Monsanto NYSE MON
| FY 01 Sales | $5.5 B
| FY 01 profit | $295 M
| Market cap | $8.0 B
Life sciences
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Six stories above the countryside outside of St. Louis, there's a 2-acre plot of hermetically sealed land that just may be the most productive farm on the planet. With optimized, machine-made weather – think June in Iowa, 365 days a year – the rooftop plantation at Monsanto's Chesterfield Research Center turns out new batches of soybeans, corn, cotton, and canola every three months. Too bad all but a tiny fraction of the green abundance ends up in an EPA-monitored, high-temperature steam furnace.
That's because these crops aren't meant for the dinner table, at least not yet. They're test beds for superplant qualities – drought tolerance, antioxidant content, insect resistance – each carefully programmed, barcoded, and monitored by platoons of molecular biologists working on the floors below. In the life sciences industry, the qualities being created are known as traits. To Monsanto, they're the keys to feeding the hungry, curing the sick, and powering your car – not to mention making a buck for the company that oversees it all.
Monsanto is what happens when technology's leading edge runs into an ancient human enterprise. With a hold on 90 percent of the $3 billion genetically modified seed industry, Monsanto already has a hammerlock on its market. If the company is successful in breaking down political and social resistance to GMfoods, the industry could explode. And no company is better positioned to benefit. Unlike rivals Aventis and Syngenta, Monsanto has extensive research operations, and the speed and scale to capitalize on the likely expansion of the market.
As it is, protesters might be both surprised and frightened by the growth of the GM sector. Genetically engineered crops have increased from essentially nothing in the mid-1990s to 130 million acres in 2001 – roughly 20 percent of the world's soybean, corn, cotton, and canola. For 2002, the USDA is predicting a 10 percent increase for GM soybeans (three-quarters of the US crop) and nearly 32 percent for corn. The uptake has been even more rapid in developing countries like China, Argentina, and South Africa, where traits like pest-resistance have boomed. "The technology now exists to improve anything people grow, anywhere in the world," says Monsanto CTO Robb Fraley, who has a PhD in molecular biology. "We're where electronics was with the first transistor radio."
Until the late '90s, Monsanto was all about agri-chemicals. The transition to life sciences went smoothly from a business perspective, but not on the PR front. Amid reports of dying butterflies and Brazilian farmers uprooting experimental crops, Mutanto, as it came to be called, was – and still is – pilloried for what some consider to be its threat to consumers of frankenfoods.
To deal with public concern, Monsanto executives have shifted the company's communications strategy. Rather than focusing on cost savings and productivity gains for farmers, Monsanto has begun to emphasize GM's environmental and health benefits (eliminating the need for 11,000 tons of pesticides, for starters) and new applications in the works: cheap GM-enhanced ethanol and plant-produced vaccines. It's also winning regulatory approvals. In arch, the world's third-largest cotton grower, India, gave the OK to Monsanto's pest-resistant Bollgard seed. Brazil is expected to make a similar decision that will make herbicide-resistant soybeans the de facto global standard. Formal US approval is pending for pest-resistant corn and cotton traits. And even the European Union – the most conservative region when it comes to GM food – is reconsidering its hold on the planting of genetically modified corn. As Britain's House of Lords recently noted, "We need to look at the product, not the process."
As for farmers, they keep on buying the stuff. Monsanto projects earnings growth of 4 to 6 percent this year, 6 to 9 percent for 2003, and double digits after that, as new traits reach the market. And Monsanto shares have climbed right along with the size of the GM market, increasing 50 percent since October 2000.
Consumers should come around, too. The GM future will be full of more nutritious cereals, reduced-calorie sweeteners, and oil seeds higher in healthy saturated fats. "You won't have to make the trade-off between taste and health," says Fraley, offering "the healthy Big Mac." To hardcore technophobes, that will be tough to stomach. But the rest of us just might enjoy it.
