Formation of the ‘Big 6’ seed-biotech-crop companies

Over the past 15 years, the world seed industry has consolidated through mergers and acquisitions. This graphic, extracted from a 2011 December USDA report, shows how the ‘Big 6’ got to the positions they now occupy (I have added colour to make it easier to distinguish each dominant conglomerate’s consolidation history).

Formation of the 'Big 6' seed-biotech-crop companies. Graphic from: Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide / ERR-130. Economic Research Service / U.S. Department of Agriculture (USDA) (Report Number 130, December 2011) (click for the full size png image, 652kb).

Over the past 15 years, the world seed industry has consolidated through mergers and acquisitions. This graphic, extracted from a 2011 December USDA report, shows how the ‘Big 6’ got to the positions they now occupy (I have added colour to make it easier to distinguish each dominant conglomerate’s consolidation history).

An excerpt from the USDA report has explained some of the features of changes to the seed industry which can be summarised as follows:

1. Among the largest firms in terms of total product sales, the close relationships between seed and agricultural chemicals industries have continued. This applies to the Big 6 firms in particular. These relationships may result partially from complementarity of product lines such as herbicide-tolerant seeds and chemical herbicides, or possibly from economies of scope in marketing as well. Chemical companies also realized GM crops with pest resistance traits would compete with the crop protection chemicals, which helped drive these companies’ interest first in biotechnology and eventually in seed, thus changing their business models to meet farmer demand for crop pest management as technological opportunities changed.

2. On the other hand, the “life science industry” model suggested a decade ago has not become the dominant paradigm. This model stemmed from the likelihood that technologies underlying pharmaceutical discovery were the same as those underlying gene discovery for seeds. Differences in business models and types of customer, however, prevented firms from combining both pharmaceuticals and agricultural biotechnology. Of the current Big 6 companies, only one — Bayer — has pharmaceuticals as its primary product line.

Detail from the graphic, 'Formation of the 'Big 6' seed-biotech-crop companies'

Even when Bayer expanded into the seed/biotechnology industry in 2002 with its acquisition of Aventis Crop Science, Aventis pharmaceuticals eventually became a component of Sanofi-Aventis pharmaceuticals, not Bayer. Monsanto, which entered pharmaceuticals in the mid-1980s with its acquisition of Searle, was briefly held by Pharmacia before the agricultural enterprise was spun off as the “new Monsanto”; Pharmacia retained the pharmaceutical business segments. When Novartis’s chemical and seed businesses were merged with Zeneca’s agricultural chemical business in 2000 to form Syngenta, the pharmaceutical portion of Novartis remained intact as a separate large pharmaceutical company. BASF and DuPont ended their relatively smaller pharmaceutical investments after 2000 and 2001, respectively, and Dow had already sold its pharmaceutical subsidiary Marion Merrell Dow to Hoechst in 1996.

3. Agricultural chemicals have been an important part of product sales for all the Big 6 companies. However, positions in markets for non-agricultural chemicals have not remained constant, with some companies shedding these nonagricultural products. Monsanto divested this portion of its business to Solutia in 1997. When Ciba-Geigy and Sandoz merged to form Novartis in 1996, nonagricultural chemicals were spun off to Ciba Specialty Chemicals, which eventually was acquired by BASF. In response to antitrust considerations, Bayer sold selected insecticides and fungicides to BASF in 2003. DuPont sold its polymers business in the early 2000s.