ST. LOUIS, May 27, 2010 /PRNewswire-FirstCall/ — Monsanto Company (NYSE:MON – News) today announced it is repositioning its Roundup® business in the face of fundamental structural changes that have caused upheaval in the glyphosate industry. Focusing its glyphosate products on supporting the core seeds-and-traits business, the company plans to drastically narrow its Roundup® brand portfolio to offer farmers a simple, quality product that meets their needs at a price closer to generics.I think that’s CEO-speak for demand is down, competition is up, and Monsanto is retrenching in hopes of saving its core glysophate business. So sad.
“By reducing the uncertainty associated with Roundup, we free Monsanto to grow on its fundamentals,” Chairman and Chief Executive Officer Hugh Grant said. “What matters to our long-term growth is our seeds-and-traits business, which is on track.”
More clarification from the CEO:
Grant said the company acted once it had confirming data from the early U.S. Roundup® application season that the industry had undergone fundamental structural changes. Among the driving structural changes in the industry Grant noted are systemic margin compression in the distribution channel attributed to sustained oversupply of glyphosate and the reality that Chinese glyphosate capacity is profoundly overbuilt.Well, that makes the added competition part clear. Remember, Monsanto’s U.S. patent on Roundup expired in September 2000, and its patents in other countries expired earlier. So there’s nothing to stop somebody else from making and selling the same product as a generic.
But the CEO’s rationale glosses over what other driving structural changes there are. Hint: mutant weeds!
So, what’s Monsanto going to do about it?
To address these issues, Monsanto is revamping its glyphosate business, pricing Roundup® nearer to the level of generics and simplifying its product offerings. In key segments within large markets like the United States, the company will move to a single-brand strategy, using resources to promote a single brand rather than splitting them among multiple tiers.Oh really? Monsanto has the tools to fight the mutant pigweed? And simplification means adding more chemicals to Roundup? Could that be because it’s not working like it used to?
The company also is creating a new offering of solutions to address the need for a simple weed resistance package. It will work with key U.S. distributors to combine a simplified Roundup® brand with a package of complementary chemicals to create an affordable and easy-to-use weed control regimen.
“There’s good news for farmers in all of this – we’re going to bring simplicity to weed management,” Grant said. “Weed resistance is real, but managing it doesn’t have to be complex. The right tools exist today, and we’re going to make it easy and more affordable for farmers to access those tools as a package, with Roundup as the cornerstone.”
What about next year’s mutant weed? What will Monsanto do then?