Forum > General > Monsanto - Why the company failed

Posted by Susan Sharma on August 19, 2007

 

 Robert Shapiro rose to the top of Monsanto Corp. with a powerful vision for transforming the company from a chemical manufacturer to a life sciences company using genetic engineering to produce "Food,Health and Hope." His logic seemed impeccable: use science, specifically genetics, to engineer plants that were resistant to disease, drought, and insects and that produced better yields per acre using less energy and pesticides.  Monsanto spent millions of dollars developing the technology and several billion to acquire the seed companies and distributors it needed to make Shapiro’s vision a reality.  Wall street applauded Monsanto’s pioneering efforts.  The stock price even rose after the company slashed its dividend to help cover its heavy spending. 

Monsanto’s genetically engineered products were a hit with big American agricultural companies.  The soybean, corn, cotton, and other seeds, while more expensive to purchase than unmodified seeds, fulfilled Monsanto’s promise of better yields.  Cultivation of genetically modified crops in the United States soared from 18 million acres in 1997 to 58 million acres in 1998. By the end of that year Monsanto was on a path to generate $10 billion in annual revenue from a pipeline of new products to be introduced over the next few years.


Then the problems began.  A farmer in Canada reported that some canola seeds, genetically modified to be pesticide resistant, had escaped and cross pollinated with a related type of weed on the fringes of his field, creating, in effect, a "super weed" that couldn’t be controlled by existing pesticides.  A rival seed company introduced genes from a from a Brazil nut into a soybean to make it more nutritious as animal feed.  But soybeans are a big source of protein for human consumption too, and some people are fatally allergic to Brazil nuts.  The product never made it to the market, but news accounts speculating that modified soybeans could kill people allergic to Brazil nuts got plenty of attention.  And then there was the Terminator gene.  Monsanto bought a seed company that had patented the technology to insert a gene in crops that effectively sterilized new seeds when the crop was harvested.  The idea was to prevent farmers from saving the seeds from a portion of their crop to plant the next year, in effect, protecting the seed company’s proprietary genetic modification technology.  Farmers would have to buy new seeds each year.

Everything came to a head when Monsanto applied to sell its genetically modified seed in Europe.   Europeans were already reeling from a decade of health scares related to food, including Britain’s terrifying encounter with "mad cow" disease.  Although the European Union’s regulators gave Monsanto permission to sell its modified products, consumer reaction on the Continent verged on hysteria.   Environmental groups and the media led the charge against Monsanto, labeling its products "Frankenstein Foods".  Prince Charles weighed in with the opinion that "I happen to believe that this kind of genetic modification takes mankind into realms that belong to God, and to God alone."  The German subsidiaries of both Nestle` and Unilever said they would not use Monsanto’s genetically modified soybeans.   Polls showed huge majorities of Europeans firmly against altered foods.  Monsanto’s efforts to counter the critics-a $5million advertising campaign that told Europeans that while they were new to biotechnology, Monsanto has been researching the subject for twenty years-instead inflamed public opinion as being condescending.

Shapiro wasn’t swayed by the furor.  "This is the single most successful introduction of technology in the history of agriculture, including the plow," he proclaimed.  He acknowledged the opposition, but contended that "eventually, scientific proof should win over reluctant and skeptical consumers."

But science had never been the real issue.  Public opinion was what counted.  A consultant whom Monsanto brought in to mediate with the company’s growing number of critics gave up, claiming that Monsanto just didn’t get it.  "There is a barrier to really listening to what people are saying." he said of the company.  In the United States, where small farmers were becoming increasingly incensed over Monsanto’s efforts to collect fees and put restrictions on their use of modified seeds, Agriculture Secretary Dan Glickman got straight to the point, warning Shapiro to keep quiet because" every time he opens his mouth, U.S. agriculture loses millions more bushels of agriculture exports." Monsanto’s stock price fell 35 percent even as the overall market rallied 30 percent in 1999. 

( Source Know-How by Ram Charan)

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