30 March 2022 - Earlier this month, Cargill signed an agreement to sell its Format Solutions business to Datacor, Inc., a Florham Park, New Jersey-based provider of process manufacturing and chemical distribution software.
Format Solutions is a designer of software for animal diet optimisation, ingredient allocation, operational efficiency and formulation solutions for the feed, aqua feed, pet food, human food, premix and other industries. Format Solutions was formed as a Cargill brand after the combination of Feed Management Systems and Format International in late 2016.
Upon announcing the deal, Datacor’s president Tom Jackson said his company was looking forward to adding capabilities in the animal nutrition process manufacturing space, while Scott Ainslie, managing director of Cargill’s digital solutions business, said that his firm remained committed to the digital transformation of livestock nutrition and production.
Feedinfo was able to discuss the rationale behind the sale with Jackson and Ainslie and what’s in store for Format Solutions moving forward.
With the rise of digitalization in agriculture, Cargill’s decision to sell Format Solutions may come as a bit of a surprise. However, for Ainslie, it was a necessary step for the future development of the business.
First of all, Ainslie stressed that Cargill has multiple in-house offerings as part of its digital animal nutrition capability in areas such as biological modelling of nutrient content in ingredients, customised diets designed for individual farms, on-farm data and analytics, real-time animal performance, etc. However, in the case of Format Solutions, there was a need for a different approach.
“At Cargill, we know that there are times when we should own technologies. There are times when we should build them. But there are also other times when we should partner. For us to lead in this area [digital], we must be agile and know what our right role is in a particular situation. We felt like in this case, the way to accelerate was to put the business in the hands of a company like Datacor and continue to be a customer and distribution partner,” Ainslie said, specifying that Format Solutions has always operated as a separate and distinct entity within Cargill.
“We want to remain at the forefront of bringing digital transformation to our industry, and Datacor acquiring Format Solutions is in line with accelerating that commitment,” he added. “Datacor is going to be a great owner and partner.”
From Datacor’s perspective, Format Solutions will be a natural extension to the markets it already serves within the process manufacturing industry, and the business enables its entry into the animal nutrition space.
“Our focus is process manufacturing and process manufacturing software since 1981. So, we've got a nice track record there. We provide Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), formulation software solutions, and other solutions,” Jackson said, adding that the solutions are all customised and designed to meet complex market needs.
According to Jackson, there's a lot of similarity to anything in process manufacturing, be it markets such as paints and coatings, water treatment, lubricants, food ingredients, or chemical distribution. These markets are complex, but for larger software vendors, they can be considered as small. The same logic can be applied to feed additives, which is a market with complex pricing, formulas, and specifications, and which is faced with changing government regulations and customer requirements.
Moving forward Datacor will seek to improve and extend the functionality of Format Solutions’ offerings.
“We think there's decades worth of growth here. And so, we'll be heavily investing,” Jackson commented.
“We would not have done this if we didn't think that Datacor was going to be a good partner to us and to the many people in the industry for which these products are really important,” Ainslie added.
“Cargill will be a customer and we're always working with our customers and looking at ways they can use their data to improve their business and get inputs from them,” Jackson went on to say. “We're always listening to our customers and where they want us to take the products and Cargill is going to be a great source of ideas.”
For Ainslie, digital transformation in the animal nutrition industry is going take a lot of cooperation across various stakeholders in all sectors.
“This is not something one person or one company is going to do alone. This is bigger than that and we all know it,” he commented.
One such big challenge which requires the collaboration of multiple stakeholders in the digital area is global supply chain disruption, which is forcing the animal nutrition industry to look at streamlining supply chains and increasing efficiencies in distribution networks.
In this light, software can be a competitive advantage and means opportunities for customers.
“Supply chain disruption has been the biggest issue across our customer base in process manufacturing over the last couple of years,” Jackson said. “There's a lot we can do to help with software and to become more efficient specifically around inventories and then pricing, be it sales prices or input costs.”
“We have to help people in a really dynamic environment manage through disruption, not only managing their costs but also making sure that the nutrients animals get are the right ones. This is when something like Format Solutions is really valuable,” Ainslie commented.
“Being able to do that, and knowing that ingredients are going to be volatile, requires the marriage of deep nutritional experience and the use of digital products like Format Solutions and others,” the managing director of Cargill’s digital solutions business added.