|Biotechnology and the Future of World Agriculture (GRAIN, 1991)|
The few are becoming fewer, and the big grow bigger. The pace of the concentration process among the largest agrochemical, seed, drug and food houses is astonishing. The concentration of biotechnology within the hands of TNCs is happening at the same time as an explosive take-over wave amongst the big companies themselves.
The pesticide sector is an example of where this is happening. Where 30 manufacturers were engaged in pesticides development in the mid-1970s in the United States, there are only a dozen today; the situation in Europe is similar. (28) With a global market of some $20 billion, the top ten companies are now controlling a full three-quarters of it. (See Table 4.4.) With few small pesticide companies left to buy up, the take-over mania is now being extended into a fierce fight between the TNCs themselves. In the past few years ICI bought Stauffer Chemicals, Rh"ne-Poulenc took the pesticides division from Union Carbide, and the two large US chemical groups, Dow Chemical and Eli Lilly, merged their pesticides business into a new company: Dow Elanco. (29) To stay in the race, Hoechst had to buy Celanese, and Du Pont the US Shell pesticides business. Though it may seem that there is no room for further concentration, industry analysts predict that the mergers will continue. (30) Apart from sheer company size, biotechnology is acclaimed as the main factor in determining who will stay in the race for domination of the pesticide market. All of the top ten pesticide producers fall in the group of the largest agricultural biotechnology companies listed in Table 4.3. Many of them have substantial plant-breeding operations as well.
If the concentration among the pesticides groups has been dramatic, the shake-out in the pharmaceutical sector is even more spectacular. For decades, the top 30 drug producers have remained the same, although their ranking might have changed. Ten corporations now control some 28% of the world market, as a result of an enormous merger wave in the sector. Table 4.5 shows the global ten pharmaceutical giants, and lists the recent mergers and take-overs. Apart from the Monsanto buy-out of Searle (1985) and the Kodak acquisition of Sterling Drugs, all major take-overs took place in 1989-90, and there are a lot more to come. In total, the drug giants spent over $40 billion in such take-overs in these two years alone. Even after the recent merger-mania no single TNC has more than a four per cent share of the world market. According to Mads Olvilsen, the boss of the Nordic pharmaceutical company Novo, a handful of TNCs are now heading for global market shares of over ten per cent each. (31) Here again, the control over biotechnology seems the deciding factor for the future. While many see the Genentech take-over by Hoffmann-La Roche as only the first step in a major acquisition drive of smaller pharmaceutical biotech companies by TNCs, others think it will depend more on the extent that biotech research will be built-up in-house. Most TNCs follow both strategies.
Yet even before anyone thought of biotechnology as the driving force behind the restructuring of agriculture, TNCs started massively buying up independent seed companies. With or without biotechnology, the seed is the ultimate vehicle of genetic improvements in agriculture, and the TNCs realized the importance of that. Once a highly diverse and often familybased sector with no TNC involvement, virtually all top seed houses now have their main interest in either chemicals, pesticides or pharmaceuticals (Table 4.6). Pioneer Hi-Bred and Limagrain, both primarily seed companies, are the only exceptions. Together the top ten now control over 20% of the global market - a figure that is increasing. ICI, Britain's number one chemical company, for example, aims to continue its spectacular growth in seeds. Entering in the seeds business only in 1985 with its acquisition of Garst Seed (USA), it continued to buy up seed companies in Europe and now has annual seed sales of some $250 million. The firm's objective is to triple this figure before the turn of the century. (32) Another newcomer on the scene is Unilever. Apart from some work on its plantation crops, it had little seed interests until it bought up the Cambridge-based Plant Breeding Institute from the UK Government. After its latest acquisition of Barenburg Seeds in the Netherlands, it now ranks as thirteenth among the world's largest seed companies with annual sales of $110 million. (33) Both companies are heavily committed to biotechnology, with ICI spending half of its R&D budget on it. (34) According to US seed industry consultant William Teweless, the restructuring of the seeds sector is only half completed. He expects that by the year 2000 between ten and 20 TNCs will dominate the entire market. (35)
The fourth, and probably in the long-run most dominant, actors in biotechnology are the food processors. 'The greatest impact on food industry costs and profits may stem from research and development in the field of biotechnology.' This was the conclusion of an OECD study on the impact of technology on the food processing industry. (36) Indeed, the food transformers are probably in the best position to reap the benefits of the bio-revolution. The cost of their raw materials is much more of a determining factor than in the other sectors, representing up to two-thirds of the sales value of the food processors. (37) This is exactly where biotechnology can make the difference. With improved enzyme and fermentation techniques, tissue culture and genetic engineering, raw material requirements can be diversified, reduced or eliminated altogether. The same techniques can produce higher yields of crops and animals. They can also modify the components to suit the needs of the industry better. Finally, energy costs can be greatly reduced as the food industries switch from chemical to biological technologies. Higher yields and increased interchangeability tend further to decrease the prices of what is the end product of the farmer but the raw material for the food processor. Chapter 6 explains some of the implications.
One reason why neither the farmers nor the consumers will profit much from all these cost savings is that the industry structure is highly oligopolistic, as shown in the above quoted OECD study. In the USA the four firms accounted for some 45% of the sales, while in the UK the five largest food TNCs commanded up to 70% of the market in the early 1980s. (38) Since then, the major food processors have been involved in a life-and-death acquisition battle involving billions of dollars. Since 1982, a quarter of the 100 largest processors have disappeared into the hungry mouths of even biggercompetitors. (39) In 1985 four mergers, together costing over $16 billion, completely changed the US industry: Reynolds took Nabisco (forming RJR Nabisco); Philip Morris took General Foods; Nestle took Carnation; and Beatrice took Essmark. (40) Later Kraft and RJR Nabisco - both in the top ten listing - were themselves taken-over for $37.5 billion in total. Kraft now belongs to Philip Morris, which thus overtook Nestle as the number one food processor. RJR Nabisco was taken-over by the US buy-out specialist Kohlberg Kravis Roberts (KKR). Several others followed. Table 4.7 gives a rough approximation of the provisional result up to 1990: the global top ten companies together selling for more than $100 billion a year. 'The food companies haven't finished eating', announces Business Week, with industry experts predicting that Europe's (45) major food processors may further merge into ten giant companies within the next few years. (41)
Everybody is trying to fit biotech into its operations: General Foods uses it to produce a caffeine-free coffee bean; Hershey tries to get more cocoa from the cocoa tree or from other crops; Campbell Soups makes high-solid tomatoes; ICI developed an enzyme to speed up cheese ageing; Nestle modifies soybeans; and Unilever works on everything from cloning plants to producing biotech sweeteners. Either in-house or by contracting NBFs, the food processors are trying to make up for their late entry into the sector. Backed by multi-billion sales, they do not hesitate to put money on the table. Sir Geoffrey Allan puts it this way: 'I could make a small fortune on biotechnology if only I had a larger one to invest in it.' (42) This might be a reason why he is now director of Unilever's Research and Engineering Division. He claims that his company is spending an annual $33 million on applied biotechnology, but other sources calculate the firm's total biotechnology budget to be well over $100 million. (43) Unilever's activities in this field are almost as broad as the company itself: enzymatic modification of fats and gums; new enzymes for detergents; genetic engineering of microbes; genetically engineered sweeteners; tissue culture of plants; pregnancy and ovulation testing kits and so on.
These companies, then, are the dominating forces in the biotechnology drama. The stage is set after only a decade of commercial biotechnology. Starting in the university laboratories and passing through an exciting but short phase of small, independent biotech companies, the decision on what will happen next lies mostly in the boardrooms of the giant suppliers of agro-chemicals, medicines and processed food. Some directions in these decisions are easy to assess, others more difficult to speculate on. In general, however, boards of directors tend to look at what is best for the company's profit; which is not necessarily the same as the people's well-being. The European Commission tends to agree. In a report on science, technology and the global economy, it comes to the following conclusion:
The global economy might be increasingly governed by decision making processes and decisions makers primarily reflecting the corporatist, though legitimate, interests of private groups and networks of global firms. In this context, the decision making processes concerning the allocation of the most important segment of the world human, technical and natural resources will be less and less based on representative democratic procedures. (44)
Notes and references
1. P. S. Carlson, 'One Company's Attempt to Commercialize an Agricultural Biotechnology Technology', in strengthening Collaboration in Biotechnology, Conference Proceedings, AID, Washington, 1989, p.414.
2. R. Chandler, The High Window, Penguin Books,NewYork,1943,p.113.
3. 'Test-tube Trauma: the sale of Genentech', in The Economist, Vol. 314,10 February 1990.
4. UNCTC, Transnational Corporations in Biotechnology, UNCTC, New York 1988, p.36; end 'Test-tube Trauma', op. cit.
5. 'A New Era for Genentech, and So It Goes', in Bio/Technology, Vol. 8, No.3, March 1990,p.178.
6. 'Test-tube Trauma', op. cit.
7. Susan George, lll Fares the Land, Penguin Books, London, 1990. pp.115- 16.
8. G. Persley, 'Agricultural Biotechnology: Opportunities for International Development', Draft Synthesis Report, World Bank, May 1989, p.68.
9. 'Japanese Biotech's Overnight Evolution', in Business Week, 26 February 1990, pp.34-6.
10. Keith Pike, Marketing and Sales Director of ICI Seeds, in a letter to Alistair Smith, Surrey(UK),6 April 1990.
11. OECD, Biotechnology and the Changing Role of Government, OECD, Paris, 1988, p.91.
12. Mark Cantley, 'Managing an Invisible Elephant', in Biofutur, No. 84, November 1989, pp.8-16. Total figure is 280 million ECU.
13. H. Guillaume et al, 'Eureka: Vitesse de CroisiŠre', in Biofutur, No. 84, November 1989 pp.35-6.
14. OECD, 1988, op. cit., p.92.
15. Jack Doyle,AlteredHarvest, Viking Press, New York, 1985. Doyle estimates Du Pont's R&D as over $US 200 million and puts the figure for Monsanto at $US 190 million.
16. OTA, 1984, op. cit., p.74.
17. 'Japanese Biotech's Overnight Evolution', op. cit., pp.34-6.
18. Ibid., p. 34.
19. Quoted in 'Japanese seem headed toward ownership of US Companies', in Genetic Engineering News (GEN), Vol.10, No. l, New York, January 1990, p. 36.
20. According to a survey of industry analysts, the Arthur Young Group. Quoted in 'Pendulum is set to swing back', Financial Times, 12 May 1989.
21. Commission of the European Communities, The FAST II Programme, Results and Recommendations, Vol. l, Brussels, 1988, p.69.
22. KNBTB, 'Biotechnologie en Land - en Tuinbouw', The Hague, January 1989.
23. Ibid., p.24.
24. OTA, 1984, op. cit., pp.574-7. See also Jack Doyle, 1985, op. cit.; and Martin Kenney, Biotechnology: The University-lndustrial Complex, Yale University Press, New Haven/ London, 1986.
25. Both quotes from Doyle, 1985, op. cit., p.359.
26. Martin Kenny, 1986, op. cit., p.246.
27. G. Persley, 1989, op. cit., p.68.
28. Fowler et al, 'The Laws of Life', in Development Dialogue, Dag Hammarskjold Founcation, No. l/2,1988,p.74.
29. Peter Marsh, 'Seeds of Doubt in Agrichemicals', Financial Times, 5 May 1989.
30. Allen Woodburn, from the UK stockbroker CNW, quoted in Peter Marsh, 1989, op. cit.
31. 'The New World of Drugs', in The Economist, 4 February 1989.
32. 'Seeds, a Natural Route for Biotechnology', in European Chemical News, Fertilizers
Agrochemicals Supplement, March 1988. ICI's objective is a seed business of Sterling 500 million in the next 15-20 years.
33. 'World Seed Sales Top $ 15,100 million in 1988', in AGROW, No. 102, 15 January 1990, p.8.
34. 'Seeds a Natural Route . . .', op. cit.
36. OECD, 'Technology and the Food Processing Industry', STl Review, No.2. September 1987, OECD, Paris, 1987.
39. Fowler et al, 1988, op. cit., p.96.
40. OECD, STl Review, 1987,op.cit.
41. 'The Food Companies Haven't Finished Eating', in Business Week, 9 January 1989, p.42.
42. Quoted in 'Les Pas de G,ant d'Unilever', inBiofutur, January 1988, p.21.
43. J. C. Pinon, 'Financements Nationaux de la R&D en Biotechnologie: Les Ann,es 80', inBiofutur, No.90, May 1990,p.121. (Figure quoted is 750 million French francs.)
44. Commission of the European Communities, 1988, op. cit., p.72.