In Lord of the Rings parlance, the German chemicals and life sciences giant Bayer towers over the agtech space rather like an Ent. As with those walking, talking trees of JRR Tolkien’s imagination, the German multinational has deep roots in the sector; but large incumbent corporates can also be a little slow, lumbering, and sleepy when it comes to the rampant disruption going on beneath their hooded gaze. Besides, you’re never truly sure how Bayer will treat all those hobbit-like startups clamoring for attention: will they be ignored, picked up and carried — or simply crushed?
Monsanto could have been described as another Ent of the agtech space, albeit probably the nimblest of them — until Bayer bought it for a cool $63 billion in 2018. The stock market balked at that whopping merger; at one point this summer, Bayer’s share price was down to almost half of its value before the merger — the result of regulatory setbacks, increasing legal claims — including $2 billion of charges in just one case — and underwhelming earnings. Some, including activist Bayer shareholder Christian Strenger, even pushed for a motion of no confidence in Bayer’s board ahead of this year’s AGM, describing an “almost complete failure to deliver the key objectives.”
The aims set out by Bayer CEO Werner Baumann were, in essence, to ramp up the company’s digital agriculture strategy bolstered by Monsanto’s Climate Corp, while seeking a deeper footprint in seeds and genetically modified crops. On paper, Monsanto ticked all those boxes. But in practice, the move was dogged by US competition law from the outset, and once the merger was done, an escalating barrage of lawsuits gnawed away at confidence. In particular, an escalating onslaught of lawsuits relating to the alleged health risks of the weedkiller Roundup and its active ingredient, glyphosate. As the Bayer conceded in October, the number of plaintiffs now suing over health concerns has reached 42,000 — a doubling of the 18,400 reported in July, who claim the product has directly led to instances of cancer, an allegation Bayer denies, citing reports that highlight the product’s safety.
At this October’s World Agri Tech Innovation Summit in London, I caught up with Brett Begemann, who is a member of Bayer’s executive leadership team and chief operating officer for the company’s crop science division. A veteran agri-titan, Begemann strode into Bayer as a top-level entrant from the Monsanto merger, where he was president and COO.
The twilight of glyphosate?
If anyone is well versed in the glyphosate debate, it is Begemann. What struck me ahead of our conversation was reading a recent story of how a country like Germany — right where Bayer is headquartered — would be banning glyphosate as of 2023. So I thought it worth asking him straight up whether we have reached the twilight era of Roundup.
Under today's unique circumstances, AgFunder is re-opening Fund III for a limited time to enable investors to join our mission and invest alongside us as LPs in a second close. Learn more here.
“It’s always hard to predict those kinds of outcomes,” Begemann replied. “I look at history to inform me of the future. Roundup is 40 years old. It’s as big a player today as it’s ever been, and still growing. It’s generic, so it’s therefore cost-effective. It has one of the most pristine toxicological profiles you could ever imagine for a crop protection product. And it has the support of regulators around the world that it should continue to be used. There are some in society who have concerns with that, and I recognise that, and that’s an example of how we all need to get together around the table, and talk about these things together and make informed trade-off decisions.”
An argument in Roundup’s favour, Begemann added, is that it does not get enough credit for its sustainability. “As the old saying goes, we don’t want to throw the good out with the bad,” he said. “Just because it’s big, doesn’t mean that it’s bad. It actually brings huge value to a lot of farmers. I also think there’s a misunderstanding of the huge impact it’s had on the sustainability of agriculture. It’s not the only thing, but it was an enabler of conservation tillage, reduced tillage, no-till, which led to better soil, taking care of our soil, better soil health, less erosion, cleaner water, etc. So it has a lot to add to what we’re doing today in agriculture, so we’ll have to see. I believe the regulators will continue their view because the science is so clear. We’ll see where we land. We’re supportive of it; we’ll continue to support it.”
A great LEAPs forward?
Another closely-watched aspect of the merger by rival corporates and budding startups alike was what the combined venture arm would look like. Monsanto Growth Ventures (MGV) already had a chunky portfolio, which is being folded into the umbrella of LEAPs by Bayer, where it will be set alongside Bayer Growth Ventures (BGV). So far, all has gone a little quiet on this front.
“We’re consolidating the portfolio of companies,” said Begemann. “The concept is still the same. To engage with the startup community and look for opportunities to collaborate, partnerships, et cetera.”
It is always curious how Bayer goes about this. How exactly does it find which startups to partner with, and which it feels might create a conflict with its own existing operations? All too many startups have been flummoxed by this sort of strategic ambiguity. As with other big players, the debate is very much open about whether Bayer plans to build its own agtech in house, or to continue doing so through acquisition. “If you look at the history of Bayer, we’ve played across that spectrum,” explained Begemann. “So, there are some things we work on and develop and innovate ourselves, all the way to the other end of the spectrum where we work with startups and look for those companies that are investing in areas that are synergistic to the work that we’re doing.
In some cases there may be licence arrangements to work together, to collaborate; in some cases, it does turn into an acquisition. I’d say those were more the exception than the rule. But it’s clearly an opportunity across that whole spectrum to work together, and I think the challenges we’re all trying to solve are bigger than any one company is going to do, so it’s important that everyone has a seat at the table and is allowed to and encouraged to bring new technology to the space.”
So in short, it seems, all options open; cards left close to chest, although disappointing to hear acquisition was the exception to the rule. So I asked him how much, broadly, Bayer might be willing to spend over the next three years in the agritech innovation space. “I would not be able to talk about what we would be willing or even entertaining to spend from an acquisition standpoint,” he shoots back. “But we already spend — I’ll categorise it by calling it hundreds of millions of dollars — in the digital science space that we’re innovating in. But we also spend obviously a bit more than that in traditional areas of plant breeding and gene editing and biotechnology, to crop protection products, small molecules to biologicals.”
“So we have a suite of things that we’re working on, and it’s always interesting at events like this to see companies also working across that whole suite of things. In cases where something looks like duplication to us, then we move on it ourselves, or stop ours and use theirs, or some cases they’re doing things we’re not doing, and so it’s a whole spectrum across there.”
“I always say that acquisition is never off the table, but it isn’t where we start.”
The Holy Grail
If you were to advise one of these startups today, I ask Begemann, what problem would you have them focus on, given the challenges you see in the industry?
“I think there’s a lot of room for a lot of startups in a lot of different areas,” he replies vaguely, before drilling down into the specifics: the digitalisation of agriculture, the small molecule biological space and gene editing. “There are always companies looking for what I call, ‘new genes of interest.’” he said. “The holy grail is when we can get nitrogen-fixating grass plants like cereals and corn; and there’s work that goes on there that’s intriguing and interesting — hard to do, but very interesting.”
How about the innovation that isn’t around yet but you’d like to see?
For Begemann, that means looking beyond the excitement around digitalisation plays, and train focus back on gene editing and molecule discovery. Gene editing, he noted, is a far more open playing field for major innovation than other forms of biotech that have traditionally required high-spec laboratories with specific niches. “I think that’s a rich space,” he said, “where we’re going to need innovation to continue to drive our agronomic systems.”
No silver bullet
There is one thing that will not impress Begemann, if you ever even get the chance to pitch this agri titan. Hint: do not go in all guns blazing with a solution that is claiming to solve everything. I sensed Begemann seemed a bit tired of such startup hyperbole. “Oftentimes,” he sighed. “I find myself in conversations where someone is of a strong conviction that if you just took my idea this would be the answer,” he said, “and I think the challenge is far greater than that, and it’s going to take all of us.”
“I think there’s room for everyone. I don’t think it’s going to be a small handful who solve all the problems,” he said, so the ecosystem won’t just be dominated by a Facebook of agtech, as it’s “too complex.”
One advantage Bayer has over startups is their deep access to the needs and outlook of the farming community. Hint number two: if you’re a hot-shot startup from San Francisco, it is best not to tell Bayer what farmers really want. So, what trends is Begemann seeing from his farming clientele?
“I think farmers recognise very clearly that their licence to operate, and the tools that they’re using to do it, are somewhat threatened,” he cautioned, referring to agri-chemicals. “And that can be from an extreme situation where they lose access to a product, even in a case of when it has a good scientific review and package.” The worry here, he notes, is a chilling effect where investment in agrichemicals dries up as investors get cagey about whether the development of chemicals could lead to regulatory approval.
Another category he mentioned was how farmers fear the burden of innovation ends up falling on their shoulders. He mentioned how farmers are often wary of new ideas after years of overpromising from canny salesmen. “I can’t be the only one taking the risk,” he said, rhetorically in the role of a farmer. “I can’t buy all these things and try them, recognising that mother nature plays a role and other things play a role.” Beyond that wariness of risk and misselling, farmers are looking for better information to make better decisions, and are not averse to digital, he countered. “Today they’re saying, ‘hey, will somebody share a risk with me?’ That’s something we’re pursuing at Bayer and we’ll continue to look at as a possibility,” referring to markets in Europe and North America.
The Smallholder view, according to Bayer
“What I keep hearing from smallholders is, ‘I need access to tools,’” he said, switching his focus to the developing world and emerging markets. “I have spent a lot of time in my career with smallholder farmers across Africa and Asia, and it really pains me when I talk to one of them, and they don’t have access to stuff we’ve been using for 60 years.”
“So this isn’t the latest and greatest and newest technology, but they don’t even have hybrid seeds, and unfortunately some people are standing in the way of them trying to get hybrid seeds, and that’s really disheartening to me, because that in itself can make a step-change. All the way to even an understanding of how to use the new tools that are available from a crop protection and a seed standpoint. Are they going to have access to data and data systems that can help them? So they see the world very differently, the larger more sophisticated farmers know they’re already going to get those tools, and the small-holders are wondering if they’re going to be left out, and frankly they need more help than anyone to address their own individual challenges.”
You can find some more thoughts from Begemann in this interview in London here, produced by the event organisers:
How do you view Bayer’s role in the agtech ecosystem? Let me know at firstname.lastname@example.org