1) In the past year since we saw you at the World Agri-Tech Investment Summit in San Francisco, what have been the most significant events or developments impacting the global agribusiness industry?
The global agribusiness industry has been and continues in 2016 to be impacted by a number of developments. Emerging economies are slowing; currencies and key governments are weak; and energy costs are very low – all of which has a direct impact on agriculture. For example, slowing Asian markets mean lower demand for animal-based protein like meat, eggs and cheese. Lower fuel prices and cheap gas mean less demand and profit for corn-based ethanol. These factors put pressure on the commodity markets, with low commodity prices making it more difficult than ever for our grower customers. And we know this is having an impact on the tools and technology decisions they make on the farm. In turn, market pressures are forcing some pretty significant consolidation in our industry, as we’ve seen through the recent Dow-DuPont merger, as well as the play made by Monsanto to purchase Syngenta, and the eventual acquisition of Syngenta by ChemChina. And yet, 2015 saw an astonishing increase in investment community interest in food and agriculture technology.
2) As you look for new areas of business growth, which verticals within agriculture represent the greatest opportunity for investment and expansion?
The plant microbiome has received substantial attention in recent years. Millions of microbes inhabit plants – living on, in and around them – and forming complex ecological communities. Studies have shown that a plant’s microbiome influences its growth, health and stress tolerance. Having a better understanding of plant-microbe interactions will help us to ensure sustainable crop production in a variety of diverse environments and conditions on our ever-changing planet.
Another opportunity for agriculture is the digitalization of the farm and the translation of data into valuable information the farmer can use to improve efficiency and profitability. I would go so far as to say that these trends are the next revolution happening in agriculture. As the world population grows, each farmer will have to produce more on the same amount of land. The three most influential variables that determine yield are genetics, weather and management practices. Combining digital technology with these important variables can change the way farmers do their job. We believe data analysis – understanding the correlations between hybrid type, nutrient and water management, planting date, soil type, plant health management, etc. – and the ability to correct growth problems in-season – have the potential to help farmers drive increases in productivity similar to what hybridization, genetics and biotechnology have done for production agriculture until now.
3) How do you strike the right balance between internal R&D at Bayer CropScience, and external investments and acquisitions? Where are you currently investing most capital?
The stakes are high when it comes to research. It’s the key not just to the success of our business, but to healthy food for everyone. So we put 10 percent of our earnings straight back into the lab – investing a significant amount of money into internal R&D activities and having a rich product pipeline to show for our efforts. In addition, Bayer is in a unique position, as the only company in our industry that is focused on the Life Sciences and the research perspective and power that this can bring.
Our researchers also recognize that new technologies are being applied to agriculture every day, and Bayer wants to know about them and have the opportunity to invest in them. Acquisitions allow us to expand our research activities and capabilities into emerging fields of expertise. Bayer has taken an indirect approach to venture capital investing in agriculture and has formed alliances with Flagship Ventures (Boston) and Finistere Ventures (San Diego). The main emphasis of the fund investments are new trait technologies, biologicals and digital agriculture technologies.
4) When looking at potential investments or acquisitions, what are the key criteria that you’re currently looking for? Have these criteria changed over the past five years?
When looking at potential investments or acquisitions, Bayer considers several key criteria; whether the technology addresses gaps in our existing product portfolio, or whether it provides adjacencies that enhance our future product offerings. We look for investments that complement current products, services and support and that allow us to provide complete and integrated solutions to growers and other key stakeholders. Another type of investment or acquisition that is meaningful is one that offers potential for future market disruption –fundamentally changing the way we approach the market or do business.
During the past five years, these specific criteria have not changed, but the types of technologies have continued to evolve, particularly in key areas of interest in the biological space and digital agriculture technologies.
5) Please tell us a little more about Bayer CropScience’s approach to partnerships and alliances? What models have you developed for successful collaboration, and can you share any current examples?
We generally adopt a stepwise approach to partnerships and alliances. To understand the technology and to get to know the people in a potential partnership, we first would establish a collaboration. If successful, this collaboration could then lead to a licensing opportunity or an acquisition.
One example of this approach is our Biologics business, which complements our Crop Protection portfolio with a range of products to control pests and plant diseases through biological modes of action. This business was developed through the 2012 acquisition of AgraQuest, Inc. Prior to the acquisition, Bayer partnered with AgraQuest in 2009, in a supply agreement for the production and packaging of our Bayer Advanced™ Natria™ product line. This successful collaboration with AgraQuest allowed us to better understand biological technology and the global biological market, and to eventually develop a business that offers revolutionary, tailor-made biological solutions for our customers.
6) To what extent is Bayer CropScience exploring new alliances that tap into emerging markets/new geographies? Which global markets currently present exciting opportunities for the development and implementation of advanced agricultural solutions?
Our investment focus is on North America and Europe, which are the current hotspots of agricultural innovation, but we are also exploring opportunities for collaborations in emerging markets in Brazil and in China.
7) And finally, what will you be looking for at the 2016 World Agri-Tech Investment Summit? Who would you like to meet and what kind of information will you be looking out for?
The 2016 World Agri-Tech Investment Summit offers a great opportunity for us to hear from like-minded thought leaders creating innovative, sustainable, modern agricultural technologies for a growing world. We are interested in new companies, technologies and developments in agriculture that complement our product portfolio and market services offerings, and enable Bayer to stay at the forefront of agricultural innovation.
Join the conversation www.worldagritechusa.com