Forthcoming IPES-Food report – Key points
Corporate concentration within the agri-food sector
The Issue
The need to assess the current state of mergers within the agri-food sector has never
been more pressing. While a long-standing feature of the agricultural sector, corporate
concentration has dramatically escalated since the 1980s, with major implications for
farm and food chain workers, consumers, and rural communities. By 2014, 4-firm
concentration (i.e. the market share of the four largest firms) in each of the agricultural
input sectors (seeds, agrochemicals, animal pharmaceuticals, and farm machinery)
ranged between 54% and 62% of global market sales 1 (See Figure 1).
Figure 1 - 4-firm concentration in major agricutural input sectors
from 1994-2014
100
80
60
40
20
0
1994
Crop seeds/traits
2000
Agrochemicals
2009
Farm Machinery
2014
Animal Pharmaceuticals
Source: ETC Group, 2014
Concentration can jeopardize the ability of farmers around the world to increase their
resilience in the face of change, as food and agricultural inputs fall into fewer and fewer
hands. It may allow for a small number of firms to dominate private sector research and
design (R&D), effectively deciding how, where, and by whom innovation is made
possible. Concentration within the agri-food sector likely contributes to the
industrialization of food systems, furthering species and genetic losses, and decreasing
both biodiversity and the nutritional qualities of industrially-bred plant and livestock
breeds. Lastly, agri-food sector concentration perpetuates a multimillion-dollar
lobbying industry, influencing governments in shaping the nature of international
foreign aid, agricultural development and multilateral trade agendas. These impacts
have the potential to not only shape the agricultural sector, but the global food system
as a whole.
1
ETC Group, from publicly available information, 2014.
Background
2015 was one of the biggest years ever for global mergers and acquisitions (M&A), with
42,300 announced deals valued at $4.9 trillion.2 There were 71 deals valuing over $10
billion in 2015, accounting for 41% of total announced M&A value. For the first time
ever, seven M&A deals surpassed the $50 billion mark. The biggest deals on record were
announced in several industries, including: pharmaceuticals (Allergan and Pfizer valued
at $160 billion - withdrawn), beverages (AB InBev and SABMiller - $120 billion completed), chemicals (Dow Chemical and DuPont - $130 billion - pending); and food
(Heinz and Kraft Foods - $55 billion - completed).
For the first time, large corporations from emerging markets are also becoming major
drivers of M&A activity. In the past decade, the 50 largest firms from emerging
economies have doubled their share of revenues from cross-border activity, from 19%
to 40%.3 The trend is most prominent in China: Cross-border M&A activity by Chinabased companies tripled from $259 billion in 2013 to $735 billion in 2015.4
Concentration trends in key sectors
Corporate concentration is a trend throughout the entire industrial food system, and is
most notable within the first links of the food chain. A brief overview is offered below of
major trends in key agri-food sectors.
Seeds and Agrochemicals: Today, the proprietary seed sector is firmly in the hands of
the world’s six largest agrochemical corporations: Syngenta, Bayer, BASF, DuPont,
Monsanto, and Dow, who control 75% of the global pesticides market. The impending
$130 billion merger between US agro-chemical giants, Dow and DuPont, and Bayer's
$66 billion buy-out of Monsanto, could place almost two-thirds of the agrochemical
industry in the hands of only three companies (Dow, DuPont and Bayer). Over the past
two years, some of the largest M&A deals in history have occurred within the seed and
agrochemical sectors.
Livestock genetics: The livestock genetic and breeding industry has also experienced a
significant degree of concentration in recent years:
•
•
Layer Genetics – Two companies (Hendrix/ISA and EW Group) control an
estimated 90% of layer chicken genetics worldwide.
Broiler Genetics – Three broiler breeding supply 95% of the commercial
breeding stock of broilers (EW Group; Groupe Grimaud; Tyson).
Thomas Reuters, 2015. Mergers and Acquisitions Financial Advisors Full Year Review.
http://share.thomsonreuters.com/general/PR/MA-4Q15-(E).pdf
3 McKinsey Global Institute, 2015. Playing to win: The new global competition for corporate profits.
http://bit.ly/2eRx2T2
4 JPMorgan, 2016. China’s increasing outbound M&A: Key drivers behind the trend.
https://www.jpmorgan.com/global/insights/chinas-key-drivers
2
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Turkeys – Two leading companies supply virtually all of the industrial turkey
genetics worldwide (EW Group and Hendrix Genetics).
Pigs – Three leading pig breeders dominate global markets (Genus, Hendrix, EW
Group).
By further integrating with animal pharmaceutical companies, global livestock breeders
are expanding to include in-house animal health operations. Due to being bred in
confined and highly-controlled production environments, the narrow selection of highly
uniform breeds typically requires high-protein feeds, veterinary pharmaceuticals (e.g.
antimicrobials, vaccines) and climate-controlled, biosecure facilities that are designed
to prevent the introduction and spread of disease.
Farm Machinery: The three biggest farm machinery companies (Deere, CNH, Kubota)
accounted for almost half of global farm machinery sales in 2014. For some perspective,
the combined sales of the top three machinery firms are twice the size of the top three
pesticide sellers.
Leading farm machinery companies are consolidating to gain better access and control
over Big Data (i.e. large or complex data sets) to equip on-farm hardware (e.g. in
tractors, combines, sprayers) with digital tools (e.g. remote sensing, aerial imaging,
wireless data servers). These tools are intended to provide prescriptions for how,
where and when farmers should irrigate, fertilise, plant seeds and apply pesticides.
Newer agricultural equipment such as driverless tractors (using GPS) and drones rely
even more heavily on digital inputs.5 Recent moves in this direction include:
•
•
5
2014:
o DuPont and AGCO announce global wireless data transfer collaboration
o CNH Industrial & the Climate Corporation, a division of Monsanto, announce
a licensing agreement for Precision Planting Technology.
2015:
o Deere reaches agreement with Monsanto’s Climate Corporation, allowing its
equipment to connect with the company’s Climate FieldView platform
wirelessly, in-cab and in “near real time”, agrees to buy Monsanto’s Precision
Planting, LLC.
o BASF reveals “Farm Management Information Systems” partnership with
AGCO and deal with Monsanto’s Precision Planting to outfit its planters.
o Mahindra & Mahindra (India) buys 33% stake in Japan’s Mitsubishi
Agricultural Machinery, now called Mitsubishi Mahindra.
Deere & Co. has been selling self-guided tractors for more than a decade and sells its technology in more
than 100 countries (See Peterson, A. “Google didn’t lead the self-driving vehicle revolution. John Deere
did.” Washington Post, 22 July 2015: http://wapo.st/23m0Irc). Drones have been used for spraying crops
in Japan since the late 1980s, where an estimated one of every three bowls of rice has been sprayed by
one company’s drones (Yamaha) (See Inagaki, Kana. “Yamaha aims to unlock US and EU markets with
agricultural drone.” Financial Times, 05 July 2015: http://bit.ly/2dOl48p).
•
2016:
o Deere buys majority stake in Hagie Manufacturing, maker of high-clearance
sprayer equipment, with plans to integrate its precision technology into
Hagie sprayers.
o CNH launches Autonomous Concept Vehicle (ACV), a cab-free tractor
controlled through sensors, followed wirelessly by computer or tablet.
o Mahindra & Mahindra takes 35% stake in Finland’s Sampo Rosenlew, which
makes combine harvesters.
Food and Beverage Processors: Because of the size and scope of the food and
beverage processing sector, it is difficult to provide reliable figures on the value of the
global market and market share. Recent food and beverage industry mergers include:
•
2013: 3G Capital and Berkshire Hathaway Inc. acquire Heinz for $23 billion.
•
2015: North American subsidiary of JBS S.A. (Brazil) acquires Cargill’s U.S. based
pork processing business for $1.45 billion.
•
2015: Heinz acquires Kraft Foods for $63 billion, a merger engineered by private
equity firm 3G Capital and Berkshire Hathaway.
•
2016: Anheuser-Busch inBev’s $107 billion takeover of SABMiller Plc, creating
brewer with almost 30% of global beer sales—and the world’s top ranking food
and beverage company.
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2016: Mondelēz makes bid to acquire Hershey Foods for $22.3 billion—a
takeover that would have united the world’s second and fifth largest candy
companies. The offer was rejected by Hershey. At the end of August 2016 there
was speculation that Mondelēz might become a takeover target itself with the
most likely buyer being Kraft-Heinz.
IPES-Food’s full report will be published in Spring 2017. The report will adopt a political
economy approach to analyze the extent to which concentration is occurring in different agrifood sectors, the impacts of this concentration, and the possible solutions to redress power
imbalances within the food system. The report will be structured around the following 3
questions:
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SECTION 1 What is the current state of concentration in different agri-food sectors?
SECTION 2 What are the impacts of this concentration?
SECTION 3 How might power in food systems be rebalanced to support fairer, more
sustainable food systems?
It will be circulated via the IPES-Food newsletter and via social media: http://www.ipesfood.org/newsletter. For more information please contact Chantal Clément at
[email protected].