It appears that Monsanto, better known as a seeds and traits company, has now shown an interest in getting back to its roots – chemicals. Monsanto recently bid $45 billion to acquire the chemical giant Syngenta. Although the offer was rejected, a merger could still be in the works.
Such a merger would create an agricultural behemoth. Both companies are of similar size and generate revenues from different steams. Monsanto makes money by selling seeds while Syngenta’s revenues mainly come from weed control products. Such an initiative might be described as life trying to buy death, so to speak.
By trying to go back into chemicals, Monsanto has the potential to become more powerful than ever in agriculture by increasing economies of scope up the food value chain. Such a deal would likely increase antitrust issues and Syngenta could conceivably be requested to sell its seed division.
One other benefit for Monsanto would be relocating its head offices from St. Louis, Missouri to low-tax Switzerland and cashing in on the advantages of tax inversion. Regardless, Monsanto’s quest to get larger, bigger and more influential will likely not end here.
A backdrop to all of this is the ever increasing public outcry against Monsanto’s approach to agriculture. Monsanto has been mollified for many years into thinking that their science-based approach has been good enough and would help validate what they were trying to achieve.
On May 23rd, however, hundreds of thousands of concerned individuals will yet again gather across almost 40 countries and more than 400 cities to march against Monsanto. It seems the company’s risk communications scheme over the years has failed miserably. Gatherings around the world seek to raise awareness about Monsanto’s genetically modified seeds, GMO labelling and potential health risks caused by the use of herbicide Roundup. With the help of social media, opposition to Monsanto is gaining steam.
In the past, Monsanto felt confident about focusing on a science-based approach in a science-dominated corporate culture. Societal optics were never seriously considered by the company. It seemed to think that, by having science on its side, there was no need to tackle concerns rooted in what it considered flawed scientific studies.
Contradicting this unshakable confidence in scientific authority, adversaries of Monsanto’s business model have been successful in recognizing that trust – the golden rule in risk communications – actually has more currency than science. The extent and amplitude of criticisms in the public realm have caused Monsanto to recognize fairly recently that they have lost control over how they are perceived publicly.
Monsanto is now making an effort to gain its social licence, something it clearly does not have. Over the years, the company has inadvertently polarized the issue of genetically modified crops, to its detriment. Recognizing the need to connect in a meaningful way with consumers, the company is engaging more than ever with the public on many different levels. It is entirely unclear whether its strategy will be successful.
As it grows its business, winning the confidence of consumers is arguably the company’s biggest challenge. Without this trust, executing mega-deals like the one which could bring Monsanto and Syngenta together will only bring more hardship.