Monsanto: Winning the Ground War

How the company turned the tide in the battle over genetically modified crops

by Brian Hindo

• View Slide Show

When Hugh Grant took the top job at Monsanto (MON) in May, 2003, the company's nickname in some quarters was "Mutanto." A growing chorus of critics warned that Monsanto's genetically modified plant seeds would wipe out the monarch butterfly, give people virulent new allergies, and reduce the planet's agricultural diversity. Author Jeremy Rifkin predicted that genetically modified organisms (GMOs) would turn out to be "the single greatest failure in the history of capitalism." Paul McCartney urged the world to "say no to GMO." Prince Charles wrote an editorial arguing that genetic engineering takes "mankind into realms that belong to God and to God alone."

During the 12 months preceding Grant's elevation, Monsanto's stock price fell nearly 50% to $8 a share. In 2002, the prior fiscal year, the company lost $1.7 billion. "We were pretty financially fragile," recalls Grant, 49, who speaks with the lilt of his native Scotland.

Fewer than five years later, Monsanto is thriving. The St. Louis company's net income leaped 44% last year, to $993 million, on $8.5 billion in revenue. Monsanto shares, which closed at $104.81 on Dec. 5, have risen more than 1,000% during Grant's tenure. At 58.6, the company's price-to-earnings ratio is about two points higher than Google's (GOOG). These numbers reflect a broader story: that Monsanto has quietly turned the tide in the war over genetically modified foods.

While a vocal band of opponents is still protesting biotech crops, a growing multitude of farmers around the world is planting them. The reason is no mystery: Monsanto seeds contain genes that kill bugs and tolerate weed-killing pesticides. So they are much easier and cheaper to grow than traditional seeds. More than half the crops grown in the U.S., including nearly all the soybeans and 70% of the corn, are genetically modified. Just five years ago, China, India, and Brazil planted virtually no genetically engineered crops. Now Brazil can barely build roads fast enough to get all of its biotech soybeans from the fertile interior Mato Grosso state out to ports. Farmers in China and India, meanwhile, planted more than 17 million acres of biotech crops last year. These three countries are now three of the six largest GMO-planting nations in the world, as measured by area planted. At a time when organic food is more popular than ever, about 7% of the world's entire farmland acreage is now planted with genetically modified crops—the ultimate anti-organic food. "When you're more than 1 billion acres planted," says Grant, "I think the conversation moves from what if' to what is.'"

The battle over genetically modified food is being won not in scientific journals but on the ground. Global demand for food and fuel have made farmers ever eager to squeeze more yield from an acre of dirt. And the undeniable fact is that during the 12 years since the first biotech seeds were planted, the most dire predictions of Monsanto's opponents have so far failed to come true. That's prompted some swaggering at company headquarters. In interviews with BusinessWeek, Monsanto executives variously described the safety objections of adversaries as "scare tactics," "Chicken Little theatrics, "mischief," and "misinformation."

Managers at the company display a near-religious conviction about the GMO cause. In the days when fear of so-called Frankenfoods was at its peak, Grant and his team made a risky decision to stand firm. They insisted on holding research and development spending to 10% of sales. Grant also made a crucial strategic decision to pare down the products Monsanto sold. No longer would Monsanto sell seeds for produce destined directly for the dinner plate. Instead Grant focused exclusively on seeds for agribusiness, ones that produced such goods as animal feed, ethanol, and corn syrup. That has helped deflate the opposition.