Challenges and Opportunities Facing the Seed Industry
A private lunch with Matthew Johnston, president and CEO of HM.CLAUSE
Before joining the UC Davis MBA program, Jennifer Hebets was an international economic development consultant who spent the eight years working for various institutions in Washington, D.C. and across Latin America dedicated to promoting equitable, sustainable economic growth in emerging economies.
Over the course of two hours, Johnston spoke candidly about some the biggest challenges facing the seed industry as well as the most exciting opportunities around the corner.
In my recent blogs, the theme of food security has been a predominant concern among executives in food and agriculture sector. For Mars Inc., the concern is closely tied to a secure and resilient supply chain in the face of growing populations. For the organic food products market, the concerns are surrounding the quality and transparency of the inputs in their products. For a seed company like HM.CLAUSE, increasing demand for food and seeds represents incredible growth opportunity and complex challenges.
HM.CLAUSE has seen continuous growth in demand with rising population and GDPs of many developing nations. This has spurred groundbreaking R&D into new products that are adapted to local environments and preferences. It has also driven HM.CLAUSE to make strategic acquisitions and investments in partnerships across Africa, Asia and Latin America to meet the increasing global demand for high-quality seeds.
Johnston shared valuable insights about how HM.CLAUSE manages its growth strategy. While global demand for seed has a very bright future, profitability is not guaranteed. We learned about the highly localized nature of the seed industry and the many investments in product development and inventory management associated with such diversity.
For example, the melons we buy in the supermarket in California are not the same variety as the melon demanded by consumers in Mexico or Vietnam. Each variety requires its own time-consuming process of research and development. In addition, adoption of new varieties by producers is a very long cycle.
Forecasting trends in exactly which products to develop and market can be challenging. Complicating the scenario, seeds are a perishable good despite their extended development cycle. This means that seed companies have a limited time frame between production and sale of the product.
HM.CLAUSE’s success at this delicate balancing act is a testament to a multinational company that leverages its decentralized structure to be connected with global trends while also able to capitalize on opportunities and efficiently deploy centralized resources.
Seed to Feed the World
For me, the most interesting discussion with Johnston and his team centered around how to feed the nine billion people that will populate the planet by 2050. Johnston is clearly aware of the complexity and scope of this grand challenge.
For HM.CLAUSE, the future of their business lies in ensuring that growing populations in emerging economies have the economic means to buy their seeds. For society, the future of food security lies in having access to nutritious and environmentally resilient food sources. With the right approach toward building robust partnerships across disciplines and over the long term, these interests can be very much aligned.
For HM.CLAUSE, feeding the world’s population in the future will not be through charitable donations of seeds or food programs. Rather, their investments in scientific advancement of food that is uniquely designed for the needs of future populations is an integral component of achieving real, long-term food sustainability. Their strategic acquisitions and investments in their global supply chain also generate jobs and income, which contributes to stronger local economies. To do so, the firm must remain profitable and able to make the necessary capital investments. This approach becomes a virtuous cycle of positive impact both for society and for the business. This examples rings true of many businesses around the world that increasingly find their future success integrally tied to solving grand societal challenges of tomorrow. This is the heart of Michael Porter’s Shared Value principle.
I hope that going forward, companies such as HM.CLAUSE will remain committed to using their successful business as a motor to drive economic growth and improve food security for generations to come. It was an honor to participate in the conversation and on behalf of the UC Davis Graduate School of Management. We thank Johnston and his team for their time!