8 October 2021 - Alltech has reported circa $2 billion in revenue for 2019 and again in 2020. And according to Alltech’s President and CEO, Dr. Mark Lyons, his company also expects to record double-digit growth this year, and for all its market segments.
Though no timeline is specified, in the long run, Alltech continues to keep $10 billion in annual revenue in mind. Dr. Lyons argues that the $10 billion milestone would be extraordinary to achieve but for him it’s more a vision than a goal. What’s key is the journey in between.
Growth can come from mergers and acquisitions, but also by keeping the momentum going on organic growth and on industry partnerships, while never losing sight of the market fundamentals and drivers.
“Fuelling the journey will be the increase in global requirements for protein, being more sustainable and having to do more with less. All this bodes well for future demand for our products. This makes me optimistic for growth,” Dr. Lyons said.
Dr. Lyons provided us with some insight into his company’s investment strategy, where he sees Alltech making the most impact, and which bandwagons his company will avoid jumping on.
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First of all, he painted a historical picture of the 42-year-old company: “We spent the first couple of decades establishing our core technologies and getting into markets. In the 2000s the focus was more on building our capacities. The last decade was marked by over 20 acquisitions and increasing our access to global customers, as well as by the widening of our platform from lab to farm and across geographies and multiple species. All this has enabled us to have conversations with customers today that we weren’t able to have in the past.” |
Dr. Mark Lyons“Moving forward, we will aim to bring in new technologies,” he added.
From an operational and manufacturing standpoint, Alltech’s investments, decisions and plans will be aligned with its “Planet of Plenty” vision and ambitions.
Dr. Lyons said Alltech was planning to make 2021 one of its biggest years in terms of capital deployments in its facilities, including fermentation technology and other capacities, such as the aqua segment - where Alltech Coppens is increasing production capacities.
COVID-19 obviously created some minor delays, but according to Dr. Lyons, “this is a time we are allocating capital into our manufacturing footprint, and we are investing to improve safety criteria at our facilities.”
“I see our key investments being the bolstering of the existing platform and methods to deploy technologies further. We also have the ability to leverage our premix operations to accommodate local customers,” he commented.
Partnerships and Joint Ventures
For Dr. Lyons, the Alltech M&A strategy is clear.
“We are looking at ways to address industry concerns such as sustainability, antimicrobial resistance, etc. And to tackle these challenges Alltech first evaluates internally what the best course of action is, and this can require looking outside the platform to seek expertise elsewhere. This can take the shape of buying new technologies or partnering with providers of these new technologies,” he said.
Naturally, Alltech aims to foster relationships which aren’t transactional in nature, but which are more in the spirit of partnerships. But sometimes these can also take the shape of joint ventures, such as the February 2021 joint 50-50 acquisition of Finnish company Kärki-Agri, alongside the DLG Group, with whom Alltech already has a Russian joint venture: Nutrismart Holdings, a premix business based in Orenburg. Kärki-Agri, meanwhile, is a provider of specialty feeds and feed preservatives to Finnish cattle farms.
Another recent example is the partnership between Alltech and HELM Agro, which was announced in July 2021. HELM Agro is marketing and distributing the Alltech Crop Science line of products in the US, but the collaboration also brings together product lines from both companies and brings together both companies to find solutions for crop growers.
Talking about partnerships and joint ventures, Dr. Lyons explained that the way Alltech’s collaborations shape up depends on the size of the opportunity, how present the local partner is and how much capacity it has.
“The benefits of joint ventures are that both parties use their combined strengths, have access to an even broader spectrum solutions for customers, and by extension make their supply chains more resilient,” he said. “Alltech is approached to do collaborations on a regular basis.”
Commenting more specifically on Kärki-Agri, Dr. Lyons said: “We are excited about the opportunity this will afford us to better serve our Scandinavian customers.”
Working alongside partners proves to be useful in terms of shared knowledge and technological insights.
“And right now, we are in a period of significant supply chain disruptions, and these concerns aren’t going away at least for the next year or two,” Dr. Lyons went on to say. “We must work even more closely with our supplier base than before.”
“As an industry we are certainly more open to sharing knowledge and expertise than before. Some of the conversations we are having with others who would be perceived in other points of time as competitors are a lot more open than before,” he added. “Where we have collaborated, we have been much more effective than before. There is more to be gained by collaborating over time.”
In his view there is an opportunity to change things and shift mindsets if companies put competitive issues aside in the longer-term. Besides, there’s more to be gained doing things together than separately, especially with the perceived larger external threats the industry has (e.g., negativity towards animal agriculture).
“As an industry we are ultimately going to get measured as a supply chain and not as individual companies when it comes to sustainability,” Dr. Lyons stressed.
M&A and Mrs.Pastures
Alltech, however, continues to consider pure M&A opportunities.
Its latest acquisition took place last month, on 13 September 2021. The company in question is Mrs. Pastures® Cookies for Horses, a California-based supplier of clean label equine treats, established in 1986 by Patricia Burge.
According to Alltech, Mrs. Pastures’ cookies have been so well-received that its manufacturing facility is unable to maintain inventory. And by the end of the year, they plan to significantly increase manufacturing of the cookies through additional production in Mendota, Illinois.
“Mrs. Pastures’ established relationship with retailers throughout the U.S. will also provide us with an opportunity to further introduce our leading lifestyle nutrition, including Lifeforce™ equine supplements, as well as our extensive line of horse feeds. This is an exciting step forward in our ambitions to advance our lifestyle strategy,” Alltech said in a media statement.
There is one market segment wherein we can expect Alltech will not be investing, and that segment is alternative meats.
Investors are investing massively in the alternative meats segment right now. One noteworthy example being the late-September announcement about actor Leonardo DiCaprio investing in and joining the advisory boards of Aleph Farms and Mosa Meat, who are two cultivated meat start-ups, and - in DiCaprio’s words – who offer “new ways to satisfy the world's demand for beef, while solving some of the most pressing issues of current industrial beef production.”
Alternative Meats
But investments are also coming from companies more historically aligned with animal nutrition solutions for the providers of traditional proteins, who look at traditional meats and alternative meats as a total protein opportunity. For instance, on 16 September 2021, cultivated meat start-up Meatable joined forces with DSM to develop new growth media for cultivated meat.
Alltech will not be following that path.
“Valuations of some companies in the alternatives segment are extraordinarily high, way higher than their actual values. I don’t see the reality there,” Dr. Lyons commented. “If I was to think I am going to invest in proteins that are better for people and better for the environment, I don’t see it in this space. If an opportunity was to come along, that’s something to think about but today I don’t see a company that I would want to invest in.”
“I think the alternative proteins landscape is going to be a crowded one and I think our resources are better focused on other sectors,” he added.
For Dr. Lyons, what is puzzling is the staggering amount of money going into alternative meats compared with the more limited amounts going into the improvement of sustainability in existing agriculture.
“There’s still so much potential in traditional protein and improving upon it. It’s an area that requires more investment,” he stressed.
For him the focus ought to be on the health benefits and the role traditional protein can have on diets. Also, the health issues regarding meat consumption are overblown and we need good proteins in our diets.
“We need to bear in mind that in the food industry, any time you can process there’s an opportunity for profit. That is the same type of direction we are being taken down again with highly processed foods like meat alternatives that are reported to be better for us and for the environment,” he commented. “There is a huge amount of money going into this area. Investors are perhaps seeing this as a less complex opportunity.”
Taking the US as an example, Dr. Lyons pointed out that the reality is that meat production in the country only represents 2% of greenhouse gas emissions (GHGs), maybe 3-4% when you add in all the other factors that come into meat production; numbers which are significantly lower than the GHGs of the energy and transportation sectors.
“Fossil fuels are the problem,” he highlighted. “We have to do two things: use the credentials we have in terms of the improvements we’ve made as a sector, and at the same time assess where the real impact is going to be.”
“Changes need to be made with our energy consumption and how we move product around. They need to be in the way we build, the way we live. And those are topics that are more uncomfortable for people because it’s going to change their lifestyle. It’s quite easy to understand the arguments of the plant-based meat advocates, so we have to somehow transmit the complexity of animal agriculture in a simple way and explain the important role it plays in society and our willingness to be part of the solution.”
