Monsanto Repositions Roundup Business
27 May 2010 ST. LOUIS, Missouri, US — Low-cost Chinese glyphosate has finally taken its toll on Roundup. Reduced margins in the distribution channel caused by sustained oversupply of glyphosate and overwhelming Chinese glyphosate capacity have spurred Monsanto Co. to announce the repositioning of its Roundup business.
“There’s a major oversupply of glyphosate in the marketplace, and this is likely to be the situation for some time to come, as China has profoundly overbuilt manufacturing capacity,” said the company, which deferred questions to statements on its website. “China’s capacity alone accounts for twice the world’s current glyphosate demand, and they continue to sell below cost.”
Monsanto will reduce Roundup pricing closer to the level of generics, the company says, and focus its glyphosate products on supporting its core seeds-and-traits business. Monsanto will work with key US distributors to combine a simplified Roundup product with a package of complementary chemicals to create an affordable and easy-to-use weed control regimen, as well as move to a single-brand strategy in key segments with large markets, such as the US. “The current scale and scope of the Roundup products is large and complex,” Monsanto said. “We need to simplify that for our customers.”
Monsanto said the strategy will be employed globally, with some of the lead markets being North and South America.
Monsanto has initiated a series of actions that are expected to cumulatively reduce the ongoing earnings per share contribution of the Roundup business in fiscal-year 2010 by $0.50 to $0.70. These actions include lowering prices on volume for the 2011 season, as well as accelerating payment on certain distributor and retailer incentives to close out multi-tier brand support and speed the transition to the new brand strategy.
Following these changes, Monsanto now expects the ongoing gross profit contribution of Roundup to be in the range of $250 million to $300 million per year.
Get The Newsletter Today!
