pressure for creating specialty seeds that can withstand things like weather conditions while producing a higher yield. One customer that the seeds all have in common is export markets and other farmers (Isakowitz, 2014). Environmental Analysis When & Why Do Customers Buy Characteristics of Purchases September 16, 2014 10 271,000 227,000 232,000 261,000 311,000 339,000 544,000 300,000 289,000 298,000 316,000 302,000 0 100,000 200,000 300,000 400,000 500,000 600,000 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan/Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14 Production of Chemical Pesticides in China From July 2013 to July 2014 (in tons) (National Bureau of Statistics of China, 2014)
COMPETITION The agrochemical industry is ranked with a medium market share competition. It is very difficulty to enter the pesticide and fertilizer industry. The cost to open a competitive fertilizer plant is staggering. For example, The initial capital outlays required to enter this industry are quite significant. Operators require more than $500 million to construct a competitive fertilizer plant. According to the Freedonia Group, there are fewer than 20 basic manufacturers of active pesticide ingredients, and the top six players account for the majority of national demand. Due to the medium market share, company acquisitions occur fairly often (Khedr, 2014; Haider, 2014). The pesticide industry is driven by research and development. Companies are trying to make seeds that are most resistant to their own pesticides, while some of these manufacturers also produce genetically modified seeds, made specifically for biofuels, which are more resistant to their company specific pesticides (Haider, 2014). Environmental Analysis Agrochemical Competition Gaining a Competitive Advantage Rivalry 3,522 4,521 5,638 6,952 9,568 10,923 0 4,000 8,000 12,000 DuPoint Monsanto Dow Chemical BASF Bayer Syngenta Leading 10 Global Agrochemical Companies Based on Revenue in 2013 (In Million U.S. dollars) September 16, 2014 11 The top four players in the pesticide industry account for 68.5% of its revenue. The top four players in the fertilizer industry account for 79.7% of revenue Threats of new entrants to the Organic Chemical Manufacturing industry include a requirement of a large amount of capital, an intensive amount of maintenance on factory equipment, and expensive raw materials. Also, health, safety, and security regulation must be heavily considered. This part of the chemical producing industry must also be as efficient as possible in order to reduce the already high cost to the consumer (Morea, 2014). Data Source: Morea, 2014
KEY SUCCESS FACTORS Yield Potential Consumer Safety Intellectual Property Rights and Protection As previously stated, the key success factors for the seed and agrochemical industries are yield potential, consumer safety, and intellectual property rights and protection. Yield potential deals with the combinations of innovative seed and agrochemical technology as well as new biochemical knowledge to create a product that increases production and efficiency. Consumer safety touches on all of the issues that come with genetically modifying seeds and using agrochemicals such as pesticides and fertilizers. The consumer safety portion will specifically provide information about manufacturing control, agrochemical and environmental safety, the well-being of the seed consumer, and the effects of cross pollination. Intellectual property rights and protection will highlight why there is an increase in urgency to protect your product and research. It will also discuss the use of trade secrets and the Plant Variety Protection Act. All of these factors can be responsible for a companies success or failure in these two industries. Key Success Factors Introduction September 16, 2014 12
YIELD POTENTIAL Biotechnology is the alteration a cells DNA, “that overcome natural physiological reproductive or recombination barriers”(WHO, 2005). Some forms of biotechnology in the industry include cloning and tissue culture. Gene technology allows plant modification well beyond the plants natural capabilities (WHO, 2005). Genetically modifying seeds leads to herbicide and insect resistance, as well as an improved plant and root structure. “It has been estimated that 80% of all plant problems start with soil and root problems” (Syngenta, 2011 – Root Health). The farmers that were able to adapt to drought resistant seeds during the drought period that took place in 2012 were the ones that excelled during that time. Now about 85% of corn seeds, 91%, of soybean seeds, and 80% of cotton seeds are all drought resistant (Plunkett, Steinberg, Faulk & Snider, 2014). Many companies have realized the opportunity of combining innovative seed and agrochemical technology to produce higher yield. For example, Syngenta merged the two divisions into one in 2011. Monsanto, has used product collaboration in order to increase their product sales and have their own brand of seeds that are genetically modified to withstand herbicides. When purchasing the genetically modified seeds from Monsanto, the farmer must also purchase the Roundup to apply to the plants, forcing the farmer to purchase both products from Monsanto. Roundup ready seeds are only resistant to the herbicide Roundup (Syngenta, 2014; Monsanto, 2014). Key Success Factors Innovative Seed and Chemical Technology Seed and Agrochemical Production Collaboration September 16, 2014 13 1960 1970 1980 1990 2000 2010 Yield and Acreage Trend Yield Area The graph to the left is a representation of yield rate increasing per the increase of land productivity. In relation to the industry’s increasing demand the yield improvements has been slowing down in major crops. See right graph (Syngenta, 2013 – Our Industry). 1970 1980 1990 2000 2010 Growth and Crop Yield Yield Improvement Data Source: Syngenta, 2013 – Our Industry
PRODUCTION, CONSUMER, AND ENVIRONMENTAL SAFETY Manufacturing safety is presented more in agrochemical production than in seed production. Some chemicals may be solids, liquids, gases, flammable, explosive and/or toxic. Manufacturing processes frequently involve high temperatures, high pressures and reactions which can be dangerous. Hazards can be substantial, but are avoided by following the strict safety procedures. Workers have to be trained in handling hazardous chemicals as well as the chemical company safety measures. Workers are required to wear protective gear and have that extensive knowledge from their training (College Grad, 2014; The Essential Chemical Industry, 2013). The federal government has regulated agrochemicals since the early 1900s. With human and environmental health concerns rising over decades, several government bodies, including Environmental Protection Agency (EPA) and World Health Organization (WHO), have established guidelines needed to follow in order to produce agrochemicals. Before any crop product can be approved for use, it has to go through a series of tests to ensure that there is no harm to human or environmental health. There are also limits on how a product may be used, how often it may be used and what protective clothing or equipment that must be used. In recent years, there has been increasing pressure against the use of agrochemicals because of their effect on air, land and consumer safety. Public concern can lead to increased regulation or legislation, which could prevent companies from gaining governmental approval. Scientists have also learned that some agrochemicals can leach through the soil, affecting the groundwater in which we drink (EPA, 2014; WHO, 2005). Key Success Factors Manufacturing Control Agrochemical Consumer/Environmental Safety September 16, 2014 14
In 1990, guidelines for use and release of GMO’s were created for human health and environmental safety. Since then, many countries have established specific pre market assessments of GMO’s and GM foods before they are released. Globally, countries are bound to reach different decisions on assessing the products. Due to that concern, the international regulatory systems covering GM food safety and environmental safety was established in 2003. For seeds, the potential direct health effects are comparable to the known risks associated with foods like allergies and toxicity of present components, the nutritional quality and microbiological safety. The potential risk for environment include unintended effects on non- target organisms, ecosystems and biodiversity; cross pollination (EPA, 2014). Cross pollination of GM plants with other conventional or wild crops has a direct and indirect effect on food safety. Pollen drift and insect pollination directly affect the seeds of a plant. Unfortunately, identifying cross pollination is only possible in a laboratory. Some conclusions of how to prevent cross pollination include isolation distances, buffer zones, pollen barriers, crop rotation and monitoring crops during cultivation, harvest, storage, transport and processing. Buffer zone is very popular on farms because it isolates GM products from non GM products. Currently, there is no need to label products that are contaminated with 0.9% of the total marketed product with genetically modified organisms. The main sources of that type of contamination could be seed impurity, cross fertilization and mixing during transport, storage and processing (EPA, 2014; WHO, 2005). Key Success Factors 92% 92% 0% 20% 40% 60% 80% 100% It Should be labeled accordingly It Should Meet Mandatory Government Standards for Long Term Safety Consumer Preferences For Standards for Genetically Engineered Food in the US in 2014 Data Source: Statista 2014 Seed Consumer/Environmental Safety Cross Pollination September 16, 2014 15 PRODUCTION, CONSUMER, AND ENVIRONMENTAL SAFETY Data Source:
INTELLECTUAL PROPERTY RIGHTS AND PROTECTION Key Success Factors In the United States there are multiple ways to protect property. The first way is called Trade Secrets this is the most basic of Intellectual property. It is when the inventor doesn’t disclose information about the invention but can be discovered and copied. Trade Secrets can be enhanced by basically adding a licensing agreement but it will still only be limited protection. They can also gain rights through the Plant Variety Protection Act which allows for breeders to have commercial rights to a new product for over 20 years. Then there is utility patents which allows the inventor to maintain and control the research and commercial uses of their product. They can then specialize their patents by adding, a plant patent which controls the reproduction of the plant. SOURCE Intellectual property rights are vital to a seed and agrochemical companies success. Investing in intellectual property rights promotes a companies “research and development, which untimely enhances crop production and conversation of genetic resources” (Intellectual Property Rights FAQ, 2013). For example, Monsanto, one of the largest seed companies, writes in their 10-K that they “endeavor” gaining intellectual property rights in places where their products are produced, used, and imported. Which is a common strategy among many successful seed and agrochemical companies including Bayer and Dupont (Monsanto 10-K). Intellectual property protection allows developers to be rewarded for their efforts, which, in turn, puts extra emphasis on research and development. Intellectual property protection prevents other companies from duplicating products and research efforts. Intellectual Property Rights Trade Secrets and Plant Variety Protection Act Add something September 16, 2014 16
Environmental Analysis Industry Increase of demand caused by health awareness and education Innovative technology increases crop yield Market Large population increase leads to increase in demand, despite supply shortage Companies must comply with strict government regulations Competition Major players control majority of revenue Competitive advantage is key to success Key Success Factors Yield Potential Innovative technology, and the collaboration of company products increase crop yield Consumer Safety More safety regulations lead to difficulty in gaining product approval by government Cross-pollination has both a direct and indirect effect on food safety Intellectual Property Rights and Protection A company’s ability to protect the rights of their products allows them to maximize profits. Trade secrets and the Plant Variety Protection Act allow companies to protect intellectual property KEY TAKEAWAYS The seed and agrochemical industry has three main key success factors; yield potential, consumer safety, and intellectual property and production rights. These key success factors are vital to a sustainable and profitable company within the seed and agrochemical industry. Yield potential, being the first key success factor, adds value to the product by increasing the likelihood of crop profitability. In the process of developing a product meant to create high yield, consumer safety must be weighed heavily throughout due to human and environmental health. In order for a company to gain maximum profit potential, they must employ intellectual property rights and protection, removing the possibility of other companies or consumers from recreating the product. When companies abide by these factors, their chances of success significantly increase. Conclusion September 16, 2014 17
KEY SUCCESS FACTOR WEIGHTS September 16, 2014 18 Yield Potential 40% because the ability to create innovative products, which produce high yields and require little resources increase sales, decrease costs, therefore increase the bottom line. After extensive research of the industry, a conclusive company rating system has been decided upon. Yield Potential: 40 % Intellectual Property Rights and Protection: 35% Production, Consumer, and Environmental Safety: 25% Intellectual Property Rights and Protection 35% because it is a crucial component to a company to be able to protect their products. Without property rights and protection, a company’s investment in product innovation is vulnerable to competitors following similar suit. Production, Consumer, and Environmental Safety 25% a safe product and production chain is necessary. A buyer will not purchase chemicals which will impose harm on their crops or farmers.
Monsanto is one of the world’s top providers of agricultural products. They offer several products from seeds, herbicides, biotechnology, among others that are aimed to help farmers increase crop productivity, efficiency, and provide better and safer products for consumers. Monsanto’s genetically altered seeds are able to tolerate Roundup, which is it’s flagship product and also the world’s top herbicide. Among these seeds, the company also provides Asgrow, DEKALB, Deltapine, and Seminis seeds. Recently, Monsanto has strayed away from being a company focused on agrochemicals to one focused on seeds and biotech (Mergent, 2014; Hoovers, 2014). MONSANTO ANALYSIS Strategy September 16, 2014 19 54.90% 6% 10.60% 13.90% 7.70% 4.20% 3.20% Total Revenue North America Asia Pacific Brazil Europe - Africa Argentina Canada Mexico Monsanto is a leader in providing agricultural products around the world. Monsanto is focused on empowering farmers to make the absolute most from their plantable land while conserving water and energy. By using in-the-seed technologies, Monsanto is able to improve yields and increase efficiency by reducing on-farm cost. Monsanto is able to provide a very wide range of crops. They offer crops corn, cotton, soybeans, canola and vegetables. Monsanto holds many patents, trademarks and licenses for the intellectual property protection of its seeds and genomics-related products and processes. For example, Monsanto hold the rights to the Roundup Ready seed trait. Research and development is one of the largest outlays of Monsanto’s revenue. Monsanto invests a substantial portion of its revenue towards research and development per year. In 2013, the company's investment in R&D amounted to $1,533 million (One Source. 2014; MarketLine 2014). Monsanto targets its market efforts to farmers or growers, development partners and distributors like wholesalers and retailers. They are involved with crop protection, seed, and lawn and garden businesses. Monsanto has buyers in United States, Europe-Africa, Mexico, Brazil, Canada, Australia, and Argentina (Monsanto 10-k). Market Research and development is one of the largest outlays of Monsanto’s revenue.
MONSANTO ANALYSIS Future Prospects September 16, 2014 20 Strengths Weakness Opportunities Threats •Leading market position •Strong focus on research and development •Diversified operation •Legal Proceedings •Growing demand for food products with reduced saturated fat and trans-fat •Strategic agreements and acquisitions •Growing population, especially in Asia •Infringement of intellectual property rights GMO’s regulations •Seasonal nature of sales of the seeds and genomics segment •Risks associated with conducting business outside the US Financial Situation (See Appendix blah blah for detailed information) Monsanto’s made a commitment in 2008 to sustainable agriculture by producing more, conserving more and improving lives everywhere by 2030. They want to be able to meet the needs of a growing population by doubling yields in core crops. They will reach their goal through advanced plant breeding, biotechnology and improved farm management practices. Monsanto also commits to using one-third fewer resources such as land, water, and energy while holding the goal of doubling crop yields. They are working with their partners to develop better conservation system and are improving on-farm practices. Monsanto set a goal to help farmers improve their quality of life to result in helping people prosper through healthier diets, educational opportunities and improving local economies (Monsanto, 2014). In 2012 Monsanto recorded a net sales of $13,504 million and $14,861 million in 2013, a 10% increase between the two years. Net income increased by 17% from $2,093 million in 2012, to $2,525 million in 2013. During the same time their assets increased by 2.1%, from $20,224 million in 2012 to $20,664 million in 2013, while their liabilities decreased by 3.1% from $8,188 in 2012 to $7,936 million in 2013. $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $0.00 $5.00 $10.00 $15.00 $20.00 2009 2010 2011 2012 2013 Revenue vs. Net Income in Billions Revenue Net Income Data Source: Hoovers
SYNGENTA ANALYSIS Strategy Syngenta is an agricultural business operating in the crop protection and seeds industry. The company is involved in a range of products designed to improve crop yields and food quality. The crop protection chemicals include controlling weeds, insects and diseases in crops. Most products work in the professional products sector like public health and turf. The seed side has three sectors: seeds for field crops, vegetable and flower seeds, and pot and bedding plants. (One Source, 2014). Syngenta regards itself to address the increasing complexity of the challenges farmers face. Syngenta’s main strategy is to integrate, innovate and outperform in the agriculture industry. So in 2011, Syngenta merged its two major divisions, Crop Protection and Seeds, into one single division. Under this strategy, Syngenta innovates by expanding crop based product pipeline and local market strategies. They outperform by aiming to create value for their shareholders first by creating value for their customers. Syngenta has broad patent and trademark portfolios. They protect its investments in research and development as well as manufacturing and marketing. The level and type of protection depends on the country according to local laws and international agreements (Duncan, 2014; Syngenta, 2014 February 13; Syngenta, 2014). September 16, 2014 21 Market Syngenta targets its market efforts towards its distributors, consultants, and growers. Such activities include meetings with growers and distributors, internet marketing, and specified publication marketing. Syngenta focuses on four main geographic segments: Europe, Africa and Middle East, North America, and Asia Pacific. The company poses its crop protection and seed business, and its global lawn and garden business (Syngenta, 2014 February 13). “The new integration strategy is expected to save the company around $150 million by 2015.” 14% 26.90% 28.90% 30.30% Total Revenue Asia Pacific North America Latin America Europe & AME Data Source: One Source
SYNGENTA ANALYSIS September 16, 2014 22 Financial Situation Syngenta expects that increased emphasis will be placed on developing products that provide benefits to food and feed processors, fuel production, retail trade and consumers. Syngenta has a growth plan that includes six commitments for change. By 2020 they commit to make crops more efficient by increasing the average productivity by 20% without using more land, water, or inputs. They plan to rescue more farmland by improving the fertility. They will help biodiversity flourish by enhancing it on 5 million hectares of land. Syngenta will help people stay safe by training farm workers on labor safety, especially in developing countries. They will also look after every worker by ensuring fair labor conditions across the entire network. Lastly, they want to empower smallholders by enabling them to increase productivity by 50% (Syngenta, 2014 February 13; Syngenta, 2014). Future Prospects Strengths Weakness Opportunities Threats •Comprehensive portfolio of agricultural and non- agricultural products •Global footprint driving growth •Reliance on single supplier for certain important products •Acquisitions likely to further strengthen Syngenta’s seeds business •New crop protection products may drive the company’s top- line growth •Consumer and government resistance to GMO’s •Intense competition likely to put position under Stringent laws, regulations and standards (See Appendix blah blah for detailed information) In 2013 Syngenta recorded sales of $14,688 million and sales of $14,202 in 2012, a 3.31% increase between the two years. Syngenta had a net income of $1,649 million in 2013 and a net income of $1,850 million in 2012, a 10.86% decrease. In 2013 Syngenta had total assets of $20,216 million and total assets of $19,438 million in 2012. Total liabilities in 2013 were $10,712 million and $10,653 million in 2012 (Duncan, 2014). ADD REVENUE $0.00 $0.50 $1.00 $1.50 $2.00 $0.00 $5.00 $10.00 $15.00 $20.00 2009 2010 2011 2012 2013 Revenue vs. Net Income in Billions Revenue Net Income Data Source: Hoovers
COMPANY COMPARISON: YIELD POTENTIAL September 16, 2014 23 Monsanto Syngenta Products Commitments Syngenta’s main strategy is to integrate, innovate and outperform in the agriculture industry. Syngenta is committed to decreasing farmer challenges and making crops more efficient by increasing the average productivity by 20% without using more land, water, or inputs by 2020 (Syngenta, 2014). Research and Development Syngenta has a broad range of crop protection products. They are active in herbicides, fungicides and insecticides which protect crops from diseases that affect yield and quality. They also produce seeds and plants that have been developed using advanced genetics and technologies (Syngenta, 2014 February 13). Monsanto is committed to their Sustainable Yield Initiative, the ultimate goal of this initiative being to double corn, soybean, cotton, and canola yields by 2030. Monsanto has an Integrated Farming System which is used to deliver higher yield to farmers while also using less resources (Monsanto 10-k; Monsanto Products) Monsanto is the leading global provider of agricultural products for to improve productivity, reduce costs and produce better foods for the consumer. They are active in biotechnologies which enable crops to protect themselves. They produce herbicides to control weeds and seeds using advanced genetic technologies (Monsanto 10-k). Monsanto’s research and development pillars are focused on farmers being more productive and profitable by protecting and improving yields and improving the ways they can produce food Research and development is one of the largest investments that Monsanto makes.: $1,533 million in fiscal year 2013 (Monsanto 10-k). Syngenta’s research and development centers and field stations are organized to continue to develop quality products to improve crop yield. Syngenta maximizes their innovation potential by partnering with other technology leaders across the globe as well (Syngenta, 2014 February 13) Weight Score 3.4 Weight Score 2.7
September 16, 2014 24 COMPANY COMPARISON: INTELLECTUAL PROPERTY RIGHTS AND PROTECTION Monsanto Syngenta Statistics Enforcement Weight Score 3.06 Weight Score 2.45 Monsanto, like most companies, obtain protection for their products and technology very routinely, whether it be via patents, or plant variety protections. Where it is needed, Monsanto also obtains registrations for its products in registration countries. In the United States they get Plant Variety Protection Act certificates, and equivalent plant breeders’ rights in other countries (Monsanto 10-k). In 2013, their total carrying amount for acquired intellectual property was $1.1 billion (Monsanto 10k). Syngenta has one of the broadest patent and trademark portfolios in the industry. Syngenta does not pursue or enforce patents and applications on their products in Least Developed Countries (LDCs) for either private or non-commercial use. Their policy is to not enforce these patent rights “where agriculture is undertaken for subsistence purpose” (Syngenta, 2014). In 2013, Syngenta had $3.3 billion in product rights, $96 million in trademarks, and $70 million in patents (Syngenta, 2014).
September 16, 2014 25 Monsanto Employee Safety Testing Methods COMPANY COMPARISON: PRODUCTION, CONSUMER, AND ENVIRONMENTAL SAFETY Global Initiatives Environmental Initiatives . Syngenta Weight Score 1.69 Weight Score 2.00 Monsanto conducts two separate studies on animals: a 42 day study on chickens, and a 90-day study on rats. Both of these studies involve feed with altered genes, and the analysis of the effects on the animal. (Monsanto, Animal Performance Assessments). Monsanto has incentive programs to increase motivation to be safe like The Monsanto Star Program and Voluntary Protection Program. They instituted a lockout/tagout procedure to reduce injury when working with machinery (Monsanto, n.d.) To decrease the use of animal testing, Syngenta employs working capital to specifically develop new methods such as cell cultures, computer modeling, bioinformatics, and in vitro techniques (Syngenta, 2009) Every year, Syngenta is focused on raising global safety awareness and trains as many farmers as possible through their partnerships and affiliated organizations, with a goal of reaching 20 million farmers by the end of decade (Syngenta, 2009) Operation Pollinator: Planting field margins with local wildflower seed mixtures. This is to create an area where environmental pollinators are able to flourish once again. Bees are almost 300 times more prevalent due to inserting field margins than before. At Syngenta, everyone is responsibly for their own health and safety. They have Group Health, Safety and Environment Policy and Standards meant to guide employees. In 2012 the UK Chemical Industry Association awarded the Process Safety Award to Syngenta (Syngenta, 2013; Syngenta, 2014). Researchers of Monsanto discontinue the development of any product that did not successfully pass each environmental safety test. Since they are a U.S. company, all of Monsanto’s products must follow the regulations of the Environmental Protection Agency (Monsanto, 2014). Every one of Monsanto’s potential products must be approved by regulatory agencies in each country. This is the only way these products can be sold to farmers or other feeds can be imported for food and/or animal feed in their country (Monsanto, 2014).
COMPANY RECOMMENDATION September 16, 2014 26 After extension research, the findings support Monsanto as being the most well positioned company within the Seed and Agrochemical Production Industry. The conclusion is represented by research within the areas of yield potential, intellectual property rights and protection, production, Consumer, and environmental safety, as well as an in depth financial analysis of both Syngenta and Monsanto, supporting the conclusion that Monsanto is leading the industry. Yield Potential Yield potential is the most important key success factor in the agrochemical and seed industry. Monsanto generates multiple products with the goal of increasing the amount of yields for farmers. Monsanto states that it’s goal is to double corn, soybean, cotton and canola yields by 2030. Although, Syngenta does want to increase their yield potential and productivity by 20%, Monsanto has been outperforming them in the seed industry, as seen in recent financial statements. Monsanto actively pursues the protection of upholding Intellectual property ownership throughout all markets involved in. This active pursuit decreases the chance of unauthorized use of patented seeds and chemicals, while increasing revenues and the return on research and development capital investments. Syngenta, on the other hand, does not pursue protecting property rights in lesser developed nations because they do not want to further hinder subsistence farming. Although this tactic is ethically applauded, it does not generate the amount of revenue which Monsanto acquires each year. Although Monsanto’s R&D expense to sales ratio has decreased from 11.72% in 2011 to 10.32% in 2013, Monsanto has increased its R&D yearly investment by $16 million from 2012 to 2013. Intellectual Property Rights and Protection Production, consumer, and environmental safety is extremely valuable and essential to any agrochemical and seed company. This is because they are constantly dealing with potentially dangerous materials that could harm the employees, the consumer, and the environment. Monsanto and Syngenta both completely excelled in consumer safety. When comparing Monsanto and Syngenta in their safety practices it was apparent Syngenta excelled more than Monsanto. Despite Monsanto's excellent star program which was considered a Voluntary Protection Program Syngenta has multiple practices that have a much more positive impact. For example Operation Pollinator which has already made bees 300 times more prevalent. They also are much better at educating farmers about global safety. Monsanto is much better at employee safety but between the consumer and environment Syngenta proves to be dominant giving them the competitive edge. Production, Consumer and Environmental Safety
27 COMPANY RECOMMENDATION Financial Analysis Financially, Monsanto has proven to outperform Syngenta in most aspects. Firstly, through the findings of financial ratios, Monsanto has proven to be more liquid, more profitable, and more efficient. During 2011 and 2012, Monsanto’s Net Income was nearly the same as that of Syngenta; however, in 2013 Monsanto earned a Net Income of 153% of Syngenta’s Net Income, compared to earning 113% in 2012, and 110% in 2011. With a continued increase in Net Income, Monsanto has doubled Return on Assets to 12.1% within three years. In 2013, Syngenta was obtaining an ROA of 10.2%. Recently, a merger proposition between Monsanto and Syngenta dissolved due to Monsanto’s decision to repurchase $10 billion in stock. This large increase in treasury stock, funded by a $4.5 billion bond, sends a strong message to investors that corporate is confident in the financial stability and future growth of the company. Clearly investors support this claim with a current 22.65 price to earnings ratio, compared to a ratio of 17.98 price to earnings for Syngenta. Gaining a Better Financial Position: Separation From the Competition: Weight Rating Weighted Score Rating Weighted Score Yield Potential 40% 8.50 3.40 6.75 2.70 Intellectual Property Rights and Protection 35% 8.75 3.06 7.00 2.45 Production, Consumer and Environmental Safety 25% 6.75 1.69 8.00 2.00 Total 100% 8.15 7.15 Monsanto Syngenta Monsanto is better positioned for the future within the agrochemical and seed industry September 16, 2014
REFERENCES • Agricultural Chemical Manufacturing. (2014, July 21). Retrieved from First Research: http://mergent.firstresearch- learn.com.proxy.library.ohiou.edu/industry_detail.aspx?pid=161&chapter=1 • American Seed Trade Association. (2011 June). Existing U.S. Seed Industry Production Practices That Address Coexistence. Retrieved by American Seed Trade Association http://www.amseed.org/pdfs/issues/biotech/asta- coexistence-production-practices.pdf • College Grad. (2014). Chemicals Manufacturing Industries, Except Pharmaceutical and Medicine Manufacturing. Retrieved by: http://www.collegegrad.com/industries/manuf03.shtml • Charles, Dan. (2013 May). Fertilizer World. Retrieved by National Geographic http://ngm.nationalgeographic.com/2013/05/fertilized-world/charles-text • Environmental Protection Agency (EPA). (2014 April 4). Overview of Risk Assessment in the Pesticide Industry. Retrieved by Environmental Protection Agency: http://www.epa.gov/pesticides/about/overview_risk_assess.htm • First Research. (2014 July 28). Crop Production. Retrieved by First Research http://mergent.firstresearch- learn.com.proxy.library.ohiou.edu/industry.aspx?chapter=12&pid=35 • First Research. (2014 August 11). Chemical Manufacturing. Retrieved by First Research http://mergent.firstresearch- learn.com.proxy.library.ohiou.edu/industry.aspx?chapter=0&pid=17 • GM Education. (n.d.). Contamination of Crops. Retrieved by GM Education: http://www.gmeducation.org/environment/p149075-contamination-of- crops.html Conclusion September 16, 2014 28
REFERENCES • GPS. (2013 September 27). Agriculture. Retrieved by GPS http://www.gps.gov/applications/agriculture/ • Grace Communications Foundation. (2014). Pesticides. Retrieved Communications Foundation http://www.sustainabletable.org/263/pesticides • Haider, Zeeshan. (2014 July). Pesticide Manufacturing. Retrieved by IBISworld http://clients1.ibisworld.com.proxy.library.ohiou.edu/reports/us/industry/def ault.aspx?indid=484 • Intellectual Property Rights FAQ. (2013). Retrieved September 14, 2014, from American Seed Trade Association website: http://www.amseed.org/issues/intellectual-property/ip-rights-faq/ • International Seed Federation. (2013, June). Distribution of the global seeds market value in 2012, by country. Retrieved from International Seed Foundation: http://www.statista.com.proxy.library.ohiou.edu/statistics/262285/global- seeds-market-share/ • Isakowitz, Lucas. (2014 July). Vegetable Farming in the US. Retrieved from IBISWorld. http://clients1.ibisworld.com.proxy.library.ohiou.edu/reports/us/industry/def ault.aspx?entid=15] • Khedr, O. (2014, May). Fertilizer Manufacturing in the US. Retrieved September 4, 2014, from IBISWorld website: http://clients1.ibisworld.com.proxy.library.ohiou.edu/reports/us/industry/def ault.aspx?entid=480 • Lowes. (2014). Fertilizer Buying Guide. Retrieved from Lowes website: http://www.lowes.com/cd_Fertilizer+Buying+Guide_543192373_ • MarketsandMarkets. (2014, February). Worldwide agrochemical market revenue in 2013 and 2018 (in billion U.S. dollars). Retrieved from Statista website: http://www.statista.com/statistics/311953/agrochemical-market-value- worldwide-by-type/ • McKitterick, Will. (2014, April) Farm Supplies Wholesaling. Retrieved by IBISworld http://clients1.ibisworld.com.proxy.library.ohiou.edu/reports/us/industry/def ault.aspx?entid=994 Conclusion September 16, 2014 29
REFERENCES • Morea, Stephen. (July 2014). Organic Chemical Manufacturing in the US. Retrieved by IBISworld http://clients1.ibisworld.com.proxy.library.ohiou.edu/reports/us/industry/co mpetitivelandscape.aspx?entid=467 • Monsanto Company (2013). Form 10-K 2013. Retrieved from SEC EDGAR: http://www.sec.gov/edgar.shtml • National Bureau of Statistics of China. (2014, August). Production of chemical pesticides in China. Retrieved by the National Bureau of Statistics of China: http://www.statista.com.proxy.library.ohiou.edu/statistics/226213/productio n-of-chemical-pesticides-in-china-by-month/ • Neville, Antal. (2013, September). Crop Services in US. Retrieved by IBIS World: http://clients1.ibisworld.com.proxy.library.ohiou.edu/reports/us/industry/def ault.aspx?entid=89 • Plunkett, Jack W., Plunkett, M. B., Steinberg, J. S., Faulk, J., & Snider, I. J. (2014). Introduction to the Food & Beverage Industry. Food, Beverage & Tobacco Industry. Retrieved September 4, 2014, from http://www.plunkettresearchonline.com • Syngenta. (2013). Our Industry 2013. Retrieved from Syngenta: http://europe.nxtbook.com/nxteu/Syngenta/ourindustry_2013/index.php#/ 12 • Syngenta. (2011). Root Health- The Key to Improving Yield. Retrieved from Sygenta website:http://www.syngenta.com/global/corporate/SiteCollectionDocum ents/pdf/publications/products/Whitepaper_V9-screen.pdf • The Essential Chemical Industry. (2013, July 21). The Chemical Industry. Retrieved by: Promoting Science: The University of New York: http://www.essentialchemicalindustry.org/the-chemical-industry/the- chemical-industry.html • U.S. Environmental Protection Agency. (2012 May 9). What is a Pesticide? Retrieved from U.S Environmental Protection Agency http://www.epa.gov/kidshometour/pest.htm • U.S. Environmental Protection Agency. (2010 August). Source Water Protection Practices Bulletin Retrieved from U.S Environmental Protection Agency http://www.epa.gov/safewater/sourcewater/pubs/fs_swpp_fertilizer.pdf • World Health Organization (WHO). (2005, June). Modern food biotechnology, 30September 16, 2014 Conclusion
APPENDICES A Political Economic Social Technology Conclusion PEST September 16, 2014 31 Political The American Association of American Plant Food Control Officials (AAPFCO): The Association of American Plant Food Control Officials also known as AAPFCO is one of the premier regulators of fertilizers. Their main purpose is to generate uniformity among all fertilizers without damaging consumers needs, the environment, or competition in the industry. It is one of the leading regulators in the United States (American Seed Trade Association, 2011). The Association of Official Seed Certifying Agencies (AOSCA): The Association of Official Seed Certifying Agencies, AOSCA, sets quality standards throughout the industry of seed production. Acts taken to ensure seed quality throughout production include steps within the planting, harvesting, cleaning, and storage processes. These such steps may either be taking by seed companies or growers producing the seeds for such companies. Examples of steps taken within these processes include having an in depth knowledge of surrounding crops, employing crop rotation, and continuous growth inspection. Maintaining the purity of the seeds is very important for acceptance in the market and commercial sales (American Seed Trade Association, 2011).
Conclusion APPENDICES September 16, 2014 32 Organic Trends: High media attention on nutrition during the past five years has encouraged awareness and education among consumers. People have shifted from processed foods to choosing fresh options or even organically grown foods. Organically grown plants are in high demand and have been affecting competition in the industry. Farmers have increased their production of higher- quality foods without the use chemicals or altered seeds, which is more expensive for the customer. Consumer concern led to pesticide alternatives like the implementation of insects that repel other harmful pests. The demand for organic chemicals produced has risen over the past five years. Due to these trends, revenue for the organic chemical manufacturing is expected to increase 2.9% in 2014 (First Research, 2014 July 28; Isakowitz, 2014; Morea, 2014). Social Some recent technological advances that help growers improve crop yield include GPS guidance and renewable energy. GPS guidance allows farmers to work in conditions such as rain, fog and darkness and is used for yield mapping, farm planning and soil sampling. Updated management systems are also a result of the AOSCA standards. Solar power is the most popular renewable energy source. However, chemical innovation and genetically modified seeds take precedence over other advances (GPS, 2013; First Research, 2014 July 28; Steinberg, Faulk, and Snider, 2014; American Seed Trade Association, 2011). Current green trends have increased farm’s production of renewable energy to more than 140% since 2007, 80% of those being small farms. (Steinberg, Faulk, and Snider, 2014) 30% 70% Market of Agrochemicals Pesticides Fertilizers The crop production industry features two main types of chemicals: Pesticides and Fertilizers. As stated by National Geographic ,“Our planet’s soil simply could not grow enough food to provide all seven billion of us our accustomed diet. In fact, almost half of the nitrogen found in our bodies’ muscle and organ tissue started out in a fertilizer factory.” Creating genetically modified seeds was one of the ways that creative technology was able to prevent a slowing in seed production. For example, the seeds that can adapt to drought during the drought period that took place in 2012 were the ones that excelled during that time. (Plunkett, Steinberg, Faulk & Snider, 2014; First Research, 2014 July 28; National Geographic, 2013). Innovative Technology
Conclusion APPENDICES September 16, 2014 33 B Porters Competitive Rivalry Threat of New Entrants Bargaining Power of Buyers Threat of Substitutes Bargaining Power of Suppliers Porter’s Five Forces Threat of Substitutes As the society becomes more educated about their food, people will turn to substitutes. For example, chemicals can be manufactured in several different ways causing competition within the industry and with substitute products. This limits the ability to raise prices, even if their own manufacturing costs rise. Since recent healthy trends, one substitute consumers are using are vitamins. Consumers would not have to worry about contamination from chemicals or disease from vitamins. The growth of Genetically Modified Seeds could reduce demand for pesticides and fertilizers. Farmers have a larger selection of seed choices due to high quality seeds and new technology (American Seed Trade Association, 2011; First Research, 2014 August 11).
Conclusion APPENDICES Bargaining Power of Suppliers Bargaining Power of Buyers Chemical manufacturers mainly sell to distributors, while only a few go directly to larger farms. They also sell large quantities to fertilizer and pesticide mixers to create various chemicals suitable for different soil, crop and weather characteristics. External factors can ultimately determine farmers demand for supplies. Generally, farmers will purchase supplies locally. The climate of a location also determines what type of supplies farmers need. Fertilizers are the top product sold because farmers need the nutrients to grow products. For the seed industry, the main buyer is vegetable and fruit farmers (Isakowitz, July 2014; McKitterick, 2014; Haider, 2014). To be a successful supplier in this industry, manufacturers need to have an understanding of the consumer’s demand. For example, market research sends information to the seed industry about what should be produced so that farmers can produce the wants and needs of the consumer. International trade in the chemical industry is big because fertilizers need potash and phosphorus rock which is only available in a few countries. The US is a net exporter of pesticides while fertilizers are imported. Thus giving farmers the ability to inexpensively outsource to international sellers causing overall profit to rise (First Research, 2014 August 11; American Seed Trade Association, 2011). September 16, 2014 34 C The Business Model Canvas: Monsanto
35 35 KeyPartnersKeyActivities KeyResources ValuePropositionsCustomerRelationships Channels CustomerSegments CostStructureRevenueStreams Whowearecreating valuefor: •Farmers •Development partners •Seeddistributors, society,lawnand garden,andcrop protectionbusiness MostImportant Customers: •Farmers •Farmersare crucialvalue additives alongthe production process •Developmentpartners •Give competitive edgeby developing innovative products SupplyChain: •Obtainsrawmaterials fromsuppliers •Manufactureseedand agrochemicalproducts •SelltoCropFarmers,Lawn andGardenBusinesses, andWholesalersand Distributers •Wholesalerssell tofarmers, processors,and importersand exporters KeyPartners •Complix •AgraQuest •BASF •Celletics •TheQualisoyFoundation •Dow •EvogeneLtd. •GrassrootsBiotechnology •Intergrain •MendelBiotechnology Inc. •ProtabitLLC •SapphireEnergy •SenescoTechnology •Sumitomo KeySuppliers •Thekeypartnersabove •Technology •Seeds •Chemicals •Equipment KeyActivitiesfromPartners •Technology •GainingRightsand Licensing TheKeyActivitiesthat Partnersperform •Exclusivity •Licensing •Researchand Development KeyResourcesforValue Propositions: •Intellectualproperty rightsandpatents DistributionChannels: •Wholesalepartners CustomerRelationships: •Strongcustomer relationshipsmaintain habitualbuyers,which reducesinpartthe costsinlocatingnew targetmarkets RelationshiptoCustomer Segments: •Improvesquality,yield protection,andlowerscosts •Distributorsexpectahigh qualityandhighvolumeof seeds Established: •Relationshipswithpremier technologycompaniessuch asCelltek,distribution,and exportcompanies IntegrationwithBusinessModel: •Partnershipscomprisemajor sourceofrevenues Costly? •Investingmoneyin developmentpartnersis costlybutreturnsinrevenue ChannelstoCustomerSegments: Whatarethemostimportantcostsinherentinourbusiness model? WhichKeyResourcesaremostexpensive? •ResearchandDevelopment •Intellectualproperty FixedCosts(salaries,rents,utilities) •Rent •Utilities Variablecosts •Productionandhourlywages ChannelstoCustomerSegments: Forwhatvalueareourcustomersreallywillingtopay? •Pricestheirproductaccordingtovalueofferedtothe customer Forwhatdotheycurrentlypay? •Fixedanddeterminablecosts(basedonvalue) HowmuchdoeseachRevenueStreamcontributetooverall revenues? •Productsales •Licensing •Reputation Valueofferedtothe customer: •Uniqueness •HighQuality •HighYields •ProvidesValue HelpingCustomers Problems: •Necessityforcrop production •Producinghigher yields ProductsandServices: •Industrialturfand ornamental •Traitstechnological andpartnering •Vegetable •Weedcontrol ChannelstoCustomer Segments: •Bydistributors •Deliveredtolocalstores Howarewereachingthem: •Media •Groundandair shipments Whatworksbest •Onlineordering MostCostEfficient •Bulksalestowholesale distributors
36 Who They Are: Monsanto is a dominate force in the seed industry. Some of the key partners who they work with include Complix, Agra quest, BASF, Celletics, The Qualisoy Foundation, The Dow Chemical Company,Evogene Ltd, Grassroots Biotechnology, Intergrain, Mendel Biotechnology, Inc., Protabit LLC, Sapphire Energy, Senesco Technology , and Sumitomo (Powers, 2012). Key Partners Key Suppliers: These partners are main suppliers in the industry (Powers, 2012) Key Activities from Partners: The key resource that Monsanto is acquiring from all of these companies are mainly technology. They are gaining rights and licensing of all of the unique technologies as well as working with them for R & D. For example Complix gave Monsanto exclusive rights to their product Alphabody which is a protein alphabody. Protien alphabodies is a protein therapeutic and prevents diseases. These key suppliers give Monsanto and a competitive edge. The more exclusivity and technology rights that a seed company has the more powerful they will be. (Powers, 2012) The Key Activities that Partners Perform: The key activities that these key suppliers will do is either provide them exclusivity, licensing, or research and development help. This will improve Monsanto's ability to keep up with the new trends. (Powers, 2012) Key Activities Proposition: The key activities that these key suppliers will do is either provide them exclusivity, licensing, or research and development help. This will improve Monsanto's ability to keep up with the new trends (Paolis, 2010). APPENDICES
37 Chemical Manufacturing and Seed Supplies Monsanto Distributors /Suppliers Importers/ Exporters Farmers Lawn and Garden Owners Farmers Farmers Processors End at Consumer Value Chain: Monsanto's value chain is critical to their success. Their process is listed above. According to a report written by Veronica Paolis the most value is added by farmers. This is because Monsanto’s seeds are combined with key resources to create all different types of products. The seed is used as in an input and the output created is then sent to food processors who make food items that include flour, oil, bread, etc. Consumers then will purchase the food. One of Monsanto's most important key activities is the money they devote to research and development. This is what gives Monsanto a competitive edge over many of the other agrochemical and seed companies (Paolis, 2010). APPENDICES Value Offered to the Customer: Monsanto delivers value to the customers by providing a unique product that is not created by other companies as well as they generate higher yields for the customers. They also deliver top notch seeds that are updated crop protection technology. Monsanto's customer segments include farmers, development partners, seed distributors, and society. Monsanto provides value to each of these customer segments in specific ways (Osterwalder, 2014). Value Proposition
Helping Customers Problems: The problem that they are helping consumers solve is that there are many environmental factors that can impact the yield that can impact a seeds yield output. Some of the factors that impact plant growth include temperature, moisture supply, radiant energy, etc. As well as insects and animals who have an tendency to destroy plant growth and provide a strong amount of crop production (Monsanto, 2014 - ). Satisfying Customer Needs: The needs that we are satisfying include the necessity for crop protection and the need to generate higher yields to meet the growing demand because of the growing population (Monsanto, 2014). Products and Services: The main bundles and products that they offer to each customer segment crop protection, industrial turf and ornamental, traits technological and partnering, vegetable, and weed control (Monsanto, 2014). APPENDICES Who we are Creating Value For: Monsanto is creating value for farmers, development partners, seed distributors, society, lawn and garden, and crop protection business (Paolis, 2010). Customer Segments Most Important Customers: The most important customers include farmers and development partners. Farmers create add value to Monsanto's seeds by combining their product with key resources to generate it into an incredibly valuable product. The development partners are incredibly important because of Monsanto’s funding into research and development. Without their development partners they would not be able to develop the high quality products that they have. As shown in the graph by Monsanto - 2013 Form 10-K, with information provided by Monsanto they spent a total of $1,533 million on research and development which is about $200 million than Syngenta. Indirectly they affect all people who by processed food and crops. Directly they affect all of their main customers (Monsanto - 2013 Form 10-K, Paolis, 2010).
39 980 1,098 1,205 1,386 1,517 1,533 0 500 1000 1500 2000 2008 2009 2010 2011 2012 2013 Monsanto’s Research and Development Expenditure from 2008 to 2009 in Million US Dollars Data Source: Monsanto - 2013 Form 10-K Value Our Customers are Willing to Pay: Monsanto is in a suppliers market. This means that Monsanto can pretty much control the prices of their products. Monsanto is an invaluable product to many farmers of course they can go to some of their competitors but each company has different quality products that improve yield production. Monsanto prices their seeds based on the value that it provides specifically to farmers. According to an article written by Monsanto they state the benefits of using their seeds and the higher the benefits the higher priced their seeds will be (Monsanto, 2014 – Prices Seeds). Revenue Streams How Customers Pay: Customers pay fixed or determinable costs. Determinable costs are generated based on value (Monsanto 10-k). How much does each Revenue Stream Contribute to Overall Revenues: Majority of their revenue stream is contributed by products that they sell or are licensing. Customers are solely responsible for their revenue stream. Their reputation and intellectual property rights also plays a huge part in their revenue stream (Monsanto 10-k)). APPENDICES
40 Channels to Customer Segments: They want to be reached with distributors and the Monsanto company itself. They also want it delivered or in stores near their locations because farmers are in rural areas and its hard to necessarily find time to go to the stores to themselves (Paolis, 2010). Channels How we are Reaching Them: Right now they are reaching them through media, delivery trucks, flight, and shipments. Specifically when seeds are sent from Latin America Monsanto will fly the seeds to their distribution centers all across the worlds (Paolis, 2010). How Our Channels Integrated: Their channels are integrated into their system by providing all farmers and distributors with easy access to their seeds by not only selling it in one specific place (Paolis, 2010). APPENDICES Which Ones Work Best?: The ones that work the best is being able to order on their website. This is because farmers do not have to leave their crops to buy their agrochemicals and seeds which saves time. This is incredibly important because when farmers waste time they lose money and potentially yield (Paolis, 2010). Which Ones are Most Cost-Efficient?: The most cost efficient is bulk selling the products into their wholesale distributors because it will be less of a delivery fee than shipping less product to one person’s house. It allows Monsanto to move inventory way quicker (Paolis, 2010). How we are Integrating Them with Customer Routines: Monsanto is integrating their product with the customer routines by making them incredibly accessible to farmers and distributors who are their main customer. They also are licensing their technology and products which allows them to save costs because they don’t have to worry about delivery costs. (Paolis, 2010).
41 Distribution: Their key distribution channels include many of their wholesale partners and farmers Monsanto 10-k). Key Resources Key Resources for Value Propositions: Their intellectual property rights and patents, multiple distribution channels and development partners, acquisitions, equipment, and the amount of investments that they spend of research and development (Monsanto 10-k). Customer Relationships: As well they need to maintain strong customer relationships because that is one of the main reasons they are so successful (Monsanto, 10-k) APPENDICES Cost Structure Channels to Customer Segments: Research and development is by far the most expensive key resource and activity but by far the most important costs. Intellectual property is key to being the most successful company in the industry. Whoever is able to keep up with the technology is able to basically dominate the seed industry (Monsanto 10-k). Company: Monsanto is value driven because their seed prices are solely based upon the value it provides to their customers (Monsanto, 2014 - Sumitomo). D The Business Model Canvas: Monsanto
42 KeyPartnersKeyActivities KeyResources ValuePropositionsCustomerRelationships Channels CustomerSegments Valueofferedtothe customer: •Uniqueness •HighQuality •HighPerformance HelpingCustomers Problems: •Focusonaddressing issuesgrowersface SatisfyingCustomer Needs: •Dependson geographicallocation andneedsofgrowers ProductsandServices: •Herbicides •Fungicides •Insecticides •AdvancedGenetic Seeds Whowearecreating valuefor: •CropFarmersin geographic markets:Latin America,Asia Pacific,North Americanand Europe&AME •Consumers MostImportant Customers: •CropFarmers •Wholesalersand Distributers •LawnandGarden Business SupplyChain: •Rawmaterialsfrom suppliers •Manufactureseed andagrochemical products •SelltoCropFarmers, LawnandGarden Businesses,and Wholesalersand Distributers KeyPartners •DuPont •Advionand Acelepryn •Taegro •GriffinGreenhouse Supplies •SunfleldSeedsInc •CropFarmers •LawnandGarden Business •Wholesalersand Distributers KeySuppliers •Relianceonsingle suppliersinvarious countries KeyActivitiesfrom Partners •Manufacturingthe products •Distributionof productstobuyers KeyResourcesforValue Propositions: •Researchand Development •Brandprotectionthrough patents,trademarksetc. •Regulations/laws–local, nationalandinternational DistributionChannels: •Partnership •Researchonshipping CustomerRelationships: •ResearchandTechnology •BrandAwareness •Trainingwithinthe companyandusage safety RelationshiptoCustomer Segments: •HigherYields •Reliability •QualityofProduct •ConsumerSafety •Training Established: •HigherYields •QualityofProduct IntegrationwithBusinessModel: •Aboutofthevalueproposition •Revenuesaredependenton this Costly? •Yes,becauseofpatents, researchandtechnology, followingregulations,adaptto market ChannelstoCustomer Segments: •Ships,trucks,airplanes •Carefullydistribute hazardousmaterial •Efficientlydistributes Howarewereaching them: •GPStrackingon vehiclesand warehouses •ITsolutions ChannelstoCustomerSegments: Whatarethemostimportantcostsinherentin ourbusinessmodel? •ResearchandDevelopment WhichKeyResourcesaremostexpensive? •ResearchandDevelopment •Licensing WhichKeyActivitiesaremostexpensive? •ResearchandDevelopment FixedCosts •SalariesandRent CostStructureRevenueStreams ChannelstoCustomerSegments: Forwhatvalueareourcustomersreallywillingtopay? •Willingtopay$14.01per$1ofrevenue Forwhatdotheycurrentlypay? •Averagepriceforaproductis$20 Howaretheycurrentlypaying? •DirectcontactwithSyngentaandpaywithcredit/cash/check HowmuchdoeseachRevenueStreamcontributetooverall revenues? •MostoftheirrevenuecomesfromAgrochemicals(19%)ofthe Agrochemicalmarket •Seeds Variablecosts •Wages •ProductionCosts
43 Who They Are: Syngenta has multiple key partners that help their company thrive in the agrochemical and seed industry. Their key partners include Dupont, Advion and Acelpyrn, Taegro, Griffin Greenhouse Supplies, Sunfield Seeds, Crop Farmers, Lawn and Garden business, and Wholesalers and distributors. These key partners provide everything from nitrates and phosphates for agrochemical production to technology for research and development. They also have key buyers that make up majority of the industry these include crop farmers, wholesalers and distributors, and the Lawn and Garden business (Syngenta 20-). Key Partners Key Suppliers: Syngenta’s key suppliers include Dupont, Advion and Acelpyrn, Taegro, Griffin Greenhouse Supplies, and Sunfield Seeds. Of course Syngenta has other suppliers but these companies have created a strong relationship with them (Syngenta 20-f). Key Activities from Partners: The Key Resources that are obtained from their Key Partners include research and development, nitrates and phosphates, equipment, and a loyal customer base (Syngenta 20-f). The Key Activities that Partners Perform: The Key Activities that partners perform in include research and development and transportation. They also help them find new partners and opportunities for mergers and acquisitions (Syngenta 20-f). APPENDICES Key Activities Value Chain: Syngenta’s value proposition can be shown through Syngenta’s supply chain. The supply chain starts off with the supplier providing chemicals, seeds and equipment it takes to manufacture their products. It is then taken to Syngenta where they add value by combining the new technology that they receive with their seeds or making cutting edge agrochemicals. The product is then distributed to four different customer segments distributors and retailers, importers and exporters, farmers, and lawn and garden owners. The distributors, retailers, importers, and exporters will provide the product to farmers as well making them a channel of reaching Syngenta’s most popular customer. The farmers then add the most value to the product by taking all of the key resources and making a fully grown crop. The crop is then sent to processors who turn the product into processed foods. It is then sold to retailers who sell it to the consumer (Syngenta, 2014).
44 Chemical Manufacturing and Seed Supplies Monsanto Distributors /Suppliers Importers/ Exporters Farmers Lawn and Garden Owners Farmers Farmers Processors End at Consumer APPENDICES Value Offered to the Customer: What Syngenta promises to deliver to its customer is a unique, high quality, high yield generating product. This is important to the consumer due to the fact that Syngenta provides a product that they can’t get from anywhere else. (Syngenta 20-f) Value Proposition Helping Customers Problems: Syngenta solves multiple customer problems by providing crop protection and quality seeds that are immune to factors that would prevent higher yields (Syngenta 20-f) Satisfying Customer Needs: Syngenta satisfies multiple customer needs. Wholesalers need a product that is efficient and in demand to the consumer, farmer needs a product that generates higher yields and protects their crops, importers and exporters need a product that is in demand globally and follows national laws, and lawn and garden owners need protection from insects and wild animals (Syngenta 20-f).
45 Products and Services: The bundles of products that are being offered to each customer segment include herbicides, fungicides, insecticides, and advanced genetic seeds. Syngenta’s highest revenue generating products are their agrochemicals). Whereas Monsanto's greatest product is their genetic seeds((Syngenta, 2014, 20f; Monsanto, 2014, 10K). Customer Relationships Relationship to Customer Relationship: The customer segments expect multiple types of relationships. Farmers expect the product to produce higher yields, to be reliable, have a high quality, a safe product, and proper training (Syngenta 20-f). Integration with the Business Model: Syngenta has established a relationship with consumer expectations of higher yields and high quality (Syngenta,20-F). APPENDICES Costly?: Syngenta is focused on the lowering of costs by acting as sustainably as possible, but the cost of Research and Development and the patents protecting those products is very expensive (Syngenta 20-F). Who we are Creating Value For: Syngenta creates value for many areas of the market. Included are: Crop farmers in different geographic locations such as Latin America, Asia, the Pacific, North America and Europe, and also creating value for individual customers buying product for non-farm related operations (Syngenta 20-F). Customer Segments Most Important Customers: The most valued customers within the segment are the crop farmers, which make up the majority of sales, wholesalers and distributors, and lawn and garden businesses. Farmers create add value to Syngenta’s seeds by combining their product with key resources to generate it into an incredibly valuable product. This is then sent to food processing plants, wholesalers and distributed where it is then sold to society (Syngenta 20-F) .
46 Value Our Customers are Willing to Pay: According to the price to earnings ratio, customers are willing to pay $14.01 for every $1 of revenue (Syngenta 20F). Revenue Streams How Customers Pay: Customers are able to pay in the usual ways of cash, debit, credit, check to purchase Syngenta products. They can also contact Syngenta directly for a private consultation (Syngenta, 2014). How much does each Revenue Stream Contribute to Overall Revenues: Majority of the revenue stream is generated from their agrochemical products. Whereas their innovative seed technology brings in the second highest for revenue (Syngenta 20f). APPENDICES Channels to Customer Segments: Syngenta sends all their products via ships, trucks, airplanes and trains. Syngenta takes special care when shipping hazardous material. Shipping efficiency is a must at Syngenta (Syngenta, 2014). Channels How we are Reaching Them: Syngenta keeps track of all products in route by using GPS tracking. They are able to know exactly where their freight is from leaving the warehouse all the way to the destination. Syngenta uses GPS coupled with IT solutions to ensure fast and efficient shipping (Syngenta 20-F, 2014). Key Resources Key Resources for Value Propositions: Syngenta’s research and development, brand protection through patents, trademarks, and regulations and laws in local, national, and international governments are all key resources for value propositions (Syngenta 20-f).
47 Distribution: Syngenta has partnerships with many shipping and distribution companies. Syngenta has done research to find the most efficient ways to ship all their products (Syngenta 20-f). Cost Structure Channels to Customer Segments: Research and Development is the most important cost when it comes to the business model. Keeping up to date with technology is how a company in this industry is successful. Syngenta invests a large amount of money in licensing and fixed cost such as salaries, rent, and utilities. Research and development is one of the largest outlays of money that Syngenta has. Syngenta takes research and development very seriously as highlighted by their 1.376 billion dollar expense (Syngenta 20-f). Company: Syngenta is completely value driven. All of their products are made for the value of the customer. Prices are given to their agrochemicals and seeds based upon the yield potential and value that they see given to the customers. APPENDICES
48 APPENDICES SWOT Analysis of Monsanto D Strengths Leading Market Position: Monsanto is able to offer a seeds that have high yields that are recognized as brand names. Monsanto can easily break into new geographies because they have such a well recognized product portfolio. With such a strong brand portfolio, Monsanto is able to enhance its market leadership position (MarketLine, 2014 July 18). Strong Focus on Research and Development: Monsanto is one of the largest suppliers of agricultural needs because of their ability to deliver innovative products to farmers. Monsanto is able to provide seeds that are weed and drought resistant that at the same time have high yield potential. Research and development is one of the largest investments that Monsanto makes. Investing amounted to $1,533 million in fiscal year 2013 (MarketLine, 2014 July 18).. Weaknesses Legal Proceeding: Monsanto has been in multiple lawsuits. One of which is one where the Arkansas Teacher Retirement System filed a lawsuit because Monsanto was making false and misleading statements regarding its earnings guidance for 2009 and 2010. The EPA has also had problems with Monsanto. The EPA issued a Notice of Violation at the phosphorous manufacturing plant. With these problems, shareholders have doubt in Monsanto and lead to a lack of customer confidence in the company (MarketLine, 2014 July 18).
49 Growing Demand for Food Products With Reduced Saturated Fat and Trans- fat: Monsanto is on the cutting edge of health trends. The are now offering Soybeans that have virtually eliminated trans-fatty acid in their processed soybean oil. Monsanto has also completed many keep acquisitions. “In June 2012, Monsanto completed the purchase of planting technology developer Precision Planting” (MarketLine 2014). The Precision Planting team is now part of Monsanto's integrated farming systems unit, which will utilize advanced agronomic practices, seed genetics, and innovative on-farm technology to deliver optimal yield to farmers while using fewer resources (MarketLine, 2014 July 18).. APPENDICES Opportunities Growing Population: With the population growing, Monsanto has a huge opportunity to increase its profit. Asia has top opportunity for Monsanto to expand. Monsanto is a leading supplier in the countries it operates in. This gives them the advantage of having expertise, distribution network, and product portfolio comprising well known brand names (MarketLine 2014). Threats Infringement of Intellectual Property Rights: One of the biggest threats that faces Monsanto is the infringement of their intellectual property rights If Monsanto fails to protect their intellectual property rights it could lead to substantial loss in revenue and market share, and brand dilution. Monsanto also faces growing legislation of genetically modified organism (GMO) regulation. Public concern can also lead to an increase in legislation against GMOs. With legislation concerning GMOs increasing, Monsanto could face difficulty expanding into new markets and growing its revenue (MarketLine 2014). Seasonal: Seasonality is also a difficult threat that Monsanto faces. In 2013 Monsanto sold 72% of seeds and genomics in the second and third quarters. This is effected by the growing patterns found in North America. Approximately 46% of Monsanto’s revenue comes from business outside the United States. This is an imposing threat due to trade restrictions, investment regulations, governmental instability, and other potentially detrimental governmental practices or policies affecting companies doing business overseas. Fluctuation of different currencies is also pressing threat that Monsanto faces. Monsanto also faces political and economic problems such as civil uprisings, riots, and terrorist acts. Such problems could a great negative effect on Monsanto's revenue growth (MarketLine 2014).
APPENDICES Strengths Weaknesses Reliance on Single Supplier for Certain Important Products: Syngenta acquires raw materials from various suppliers, but for certain important active ingredients they depend on a single supplier. Such single supplier arrangements account for approximately 16% of the company's purchases of these items. If there would be a sudden loss of a single supplier, it will affect the supply of the material which in turn may have a negative impact on the production activities (MarketLine, 2014). SWOT Analysis of Syngenta D Global Footprint Driving Growth: Syngenta is geographically diverse since it operates in North America, Latin America, Europe, Africa and the Middle East. That gives Syngenta the ability to offset demand fluctuations in certain geographic regions. In FY2013, the company generated 23.7% of the total revenues from the US (MarketLine, 2014). Comprehensive Portfolio of Agricultural and Non-agricultural Products: Syngenta has a comprehensive product range making it a leader in all of its target segments. They focus on all major crops. For example: corn, cereals, diverse field crops, rice, soybean, fruits, trees, nuts, potatoes, cotton, plantations, sugar cane and vegetables. Syngenta’s crop protection business provides herbicides, fungicides, insecticides and seed care products. The seed business offers field crops and vegetable seeds. They are sold to customers engaged in agricultural activities. The lawn and garden business offers professional products for turf, ornamentals treatment, vegetation management and for home and garden use (MarketLine, 2014).
51 Opportunities Acquisitions Likely to Further Strengthen Syngenta’s Seeds Business: Syngenta has strengthened their seed business through acquisitions. In October 2013, they acquired a developer, producer and distributer of white corn seed in Zambia called MRI Seed Zambia and MRI Agro (MRI). This will further expand high-growth in East African markets and may be leveraged globally through breeding programs. Most recently in June 2014, Syngenta signed an agreement to acquire winter wheat and winter oilseed rape breeding and business operations of Lantmannen, the Swedish food energy and agriculture group. They will enable the development of hybrids with yield stability, winter hardiness and broad disease resistance, to give them a competitive advantage (MarketLine, 2014). APPENDICES New Crop Protection Products May Drive the Company’s Top-line Growth: Syngenta has launched new crop protection products, which may help in revenue growth. The company announced, in October 2013, the registration of a novel seed treatment insecticide called Fortenza. The Fortenza family provides growers with new tools against pests above and below the ground. According to Syngenta, the global peak sales potential of the Fortenza product family is expected to be around $300 million. Recently, in March 2014, Syngenta announced a product called Elatus has been approved by Brazilian authorities. Elatus offers protection against a disease that can significantly affect yields called soybean rust (MarketLine, 2014). Threats Consumer and Government Resistance to Genetically Modified Organisms: Syngenta is active in the field of GMO’s and biotechnology research and development in seeds and crop protection. The high public profile of biotechnology and lack of consumer acceptance of products that Syngenta has devoted a large number of resources to could affect public image. There are currently resistance of GMO’s from consumer groups in Europe. They have concerns over the effect on food safety and the environment. This could influence the acceptance of products developed through biotechnology in other regions of the world, which could limit the commercial opportunities. Also, some government authorities have enacted regulations regarding GMO’s which may limit or prohibit the development and sale. This could affect Syngenta’s sales and brand image (MarketLine, 2014).
52 APPENDICES Intense Competition Likely to Put Syngenta's Market Position Under Duress: Syngenta operates in the crop protection industry which is a highly competitive environment. It is mainly comprised of agricultural businesses or large chemical companies. The top competitors are BASF, Bayer, The Dow Chemical Company, DuPont and Monsanto Company. Syngenta also competes with generic producers. The company competes on factors like product range, product development and differentiation, geographical coverage, price and customer service. Competition in the seeds business is anywhere from small producers competing in local markets. The major competitors include Monsanto Company, Vilmorin, KWS SAAT, Bayer, Dow and Takii & Co. Intense competition may affect their market position. Syngenta is subject to increasing laws, regulations and standards.If the company fails to comply they could face legal proceedings and remediation liabilities. Syngenta’s operational and financial position could be affected (MarketLine, 2014).
53 MONSANTO ASSETS Aug 31, 2013 Aug 31, 2012 Aug 31, 2011 Cash and Cash Equivalents 17.75% 16.23% 12.96% Short-term Investments 1.23% 1.49% 1.52% Trade Receivables, net 8.30% 9.38% 10.67% Miscellaneous Receivables 3.62% 3.07% 3.17% Deferred Tax Assets 2.8% 2.64% 2.25% Inventory, net 14.26% 14.04% 13.06% Assets of discontinued operations - - - Other current assets 0.80% 0.90% 0.77% Current Assets 48.77% 47.76% 44.39% Property, plant and equipment, net 22.52% 21.58% 22.14% Goodwill 17.03% 16.98% 16.96% Other intangible assets, net 5.93% 6.12% 6.60% Noncurrent deferred tax, net 2.20% 2.72% 4.40% Long-term receivables, net 1.15% 1.86% 2.39% Noncurrent assets of discontinued operations - - - Other assets 2.40% 2.98% 3.12% Noncurrent Assets 51.23% 52.25% 55.61% Total Assets 100.00% 100.00% 100.00%
54 MONSANTO LIABILITIES Aug 31, 2013 Aug 31, 2012 Aug 31, 201 Short-term debt, including current portion of long term debt 0.25% 0.18% 3.42% Accounts payable 4.82% 3.93% 4.23% Income taxes payable 0.44% 0.37% 0.59% Accrued compensation and benefits 2.38% 2.70% 2.15% Accrued marketing programs 5.22% 6.33% 5.59% Deferred revenues 2.50% 1.96% 1.88% Grower production accruals 0.29% 0.96% 0.44% Dividends payable 1.10% 0.99% 0.81% Customer payable 0.06% 0.07% 0.47% Restructuring reserves - - 0.12% Liabilities of discontinued operations - - Miscellaneous short-term accruals 3.93% 3.39% 4.13% Current Liabilities 20.98% 20.87% 23.83% Long-term debt 9.97% 10.08% 7.78% Postretirement liabilities 1.73% 2.68% 2.57% Long-term deferred revenue 0.67% 1.21% 1.70% Noncurrent deferred tax liabilities 2.27% 1.55% 0.77% Long-term portion of environmental and litigation 0.93% 1.05% 0.89% Noncurrent liabilities of discounted operations - - Other liabilities 1.5% 3.04% 3.44% Noncurrent Liabilities 17.42% 19.62% 17.13% Total Liabilities 38.40% 40.49% 40.96% Common stock, par value $0.01 0.03% 0.03% 0.03% Treasury stock, at cost -20.03% -15.06% -13.17% Additional contributed capital 52.18% 51.28% 50.88% Retained earnings 34.79% 27.38% 21.03% Accumulated other comprehensive loss -6.18% -5.12% -0.58% Reserve for ESOP debt retirement - - -0.01% Total Monsanto Company shareowners equity 60.78% 58.51% 58.18% Noncontroling interest 0.82% 1.00% 0.86% Total shareowners equity 61.60% 59.51% 59.04%
55 MONSANTO INCOME STATEMENT 2013 2012 2011 Net Sales 100.00% 100.00% 100.00% Cost of Goods Sold 48.5% 47.83% 48.58% Gross Profit 51.5% 52.17% 51.42% Operating Expenses - - - Selling, General and administrative expenses 17.16% 17.70% 18.52% Research and Development expenses 10.32% 11.23% 11.72% Restructuring charges, net - -0.07% -0.01% Total Operating Expenses 27.47% 28.86% 30.26% Income from Operations 24.02% 23.31% 21.26% Interest Expense 1.18% 1.41% 1.37% Interest Income -0.62% -0.57% -0.63% Other Expenses, net 0.41% 0.34% 0.34% Income from Continuing operations before income taxes 23.07% 22.13% 20.08% Income tax provision 6.16% 6.67% 6.06% Income from Continuing operations including portion 16.92% 15.45% 14.02% Discounted Operations - - - Income from Operations of discounted businesses 0.11% 0.07% 0.03% Income tax provision 0.04% 0.03% 0.01% Income on discounted Operations 0.07% 0.04% 0.02% Net Income 16.99% 15.50% 14.03% Less: Net income attributed to Noncontroling interest 0.29% 0.36% 0.44% Net Income Attributed to Monsanto Company 16.70% 15.14% 13.59%
56 SYNGENTA INCOME STATEMENT 2013 2012 2011 Net Sales 100.00% 100.00% 100.00% Cost of Goods Sold 54.37% 50.82% 50.78% Gross Profit 45.63% 49.18% 49.22% Operating Expenses - - - Marketing and Distribution 16.30% 17.03% 16.17% Research and Development expenses 9.37% 8.82% 8.49% Restructuring charges, net 1.22% 1.64% 2.31% Divestment Gains (losses) - -0.18% 0.57% Other General and Administrative 4.54% 5.37% 7.36% General and Administrative - -7.19% 9.10% Total Operating Expenses 31.43% Operating Income 14.20% 16.14% 15.46% Income (loss) from associated and joint ventures - 0.05% 0.11% Interest Income 0.82% 0.82% 0.70% Interest Expense - 1.00% 1.15% Other Financial Expenses - 0.14% 0.15% Currency Gains (losses), net - 0.71% 0.65% Financial Expense, net - 1.04% 1.24% Income Before 13.17% 15.15% 14.33% Income Tax Expense - 1.5% 2.27% Net Income 11.23% 13.20% 12.06% Less: Net income attributed to Noncontroling interest - 0.02% 0.01% Net Income Attributed to Syngenta AG shareholders - 13.18% 12.05%
57 SYNGENTA ASSETS Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Cash and Cash Equivalents 4.46% 8.24% 9.66% Trade Receivables, net 17.04% 16.45% 15.87% Other accounts receivable 4.84% 4.80% 4.00% Inventory, net 27.58% 24.40% 24.30% Derivative and Other Financial Assets 0.96% 1.29% 1.56% Other Current Assets 1.23% 1.32% 1.15% Total Current Assets 56.12% 56.51% 56.55% Property, plant and equipment, net 17.34% 16.46% 17.55% Intangible assets 16.72% 18.05% 16.64% Deferred Tax Assets 4.75% 5.54% 5.39% Derivative financial assets and other non-current assets 4.05% 2.89% 3.11% Investments in associates and joint ventures 1.01% 0.74% 0.76% Noncurrent Assets 43.88% 43.49% 43.45% Total Assets 100.00% 100.00% 100.00%
58 SYNGENTA LIABLITIES Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Trade accounts payable 18.88% 17.57% 16.71% Current financial debt and other financial liabilities 7.87% 5.93% 5.54% Income Taxes Payable 3.4% 2.95% 3.17% Other Current Liabilities 4.81% 5.97% 5.96% Provisions 1.42% 1.22% 1.35% Total Current Liabilities 36.39% 33.13% 32.73% Financial debt and other non-current liabilities 12.21% 12.63% Deferred tax liabilities 3.93% 4.45% 4.37% Provisions 3.79% 4.33% 5.61% Non-current liabilities 16.60% 21.74% 23.75% Total Liabilities 52.99% 54.87% 56.48% Issued share capital 0.03% 0.03% 0.03% Reserves 18.87% 19.21% 18.48% Retained earnings 30.43% 27.24% 21.67% Total Shareholders’ Equity 46.95% 45.14% 43.65% Total liabilities and equity 100.00% 100.00% 100.00%